<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 16, 1998
Owens-Illinois, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9576 22-2781933
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
One SeaGate, Toledo, Ohio 43666
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code: 419-247-5000
1
<PAGE>
Item 5. Other Events.
On March 1, 1998, Owens-Illinois, Inc. (the "Company") signed a definitive
agreement to acquire the worldwide glass and plastics packaging businesses of
BTR plc ("BTR") in an all cash transaction valued at approximately $3.6
billion. The Company filed a Current Report on Form 8-K on March 2, 1998
(amended by Form 8-K/A filed on March 4, 1998), which set forth under Item 5,
"Other Events," the press release announcing the agreement along with certain
financial and statistical information about the businesses to be acquired.
The acquisition is subject to regulatory approvals. Although there can be no
assurance of these approvals, the Company believes that the approvals will be
obtained and that the acquisition will close later in the second quarter of
1998.
The Company is filing herewith the financial statements of the business to be
acquired as required by Item 7 (a), the pro forma financial information as
required by Item 7 (b) and, as Exhibit 2.1, the definitive acquisition
agreement as required by Item 7 (c).
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Audited combined financial statements of BTR Packaging (as defined in
Note 1 to the financial statements) for the years ended December 31,
1995, 1996 and 1997.
- Report of Independent Auditors - Ernst & Young
- Combined Profit and Loss Statements
- Combined Balance Sheets
- Combined Statements of Cash Flows
- Notes to and Forming Part of the Combined Financial Statements
(b) Unaudited pro forma financial information.
- Pro Forma Condensed Consolidated Balance Sheet at December 31, 1997
- Pro Forma Condensed Consolidated Statement of Results of Operations
for the year ended December 31, 1997
- Notes to Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits.
2.1 - Share Disposition Agreement among BTR plc, Owens-Illinois, Inc.
and the Other Parties Named Herein dated as of 1 March 1998
23.1 - Consent of Ernst & Young, Melbourne, Australia
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securites Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OWENS-ILLINOIS, INC.
By /s/ Lee A. Wesselmann
---------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: April 16, 1998
3
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
BTR plc.
We have audited the accompanying combined balance sheets of BTR Packaging (as
defined in Note 1) as of December 31, 1995, 1996 and 1997 and the related
combined statements of profit and loss and cash flows for the three years
ended December 31, 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 generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above, present
fairly, in all material respects, the financial position of BTR Packaging at
December 31, 1995, 1996 and 1997 and the results of their operations and their
cash flows for the years ended December 31, 1995, 1996 and 1997 in conformity
with Australian Accounting Standards.
As discussed in Note 1 to the combined financial statements, in 1995 BTR
Packaging changed its methods of accounting for goodwill amortization.
Accounting principles generally accepted in Australia vary in certain
significant respects from accounting principles generally accepted in the
United States. The application of the generally accepted accounting
principles in the United States would have affected the determination of
combined operating profit for the years ended December 31, 1995, 1996 and 1997
and the determination of the combined divisional owners equity at December 31,
1995, 1996 and 1997 to the extent summarized in Note 31 to the financial
statements.
/s/ ERNST & YOUNG
- ------------------------
ERNST & YOUNG
Chartered Accountants
Melbourne, Australia
April 7, 1998
1
<PAGE>
BTR Packaging
COMBINED PROFIT AND LOSS STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(in millions of Australian dollars)
- ------------------------------------------------------------------------------
Notes 1997 1996 1995
-----------------------------------------
Revenue 2 2,207.4 2,149.5 2,089.3
=============================================================================
Operating profit before interest,
abnormal items and income tax 366.8 359.9 427.1
Net interest (revenue)/expense 74.0 123.3 82.3
- -----------------------------------------------------------------------------
Operating profit before abnormal
items and income tax 2 292.8 236.6 344.8
Abnormal items before income tax 3 38.6 30.0 --
- -----------------------------------------------------------------------------
Operating profit before income tax 254.2 206.6 344.8
Income tax attributable to
operating profit 4 138.1 96.1 148.1
- -----------------------------------------------------------------------------
Operating profit/(loss) after
income tax 116.1 110.5 196.7
Outside equity interests in
operating profit/(loss) after
income tax (9.5) 1.2 1.1
- -----------------------------------------------------------------------------
Operating profit/(loss) after
income tax attributable to
owners of the economic entity 125.6 109.3 195.6
=============================================================================
The accompanying notes form part of these financial statements.
2
<PAGE>
BTR Packaging
COMBINED BALANCE SHEETS
DECEMBER 31, 1997, 1996 AND 1995
(in millions of Australian dollars)
- ------------------------------------------------------------------------------
Notes 1997 1996 1995
-----------------------------------------
Current assets
Cash 411.4 214.1 369.1
Receivables 5 3,592.2 3,437.0 2,919.6
Inventories 6 459.0 396.8 409.1
Other 7 0.0 0.0 0.0
- -----------------------------------------------------------------------------
Total current assets 4,462.6 4,047.9 3,697.8
Non-current assets
Receivables 8 13.9 8.7 4.5
Investments 9 176.6 140.1 117.9
Property, plant and equipment 10 1,845.3 1,748.1 1,709.2
Intangibles 11 2,021.5 2,062.0 2,162.0
Other 12 33.0 41.7 38.5
- -----------------------------------------------------------------------------
Total non-current assets 4,090.3 4,000.6 4,032.1
- -----------------------------------------------------------------------------
Total assets 8,552.9 8,048.5 7,729.9
=============================================================================
Current liabilities
Accounts payable 13 312.0 290.0 321.7
Borrowings 14 3,195.9 2,918.3 2,734.6
Provisions 15 296.2 102.3 78.4
- -----------------------------------------------------------------------------
Total current liabilities 3,804.1 3,310.6 3,134.7
Non-current liabilities
Accounts payable 16 1.0 1.2 3.1
Borrowings 17 1,256.4 1,520.0 217.0
Provisions 18 168.0 156.7 143.1
- -----------------------------------------------------------------------------
Total non-current liabilities 1,425.4 1,677.9 363.2
- -----------------------------------------------------------------------------
Total liabilities 5,229.5 4,988.5 3,497.9
=============================================================================
Net assets 3,323.4 3,060.0 4,232.0
=============================================================================
Division owners' equity
Owners' equity attributable to
owners of the Division 3,265.8 3,002.1 4,172.3
Outside equity interests in
controlled entities 57.6 57.9 59.7
- -----------------------------------------------------------------------------
Total Division owners' equity 19 3,323.4 3,060.0 4,232.0
=============================================================================
The accompanying notes form part of these financial statements.
3
<PAGE>
BTR Packaging
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(in millions of Australian dollars)
- ------------------------------------------------------------------------------
Notes 1997 1996 1995
-----------------------------------------
Cash flows from operating activities
Receipts from customers 2,040.7 1,991.9 1,989.3
Payments to suppliers and employees (1,443.6) (1,426.4) (1,713.8)
Distributions received 11.1 11.3 10.7
Interest received 8.1 7.3 5.0
Interest paid (82.1) (130.6) (87.3)
Income tax paid (122.1) (61.8) (121.4)
- -----------------------------------------------------------------------------
Net cash provided by operating
activities 27(b) 412.1 391.7 82.5
Cash flows from investing activities
Proceeds on sale of other non-
current assets 9.5 2.9 12.2
Payments for other non-current
assets (including capitalized
interest) (261.2) (294.4) (312.0)
Acquisition of businesses 27(c) -- (21.8) (27.9)
- -----------------------------------------------------------------------------
Net cash used in investing activities (251.7) (313.3) (327.7)
Cash flows from financing activities
Proceeds from issue of shares to
outside equity interests -- -- 3.3
Advances from related companies 444.3 743.3 445.2
Advances to related companies (553.5) (979.9) (253.8)
Movement in equity 116.6 (1,280.5) (95.7)
Proceeds from borrowings 3,351.7 1,579.7 383.7
Repayments of borrowings (3,420.0) (260.4) (150.7)
- -----------------------------------------------------------------------------
Net cash used in financing activities (60.9) (197.8) 332.0
Net increase/(decrease) in cash 99.5 (119.4) 86.8
Cash at beginning of the
financial year 118.7 222.7 125.7
Exchange movement 15.1 (0.2) (1.4)
Cash acquired 27(c) -- 15.6 11.6
- -----------------------------------------------------------------------------
Cash at the end of the
financial year 27(a) 233.3 118.7 222.7
=============================================================================
The accompanying notes form part of these financial statements.
4
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. Statement of Accounting Policies
Basis of Preparation
These general purpose combined financial statements have been prepared in
accordance with applicable Australian Accounting Standards and other
Australian mandatory professional reporting requirements (Urgent Issues Group
Consensus Views). The BTR Packaging economic entity consists of the business
activities of BTR plc within the industry and geographic segments described in
note 26. BTR plc is a publicly listed company incorporated in the UK. A list
of the entities included in the economic entity are detailed in note 23. The
combined financial statements have been prepared on the accrual basis of
accounting including the historical cost convention and the going concern
assumption. All intra BTR Packaging trading has been eliminated. Financial
information has been derived from the accounting records of the units which
will form part of BTR Packaging.
The preparation of these combined financial statements reflect the following
assumptions.
i) A restructure of the economic entity has been achieved by transferring out
of the economic entity those subsidiaries and divisions which are not to be
part of the on-going packaging business and transferring in subsidiaries and
divisions which are to be part of the new economic entity. The transfers are
assumed to be at the historical cost to the BTR plc group and have been
accounted for on the basis that they were excluded from or included in, the
new structure as if that restructure had occurred at 31 December 1994. The
offsetting entry reflecting the net change in investment has been booked to
the "Division equity". It should be noted that the ultimate restructure may
result in a different movement in the cost of investments due to different
values being ascribed to the subsidiaries at the actual time of transfer.
ii) Businesses ceased or disposed which were not related to businesses
carried on by BTR Packaging during the three year period have been treated as
if they were disposed at 31 December 1994 and businesses acquired during the
period from outside the BTR plc group have been accounted for from the date
control was acquired.
The adjustments to the combined financial statements that have been made are
as follows:
a) To remove a 1% head office charge and to replace it with an appropriate
allocation of actual head office expenses; the determination of such amounts
was made by reference to specific costs, turnover and geographic location. In
the opinion of management, these allocation methods are reasonable.
5
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
b) To push down into the accounts of the economic entity:
-- Goodwill and other identifiable intangible assets of BTR Packaging
that arise on consolidation at higher levels in the BTR plc
consolidation process; and
-- Revaluations and adjustments of BTR Packaging land, buildings,
quarries, plant and equipment to reflect cost to the BTR plc group
that arise on consolidation at higher levels in the BTR plc group
consolidation.
c) Certain assets and liabilities of the legal entities which form part of
the economic entity have been excluded from the combined financial statements
because they do not form part of BTR Packaging.
Design and pre-production costs on major collaborative projects
Design and pre-production costs on collaborative projects are capitalized and
disclosed under other non-current assets in the cases where future benefits
are expected to arise.
Valuation of Inventories
Raw materials, work in progress, finished goods and stock in transit are
valued at the lower of cost and net realizable value. Cost comprises the
actual cost of raw materials and an applicable portion of labor and
manufacturing overheads for work in progress and finished goods.
Derivative Financial Instruments
The economic entity enters into a variety of derivative financial instruments
to manage its exposure to interest rate and foreign exchange rate risk,
including forward foreign exchange contracts, forward interest rate contracts
and interest rate swaps.
Exchange differences on specific forward foreign exchange contracts to hedge
the purchase or sale of specific goods or equipment are deferred and included
within the cost of the underlying asset. Gains or losses on general hedges
are included in the determination of foreign exchange gains or losses in the
period in which they arise. Gains and losses on interest rate swaps are
included in the determination of interest expense.
Equity accounting
As associate is an entity (other than a partnership) in which the economic
entity exercises significant influence but not control. The carrying amount
of investments in associates is calculated using the equity method of
accounting where the cost of the investment is increased or decreased to
6
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
recognize the investor's share of the post-acquisition profits or losses and
other changes in net assets of the associate.
The investor's share of the post acquisition profits or losses (after tax and
including extraordinary items) of the associate is included in the combined
profit and loss account of the investor as revenue.
Foreign currencies
Foreign currency transactions are converted at rates of exchange in effect
when transactions took place. Receivables and payable denominated in foreign
currencies are converted at exchange rates ruling at balance date except where
forward exchange contracts are held, in which case contract settlement rates
are used. Exchange gains and losses have been brought to account in
determining operating profit for the year. On combination exchange
differences on loans denominated in foreign currency, which hedge a net
investment in a controlled overseas entity, are transferred to the foreign
currency fluctuation reserve. Balance sheets of controlled overseas entities
are converted at exchange rates ruling at Balance date and profit and loss
statements are converted at average exchange rates for the year. Unrealized
gains and losses on conversion of the accounts of controlled overseas entities
are taken direct to foreign exchange fluctuation reserve.
Fixed assets
Plant consists of purchases, commissioning, installation costs and in respect
of major additions, interest expense incurred prior to commencement of
production. Depreciation charges are made from the time when an asset is
first put into use or the date of acquisition of controlled entities and also
from the effective dates of any revaluations.
Depreciation charges are made on a straight-line basis to provide for the
write off of cost or subsequent valuation of fixed assets, with the exception
of land, to estimated residual values, over the estimated useful life of the
assets concerned. Costs of improving leasehold properties are amortized over
the period of the lease.
Carrying amount of non-current assets
The Directors have considered the carrying amounts of non-current assets and
are satisfied that these amounts do not exceed the net amount expected to be
recovered through cash inflows and outflows arising from the continued use and
subsequent disposal of these assets. In determining recoverable amounts,
expected net cash flows have not been discounted to present value.
Revaluations of non-current assets are not made in accordance with a regular
policy of revaluation.
7
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Sales revenue
Sales revenue represents the invoiced value of goods supplied excluding sales
taxes and intercompany transactions. Income from sales is recognized at the
time of shipping products to customers.
Change in Accounting Policy -- Goodwill Amortization
Purchased goodwill and goodwill on consolidation, representing the difference
between the cost of investments and the fair value of net assets acquired, are
amortized on a straight-line basis against operating income over a period of
20 years. The method of amortization changed on 25 August 1995 from the
discounted method [see (i)] to the straight-line method [(see (ii) below].
(i) Goodwill on acquisitions prior to 25 August 1995
The consideration for the purchase of a business recognizes the future
benefits accruing from the acquisition. The portion of these benefits
attributable to goodwill, and expected during each of the next succeeding
20 years, is identified at acquisition. The carrying amount of goodwill
represents the discounted value of these future benefits. At each year
end the discounted value of the remaining benefits is calculated and the
difference in discounted value from year to year is amortized. At each
year end the remaining expected benefits are reviewed and adjusted where
the benefits initially expected are no longer probable. The amortization
expense for 1995 using the discount method amounted to A$31.2 million.
The amortization expense in 1995 on a straight-line basis would have
amounted to A$44.0 million.
(ii) Goodwill on acquisitions after 25 August 1995
In accordance with Urgent Issues Group Abstract 5, goodwill on
acquisitions after 25 August 1995 is systematically amortized against
operating income on a straight-line basis. The unamortized balance of
goodwill is reviewed at year end and charged to the profit and loss
account to the extent that future benefits are not longer probable.
Partnerships
Investments in partnerships which are not controlled are carried at cost and
adjusted by the economic entity share of the movement in the net assets of the
partnership. The economic entity interest in the net profit of the
partnership is brought to account as it is earned. The investment is
accounted for using equity accounting principles.
8
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Employee benefits
Provision is made for benefits (including on-costs) accruing to employees in
respect of wages and salaries, annual leave, long service leave, sick leave
and other entitlements when it is probable that settlement will be required
and is capable of being measured reliably.
Provisions made in respect of wages and salaries, annual leave, long service
leave, sick leave and other employee entitlements expected to be settled
within 12 months, are measured at their nominal values.
Provisions made in respect of long service, sick leave and other employee
entitlements which are not expected to be settled within 12 months are
measured as the present value of the estimated future cash outflows to be made
by the economic entity in respect of services provided by employees up to the
reporting date. Employers and employees contribute to superannuation funds
which provide benefits to employees or dependents on retirement, disability or
death. Contributions to these funds are charged against income.
Rounding of amounts and currency
Amounts in the combined financial statements have been rounded off to the
nearest tenth of a million dollars. Where the amount is A$50,000 or less,
this is indicated by a dash unless specifically stated otherwise. Unless
otherwise stated the combined financial statements are presented in Australian
dollars.
Taxation
The economic entity uses the liability method of tax effect accounting.
Provision is not made for additional taxation which may be payable of profits
retained by overseas entities were distributed as the undistributed earnings
are considered to be indefinitely reinvested. No provision has been made for
capital gains tax which may arise in the event of sale of revalued assets as
no decision has been made to sell any of these assets. Future income tax
benefits relating to tax losses are brought to account as an asset only when
their recovery is virtually certain.
Tradenames
The Directors consider tradenames to be separately identifiable assets which
do not diminish in value over time and accordingly no amortization is
necessary. The carrying value of trade names are reviewed as part of the
Directors annual assessment of all non current assets.
9
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. Operating Profit
The operating profit before abnormal items and income tax includes the
following items of revenue and expense:
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Revenue
Sales revenue 2,048.6 2,051.7 2,015.3
Other operating revenue
Interest -- non-related parties 8.1 7.3 5.0
Interest -- related parties 87.3 66.7 54.9
Income from associated companies 6.0 2.5 2.8
Income from partnerships 12.5 15.9 9.1
Proceeds from sales of non-current assets 44.9 5.4 2.2
- -----------------------------------------------------------------------------
Total other operating revenue 158.8 97.8 74.0
- -----------------------------------------------------------------------------
Total operating revenue 2,207.4 2,149.5 2,089.3
=============================================================================
Expense
Audit and accountancy 1.5 1.9 2.2
Borrowing costs
Interest -- non-related parties 129.2 114.7 72.4
Interest -- related parties 40.2 82.5 69.8
Bad and doubtful debts
Bad trade debts written off -- 0.5 0.2
Provision for doubtful trade debts 0.3 0.1 0.2
Depreciation of property, plant and
equipment 213.1 208.0 193.4
Amortization of leased property,
plant and equipment 3.1 3.5 3.5
Amortization of goodwill 108.3 106.1 31.2
Net exchange loss/(gain) on foreign
currency transactions (3.1) 0.3 2.8
Research and development costs 3.7 4.5 3.1
Operating lease rental 40.2 39.6 50.9
Provision for employee entitlements 21.3 20.7 20.2
Superannuation 16.0 14.8 13.5
10
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
3. Abnormal items
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Reorganization & restructure costs
incurred and provided for 5.0 20.6 --
Applicable income tax credit (1.8) (7.4) --
- -----------------------------------------------------------------------------
3.2 13.2 --
=============================================================================
Provision for writedown of assets
incurred and provided for 15.0 9.4 --
Applicable income tax credit (5.4) (3.4) --
- -----------------------------------------------------------------------------
9.6 6.0 --
=============================================================================
Net exchange loss/(gain) on foreign
currency transactions 18.6 -- --
Applicable income tax credit -- -- --
=============================================================================
18.6 -- --
=============================================================================
11
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. Income tax expense
The prima facie income tax expense on pre-tax accounting income reconciles to
the income tax expense in the accounts as follows:
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Operating profit before income tax 254.2 206.6 344.8
=============================================================================
Income tax expense calculated at
the Australian statutory rate
of 36% of operating profit 91.5 74.4 124.1
Differential tax rates of controlled
overseas entities and associated
companies (0.8) (0.3) 2.8
Permanent differences
Non deductible depreciation and
amortization 38.8 37.2 13.7
Investment allowances and other
incentives (0.1) (0.5) (1.5)
Under/(over) provision of income
tax in previous year (2.5) (1.3) (0.8)
Effect of tax rate change 0.0 0.0 1.9
Other 11.2 (13.4) 7.9
- -----------------------------------------------------------------------------
Income tax expense 138.1 96.1 148.1
=============================================================================
Future income tax benefit arising from
tax losses of controlled entities
not brought to account at balance date
as realization of the benefit is not
regarded as virtually certain 9.6 3.4 3.6
=============================================================================
This future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and of an amount
sufficient to enable the benefit to be realized;
(b) the conditions for deductibility imposed by tax legislation continue to
be complied with; and
(c) no changes in tax legislation adversely affect the economic entity is
realizing the benefit.
12
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
5. Current receivables
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Trade debtors 269.0 238.0 194.8
Less: Provision for doubtful debts (0.6) (0.3) (0.7)
- -----------------------------------------------------------------------------
268.4 237.7 194.1
Other debtors 76.0 101.7 78.8
Amounts receivable from contracts of sale 35.2 -- --
Amounts receivable from -- related parties 3,211.2 3,097.5 2,646.7
Amounts receivable from -- associated
companies 1.4 0.1 --
- -----------------------------------------------------------------------------
3,592.2 3,437.0 2,919.6
=============================================================================
Movement in provision for doubtful debts
Balance at beginning of year (0.3) (0.7) (0.5)
Bad debts previously provided for
written off during the year 0.0 0.5 0.0
Bad and doubtful debts provided for
during the year (0.3) (0.1) (0.2)
- -----------------------------------------------------------------------------
Balance at end of year (0.6) (0.3) (0.7)
=============================================================================
6. Current inventories
1997 1996 1995
--------------------------------
(millions of Australian dollars)
At cost
Raw materials and stores 79.1 59.5 61.1
Consumables 85.7 74.0 71.7
Work in progress 41.7 29.7 48.5
Contract work in progress 2.0 1.0 --
Progress payments received 0.3 -- --
Finished goods 248.1 230.5 226.2
At net realizable value
Consumables 0.9 0.7 0.6
Finished goods 1.2 1.4 1.0
- -----------------------------------------------------------------------------
459.0 396.8 409.1
=============================================================================
13
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. Other
1997 1996 1995
--------------------------------
(millions of Australian dollars)
-- -- --
=============================================================================
8. Non-current receivables
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Other receivables 13.9 0.3 4.5
Amounts receivable from related parties -- 8.4 0.0
- -----------------------------------------------------------------------------
13.9 8.7 4.5
=============================================================================
9. Non-current investments
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Investments in associated companies 46.2 35.8 13.5
Equity in post acquisition retained
earnings 9.2 6.5 5.5
- -----------------------------------------------------------------------------
55.4 42.3 19.0
Investments in partnerships 120.5 97.0 97.9
Shares in unlisted corporations
At cost 0.7 0.8 1.0
- -----------------------------------------------------------------------------
176.6 140.1 117.9
=============================================================================
Investments in resource venture partnerships are stated at 1992 Directors'
valuation, based on market price, plus share of profits less cash drawings.
14
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
10. Property, plant and equipment
Year 1997 1996 1995
-----------------------------------------
(millions of Australian dollars)
Land and buildings
Freehold land
at cost 63.3 92.1 97.6
Freehold buildings
at cost 314.3 266.2 269.4
accumulated depreciation (45.3) (33.3) (28.0)
- -----------------------------------------------------------------------------
269.0 232.9 241.4
- -----------------------------------------------------------------------------
Total freehold land and buildings 332.3 325.0 339.0
Leasehold land and buildings
at independent valuation on
existing use basis 1990 0.6 3.0 4.6
accumulated amortization (0.1) -- (0.7)
- -----------------------------------------------------------------------------
0.5 3.0 3.9
at cost 67.2 50.1 19.6
accumulated amortization (8.3) (5.5) (4.4)
- -----------------------------------------------------------------------------
58.9 44.6 15.2
- -----------------------------------------------------------------------------
Total leasehold land and buildings 59.4 47.6 19.1
- -----------------------------------------------------------------------------
Total land and buildings 391.7 372.6 358.1
=============================================================================
Quarries
Freehold at cost 3.8 2.3 1.9
accumulated depreciation (0.2) (0.2) (0.1)
- -----------------------------------------------------------------------------
3.6 2.1 1.8
Leasehold at cost 2.9 2.1 2.1
accumulated amortization (1.3) (1.1) (1.0)
- -----------------------------------------------------------------------------
1.6 1.0 1.1
- -----------------------------------------------------------------------------
Total quarries 5.2 3.1 2.9
=============================================================================
15
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Plant, fittings and motor vehicles
Leased assets at cost 36.6 45.9 44.4
accumulated amortization (28.7) (32.6) (28.2)
- -----------------------------------------------------------------------------
7.9 13.3 16.2
at cost 2,720.7 2,433.4 2,252.0
accumulated depreciation (1,280.2) (1,074.3) (920.0)
- -----------------------------------------------------------------------------
1,440.5 1,359.1 1,332.0
- -----------------------------------------------------------------------------
Total plant, fittings and motor vehicles 1,448.4 1,372.4 1,348.2
=============================================================================
Total property, plant and equipment 1,845.3 1,748.1 1,709.2
=============================================================================
Borrowing costs capitalized in the year in
respect of plant under construction 2.7 3.2 5.8
=============================================================================
The freehold land and buildings are being progressively revalued over a three
year period commencing the year ended 31 December 1997 on the basis of
location. All land and buildings located in Australia were independently
valued by McGees National Property Consultants in December 1997 on an existing
use basis. The current value of land and buildings based on the 1997
valuation of the Australian assets when added to the Director's assessment of
the values of all other non-Australian land and buildings at 31 December 1995
(based on the independent valuation undertaken as at 31 December 1992) after
allowing for disposals and other movements is A$391.6 million. No adjustment
has been made to record this valuation as it exceeds book value.
The leasehold land and buildings 1990 revaluation relates to an overseas
property which the Directors believe is appropriately valued and it will be
revalued in line with the policy of progressive revaluation by location.
16
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
11. Intangible assets
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Goodwill on consolidation 1,985.2 1,903.5 1,894.9
Goodwill at cost 160.7 160.7 160.7
- -----------------------------------------------------------------------------
2,145.9 2,064.2 2,055.6
accumulated amortization (337.0) (211.9) (100.9)
- -----------------------------------------------------------------------------
1,808.9 1,852.3 1,954.7
Tradenames at 1992 Directors' valuation 197.7 198.7 198.8
Tradenames at cost 2.8 2.4 2.6
Other intangibles 12.1 8.6 5.9
- -----------------------------------------------------------------------------
2,021.5 2,062.0 2,162.0
=============================================================================
The Tradenames were revalued in 1992 using either the royalty relief or gross
profit differential valuation methodologies.
12. Other non-current assets
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Future income tax benefit on timing
differences 33.0 41.7 38.5
=============================================================================
The future income tax benefits will only be obtained if:
(a) the companies derive future assessable income of a nature and of an
amount sufficient to enable the benefit from the deductions for the loss
to be realized;
(b) the companies continue to comply with the conditions for deductibility
imposed by tax legislation; and
(c) no changes in tax legislation adversely affect the companies in realizing
the benefit from the deduction for the loss.
17
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
13. Current accounts payable
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Unsecured
Trade creditors 201.4 193.8 193.1
Other creditors and accruals 110.6 96.2 128.6
- -----------------------------------------------------------------------------
312.0 290.0 321.7
=============================================================================
14. Current borrowings
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Unsecured
Bank overdrafts 178.1 95.2 146.4
Bank loans 222.5 52.1 29.9
Other loans 730.0 650.0 667.8
Amounts owing to -- associated companies 2.6 0.3 0.7
Amounts owing to -- related parties 2,062.1 2,120.0 1,887.6
- -----------------------------------------------------------------------------
3,195.3 2,917.6 2,732.4
Secured
Bank overdrafts -- 0.2 --
Finance lease liability (note 21) 0.6 0.5 2.2
- -----------------------------------------------------------------------------
0.6 0.7 2.2
- -----------------------------------------------------------------------------
3,195.9 2,918.3 2,734.6
=============================================================================
The secured loans are secured over specific assets.
18
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
15. Current provisions
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Long service leave 14.8 14.8 14.7
Annual leave 26.9 25.2 24.7
Pension 0.6 0.7 1.1
Sick leave 3.9 3.3 3.4
- -----------------------------------------------------------------------------
Employee entitlements 46.2 44.0 43.9
Reorganization 5.0 16.5 --
Dividend 179.4 -- --
Taxation 65.6 41.8 34.5
- -----------------------------------------------------------------------------
296.2 102.3 78.4
=============================================================================
16. Non-current accounts payable
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Unsecured
Other creditors 1.0 1.2 3.1
=============================================================================
17. Non-current borrowings
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Unsecured
Bank loans 1,044.7 1,506.3 215.5
Other loans 200.1 0.1 0.1
- -----------------------------------------------------------------------------
1,244.8 1,506.4 215.6
Secured
Finance lease liability (note 21) 0.1 0.5 1.4
Other loans 11.5 13.1 --
- -----------------------------------------------------------------------------
11.6 13.6 1.4
- -----------------------------------------------------------------------------
1,256.4 1,520.0 217.0
=============================================================================
The secured loans are secured over specific assets.
19
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
18. Non-current provisions
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Long service leave 11.3 9.8 9.0
Pension 1.2 1.2 0.6
- -----------------------------------------------------------------------------
Employee entitlements 12.5 11.0 9.6
Deferred income tax 155.4 145.6 130.3
Plant rationalization 0.1 0.1 3.2
- -----------------------------------------------------------------------------
168.0 156.7 143.1
=============================================================================
Employee entitlement liabilities
Current (note 15) 46.2 44.0 43.9
Non current (as above) 12.5 11.0 9.6
- -----------------------------------------------------------------------------
58.7 55.0 53.5
=============================================================================
20
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
19. Divisional equity
Millions
of
Australian
Dollars
----------
31 December 1994 Divisional equity 2,762.4
Distributions to shareholders during 1995 (626.9)
Contributions from shareholders' 1,928.5
Net Result for 1995 196.7
Foreign Currency translation for 1995 (28.7)
---------
31 December 1995 Divisional equity 4,232.0
Distributions to shareholders during 1996 (1,720.0)
Contributions from shareholders' 461.5
Net Result for 1996 110.5
Foreign Currency translation for 1996 (24.0)
---------
31 December 1996 Divisional equity 3,060.0
Distributions to shareholders during 1997 (469.0)
Contributions from shareholders 395.3
Net result for 1997 116.1
Foreign Currency translation for 1997 221.0
--------
31 December 1997 Divisional equity $3,323.4
========
20. Contingent liabilities
1997 1996 1995
--------------------------------
(millions of Australian dollars)
Letters of Credit 6.7 7.0 30.4
Unsecured Guarantee 12.6 7.9 --
Bills under discount 0.8 1.1 0.9
Continental PET Options (i) 40.0 41.3 36.5
Other 1.4 2.0 0.4
The Division has guaranteed the debts of certain related parties (other
controlled entities of BTR Nylex Limited) under the terms of an Australian
Securities Commission class order 95/1530. The class order relieves the
related parties from the requirements to prepare annual audited accounts. The
conditional contract of sale referred to in note 28 requires that prior to
divestment by BTR plc these cross deeds of guarantee be discharged.
21
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(i) Continental PET Technologies, Inc., a controlled entity, has issued
options to certain executives to acquire shares of that entity under
certain terms and conditions. Under the stock option plan ACI America
Inc., a controlled entity, is required to purchase any shares which are
issued under the plan. At balance date, had the options been exercised
the economic entity would have had a liability of the amount disclosed
above. Under clause (8) of the Continental PET Technologies, Inc. 1991
Stock Option Plan should BTR Nylex Limited sell or cease to own
Continental PET Technologies then ACI America, Inc. will purchase all
stock held by participants in the plan on the date of such an event at
the Valuation Price and all options at the excess of the valuation price
over the exercise price. As referred to in note 28 BTR plc has entered
into a conditional contract of sale. There is a trigger mechanism that
results in the actual purchase price for the company being inserted in
the formula rather than a standard 6.5 multiplier. Based on the
conditional purchase price the liability is estimated to be A$75.6
million. Depending on the ultimate purchase price this could have a
material effect on the liability of the company to purchase back the
options.
21. Capital and lease commitments
1997 1996 1995
--------------------------------
(millions of Australian dollars)
a) Finance lease commitments
Not later than one year 0.7 0.5 2.4
Later than 1 year but not later
than 2 years 0.1 0.6 0.9
Later than 2 years but not later
than 5 years -- -- 0.6
- -----------------------------------------------------------------------------
Minimum finance lease payments 0.8 1.1 3.9
Less: future finance charges (0.1) (0.1) (0.3)
- -----------------------------------------------------------------------------
Present value of minimum lease payments 0.7 1.0 3.6
=============================================================================
Current liability as per note 14 0.6 0.5 2.2
Non-current liability as per note 17 0.1 0.5 1.4
- -----------------------------------------------------------------------------
0.7 1.0 3.6
=============================================================================
22
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1997 1996 1995
--------------------------------
(millions of Australian dollars)
b) Operating lease and hire expenditure
contracted for:
Not later than one year 19.5 19.5 21.5
Later than 1 year but not later
than 2 years 15.1 16.7 18.1
Later than 2 years but not later
than 5 years 25.2 27.8 36.7
Later than 5 years 10.3 6.7 16.1
- -----------------------------------------------------------------------------
70.1 70.7 92.4
=============================================================================
c) Capital expenditure commitments
Authorized but not contracted 97.3 59.8 84.6
=============================================================================
Authorized and contracted for:
Not later than one year 57.1 54.7 143.0
Later than 1 year but not later
than 2 years -- 0.2 0.5
- -----------------------------------------------------------------------------
57.1 54.9 143.5
=============================================================================
22. Superannuation
Australia
A number of defined benefit and accumulation type superannuation funds have
been established by the economic entity for the purpose of providing
retirement benefits for employees. The benefits under the funds are provided
from contributions by employee members and companies in the economic entity
plus income from the investment of the funds' assets. Members contribute at
various rates while economic entity contributions are at fixed rates in
respect of accumulation funds and at rates determined by actuarial valuations
in respect of defined benefit funds. The employer contributions to defined
benefit funds are at rates determined to ensure that these funds have
sufficient assets to meet their liabilities. Actuarial valuations for this
purpose are carried out at regular intervals, generally once every 3 years.
23
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Employer companies also participate in various industry funds on behalf of
certain employees. The funds operate on an accumulation basis and provide
lump sum benefits for members which are subject to government preservation
rules. Contributions are made by the employer in accordance with legally
enforceable agreements and government legislation.
Employer contributions to either style of fund must satisfy the minimum
stipulated contribution under the Superannuation Guarantee Act.
Companies within the economic entity are obliged to contribute to these funds
as set out in the relevant Trust Deeds or in accordance with industrial
agreements, subject to their right to reduce, suspend or terminate
contributions as specified in the relevant Trust Deeds.
As part of the sale process, the superannuation funds will be restructured so
that they are fully funded as required by the Superannuation Industry
Supervision Act, but not overfunded. The assets of relevant funds are
sufficient to satisfy all benefits that would have vested in the event of the
voluntary or compulsory termination of employment of each employee.
The assets of the funds are not included in these accounts.
New Zealand
Superannuation is voluntary. The members contribute at various rates and the
employer contributes 1.5 times that amount. The fund is an accumulation fund.
United Kingdom
Rockware had unfunded pension liabilities as follows:
1995 A$13.7 million
1996 A$26.4 million
1997 A$20.5 million
The unfunded liabilities of the Rockware schemes were expected to be
eliminated by 31 December 2000. BTR plc have advised that as part of the
sales process a new Rockware Pension Plan will be established for all existing
Rockware members which will be fully funded as at the commencement date. BTR
plc have therefore assumed the unfunded liability at 31 December 1997 and
accordingly the liability has not been recorded in these accounts.
Other countries
Some overseas countries require employers to contribute to Government
specified retirement plans. Contributions are made by the economic entity
based on current legislation applicable to such retirement plans.
24
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
23. Details of entities forming BTR Packaging
Ownership interest Significant
(all being 100% Business
except where stated) Units/Divisions
Name of Entity/Country ---------------------- within a common
of Incorporation 1997 % 1996 % 1995 % controlled entity
- ------------------------------- ------ ------ ------ -------------------
BTR Nylex Limited/ Australia
ACI Operations Pty Ltd/
Australia ACI Glass Australia
ACI Industrial
Minerals
ACI Blowpak
ACI Closures
ACI Petalite
ACI Plastics
Packaging Auburn
ACI Bentley
+ACI America Holdings Inc./
U.S.A.
++ACI Ventures, Inc./ U.S.A.
++Andover Group Inc./ U.S.A.
++Continental PET Technologies
Inc./ U.S.A.
+++Comerc USA Inc./ U.S.A.
++++Comerc, S.A. de C. V./ Mexico
+++Continental PET do Brazil
Limitada/ Brazil
+++Continental PET Technologies
De Mexico, S.A. de C.V./
Mexico
+++Continental PET Technologies
Magyarorszag KFT/ Hungary
+++Controllers USA Inc./ U.S.A.
++++Consultores En Controles,
S.A. de C.V./ Mexico
+++Lancop USA Inc./ U.S.A.
++++Lancop, S.A. de C.V./ Mexico
+++Technological Specialties
Inc./ U.S.A.
++++Especialidades Technologicas,
S.A. de C.V./ Mexico
+Australian Consolidated
Industries Limited/ Australia
25
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Ownership interest Significant
(all being 100% Business
except where stated) Units/Divisions
Name of Entity/Country ---------------------- within a common
of Incorporation 1997 % 1996 % 1995 % controlled entity
- -------------------------------- ------ ------ ------ -------------------
+ACI Plastics Packaging (Thailand)
Limited/ Thailand
Kennon Carpet Mills Pty Ltd/
Australia
+Beadle Pty Ltd/ Australia
++ACI International Limited/
Australia
++++ACI Glass Packaging Penrith
Pty Ltd/ Australia
++++ACI Finance Ltd/ Australia
++++Breadalbane Shipping Pte.
Limited/ Singapore
++++BTR Nylex Holdings N.Z.
Limited/ N.Z.
+++++ACI Minerals Limited/ N.Z.
+++++BTR Operations NZ Ltd/ N.Z. ACI Glass New
Zealand
Nexus Packaging
Systems
ACI Closures NZ
++++New Guinea Containers Pty
Ltd/ P.N.G. 70% 70% 70%
++++P.T. Kangar Consolidated
Industries/ Indonesia 50.15% 50.15% 50.15%
BTR Nylex Holdings H.K. Ltd/
Hong Kong
ACI Beijing Ltd/ Hong Kong
+Beijing Great Wall Plastics
Company Ltd/ China 80% 80% --
ACI Guangdong Ltd/ Hong Kong
+ACI Guangdong Glass Company
Ltd/ China 70% 70% 70%
ACI Shanghai Ltd/ Hong Kong
+ACI Shanghai Glass Company
Ltd/ China 70% 70% 70%
ACI Tianjin Ltd/ Hong Kong
+ACI Tianjin Mould Company
Ltd/ China 70% 70% 70%
BTR Nylex Services H.K. Ltd/
Hong Kong
26
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Ownership interest Significant
(all being 100% Business
except where stated) Units/Divisions
Name of Entity/Country ---------------------- within a common
of Incorporation 1997 % 1996 % 1995 % controlled entity
- -------------------------------- ------ ------ ------ -------------------
Rockware Group Limited/ United
Kingdom
Blewis & Shaw (Plastics)
Limited/ United Kingdom
Interver International
Limited/ United Kingdom
PET Technologies Limited/
United Kingdom
RFP Limited/ United Kingdom
Rockware Glass Limited/
United Kingdom
+New-Tech Coatings Limited/
United Kingdom
+P & R Sand Limited/ United
Kingdom
+Rockware Glass (Headlands)
Limited/ United Kingdom
+Rockware Glass (Portland)
Limited/ United Kingdom
+Rockware Glass (Wheatley)
Limited/ United Kingdom
+Rockware Glass (Worksop)
Limited/ United Kingdom
+Rockware International
Limited/ United Kingdom
Rockware Kingspeed Limited/
United Kingdom
Rockware Shelfco No. 1
Limited/ United Kingdom
Termination No. 13 Limited/
United Kingdom
+Termination No. 11 Limited/
United Kingdom
BTR China Holdings BV/
Netherlands
ACI Qingdao Plastics Packaging
Co. Limited/ China 70% 70% --
PET Technologies BV (Formerly
ACI Skillpack B.V.)/
Netherlands
27
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
24. Associated companies
Ownership
Interest
of investor
Company in
Associated
Companies
---------------- Financial
Name of Entity/Country 1997 1996 1995 Period
Where Business Carried on Principal Activity % % % Ended
- ------------------------- ------------------ ---- ---- ---- ----------
Advance PET Manufacture of PET 50 50 -- 31 December
Technologies Ltd/ products
Saudi Arabia
Ardagh plc/ Eire Manufacture of 21.7 21.7 21.7 25 June
glass
containers
British Glass Recycling Glass recycling 50 50 50 31 December
Company Ltd/ U.K.
Solucao PET Ltda/ Brazil Manufacture of PET 50 50 -- 31 December
products
25. Interest in partnerships
Share of
Book value operating profit
of Investments after Interest
Name of ---------------- ----------------
Partnership Business Principal Activity 1997 1996 1995 1997 1996 1995
- -------------------- ------------------ ---- ---- ---- ---- ---- ----
(millions of Australian dollars)
General Chemical
Soda Ash Soda ash mining 120.5 97.0 97.9 12.5 15.9 9.1
=============================================================================
The book value of the investment in partnership is:
(i) Increased by the share of partnership profit; and
(ii) Reduced by cash drawings.
Andover Group Inc. (a wholly-owned controlled entity) owns a 25% (1995 and
1996 - 25%) share of the General Chemical Soda Ash Partnership which is based
at Green River, Wyoming U.S.A. The partnership extracts natural soda ash
deposits and sells the product to glass-makers and the chemical industry
around the world, including a number of controlled entities of BTR Packaging
on usual commercial terms.
28
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
26. Financial reporting by segments
Combined Operating Revenue
------------------------------------
1997 1996 1995
------------------------------------
(millions of Australian dollars)
(a) Business segments
Glass 1,432.2 1,296.7 1,275.2
Plastics 775.2 852.8 814.1
- -----------------------------------------------------------------------------
Operating revenue 2,207.4 2,149.5 2,089.3
=============================================================================
(b) Geographic segments
Australia, New Zealand & Others 1,190.1 1,119.8 1,116.2
Asia 130.8 133.3 114.2
The Americas 432.3 481.2 480.5
Europe 454.2 415.2 378.4
- -----------------------------------------------------------------------------
Operating revenue 2,207.4 2,149.5 2,089.3
=============================================================================
29
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Combined Profit before
Interest & Tax
---------------------------------
1997 1996 1995
---------------------------------
(millions of Australian dollars)
(a) Business segments
Glass 211.6 240.5 267.2
Plastics 136.6 119.4 159.9
- -----------------------------------------------------------------------------
Operating profit pre-corporate
activities 348.2 359.9 427.7
Corporate activities (i) (20.0) (30.0) --
- -----------------------------------------------------------------------------
328.2 329.9 427.1
=============================================================================
(b) Geographic segments
Australia, New Zealand & Others 135.8 141.0 211.9
Asia (17.2) 8.4 5.3
The Americas 144.1 137.8 140.2
Europe 85.5 72.7 69.7
- -----------------------------------------------------------------------------
Operating profit pre-corporate
activities 348.2 359.9 427.1
Corporate activities (i) (20.0) (30.0) --
- -----------------------------------------------------------------------------
328.2 329.9 427.1
=============================================================================
30
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Combined Total Assets
-----------------------------------
1997 1996 1995
-----------------------------------
(millions of Australian dollars)
(a) Business segments
Glass 9,221.6 8,505.9 8,291.7
Plastics 1 515.3 1,653.2 1,460.9
- -----------------------------------------------------------------------------
10,736.9 10,159.1 9,752.6
Corporate (i) (2,184.0) (2,110.6) (2,022.7)
- -----------------------------------------------------------------------------
8,552.9 8,048.5 7,729.9
=============================================================================
(b) Geographic segments
Australia, New Zealand & Others 6,944.8 6,767.0 6,397.7
Asia 417.0 347.6 315.1
The Americas 1,095.3 836.3 813.8
Europe 2,279.8 2,208.2 2,226.0
- -----------------------------------------------------------------------------
10,736.9 10,159.1 9,752.6
Corporate (i) (2,184.0) (2,110.6) (2,022.7)
- -----------------------------------------------------------------------------
8,552.9 8,048.5 7,729.9
=============================================================================
Corporate Activities -- disposal of non-core entities, closure and
restructuring costs of businesses, and disposal of selected non-current
investments.
(i) 1996 Corporate activities -- A$26.6 million Glass, Australia
reorganization costs
-- A$3.4 million Plastics, Australia
reorganization costs
1997 Corporate activities -- Plastics A$20.0 million ACI Petalite and
Nexus, Australia and New Zealand write down
of asset carrying values and restructuring
costs
Glass -- glass packaging containers
Plastics -- PET plastic packaging containers, non PET plastic packaging,
bottle closures
31
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
27. Statements of cash flows
Consolidated
1997 1996 1995
----------------------------------
(millions of Australian dollars)
(a) Reconciliation of cash
For the purpose of the statement of
cash flows, cash includes cash on hand
and in banks net of outstanding bank
overdraft and overnight advances.
Cash at the end of the reporting
period as shown in the statement of
cash flows is reconciled to the
relevant balance sheet items as follows:
Cash 411.4 214.1 369.1
Bank overdrafts and overnight
advances (178.1) (95.4) (146.4)
------------------------------------------------------------------------
233.3 118.7 222.7
========================================================================
(b) Reconciliation of operating profit
after income tax to net cash provided
by operating activities
Operating profit after income tax 116.1 110.5 196.7
Depreciation and amortization of
non-current assets 324.5 317.6 228.1
Partnership distribution less share
of profit (6.7) (6.8) (1.2)
Net (profit)/loss on sale of non-
current assets 6.0 (0.9) (0.4)
Changes in assets and liabilities
net of effects from acquisition
and disposal of businesses:
(Increase)/decrease in trade
and other debtors (7.6) (59.2) (25.6)
(Increase)/decrease in inventory (63.2) 16.2 (82.2)
Increase/(decrease) in trade
and other creditors 27.7 (19.6) (259.3)
Increase/(decrease) in taxation 15.3 33.9 26.4
-----------------------------------------------------------------------
412.1 391.7 82.5
=======================================================================
32
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Consolidated
1997 1996 1995
----------------------------------
(millions of Australian dollars)
(c) Business acquired
Details of businesses acquired
during the financial year are
as follows:
Consideration
Cash -- 21.8 27.9
Outside equity interest at date
of acquisition -- 5.7 4.4
------------------------------------------------------------------------
-- 27.5 32.3
========================================================================
Fair value of net assets acquired
Tangible Fixed Assets -- 5.2 25.6
Purchased goodwill -- 0.9 0.4
Inventories -- -- 3.1
Trade and other debtors -- 3.7 4.8
Cash and bank overdraft -- 15.6 11.6
Trade and other creditors -- -- (17.1)
------------------------------------------------------------------------
-- 25.4 28.4
Goodwill on acquisition -- 2.1 3.9
------------------------------------------------------------------------
-- 27.5 32.3
========================================================================
Consolidated
1997 1996 1995
----------------------------------
(millions of Australian dollars)
(d) No businesses were disposed during
the period. -- -- --
========================================================================
(e) Financing facilities
BTR Nylex Limited, a company within BTR Packaging, acted in 1995, 1996
and 1997 as the financier for all entities with the BTR Nylex Limited Group.
Consequently the extent to which facilities were utilized was affected by the
finance needs of all BTR Nylex Limited Group entities. Therefore, information
on the available financing facilities has not been provided other than to note
the loan facilities available to BTR Packaging consist of both short and
medium facilities and annually renewable facilities drawn in various
currencies. The facilities currently provided to BTR Nylex Limited are
33
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
intended to be repaid upon or prior to completion of the sale. New facilities
in respect of BTR Nylex Limited would be subject to negotiation with its
current bankers and credit providers. It is assumed that those terms would
vary from those currently provided to BTR Packaging under a new ownership
structure. Repayment of and proceeds from borrowings within the Statement of
Cash Flows includes the gross value of the periodic rollover of facilities
under the Commercial Paper Programme.
28. Events occurring after balance date
There are no subsequent events after 31 December 1997 that would effect the
financial position or balances for the years ended 31 December 1995, 1996 and
1997 other than the declaration and payment of dividends by certain companies
within the economic entity.
On 29 January 1998 the BTR Nylex Limited economic entity was restructured so
as to remove the non BTR Packaging entities from the BTR Nylex Limited
economic entity. This restructure has no impact on the combined financial
statements as at 31 December 1997.
On 1 March 1998 BTR plc signed a conditional contract to enter into the sale
of BTR Packaging to Owens-Illinois, Inc., a company incorporated in the U.S.
29. Related parties
(a) Ultimate parent entity
At 31 December 1997 the ultimate parent entity was BTR plc, a company
incorporated in the United Kingdom.
(b) Ownership interests in related parties
The economic entity's interest in controlled entities and the economic
entity's interest in associated companies and partnerships are given in
notes 23, 24 and 25.
(c) Transactions with controlled entities
Wholly owned Australian operating units pay management charges and
project management fees to BTR Nylex Limited. These transactions are at
arms length and on commercial terms and have been eliminated within the
combined financial statements. Management charges and interest are not
levied on wholly owned non-operating controlled entities.
For partly owned controlled entities, all transactions were at arms
length and on commercial terms.
34
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(d) Transactions with other related parties
Interest transactions were at arms length and on commercial terms and are
disclosed in note 2. Amounts receivable from/payable to associated
companies and other BTR plc related bodies corporate are disclosed as
related party balances in notes 5, 8, and 14. Sales to related parties
for 1997 amounted to A$4.7 million, 1996 A$2.0 million and 1995 A$2.6
million. Purchases from related parties for 1997 amounted to A$1.3
million, 1996 A$3.1 million and 1995 A$1.1 million.
(e) Transactions with directors and director related entities
As there are no directors appointed specifically to BTR Packaging group,
no disclosure is relevant in this regard.
(f) Terms, conditions and accounting policies
BTR Nylex Limited has entered into forward exchange contracts with banks
on behalf of certain Other Related Parties. As collateral contracts
effectively exist with these related parties, who have accounted for the
effects of the exchange contracts within their books, it is considered
misleading to include them within the financial instruments note 30.
30. Financial Instruments
(a) Terms, conditions and accounting policies
The BTR Packaging entities accounting policies, including the terms and
conditions of each class of financial asset, financial liability and
equity instrument, both recognized and unrecognized at the balance date,
are as follows:
Financial Instruments Accounting Policies Terms and Conditions
- --------------------- --------------------------- ------------------------
(i) Financial Assets
Cash and Term The cash balance is carried No interest is receiv-
Deposits at the principal amount. able on cash on hand and
minor balances. Rates
of interest receivable
are disclosed in note
30(b).
Receivables - Receivables are carried at Credit sales are settled
trade/other nominal amounts due less on an average 44 day
any provision for doubtful term.
debts. A provision for
35
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Financial Instruments Accounting Policies Terms and Conditions
- --------------------- ---------------------------- ------------------------
doubtful debts is recognized
when collection of the full
nominal amount is no
longer possible.
Unlisted shares Unlisted shares are carried
at the lower of cost or
recoverable amount.
Dividend income is
recognized when the dividends
are declared by the investee.
Forward exchange The BTR Packaging entity At balance date, the
contracts enters into forward economic entity had
exchange contracts where entered into a number
it agrees to buy and sell of forward exchange
specified amounts of contracts. Refer
foreign currencies in the financial instruments
future at a predetermined note 30(e) below.
exchange rate. The objec-
tive is to match the con-
tract with the anticipated
future cash flows from
sales and purchases in
foreign currencies, to
protect the group against the
possibility of loss from
future exchange rate fluc-
tuations. The forward
exchange contracts are
usually for no longer than
12 months. In accordance
with AASB 1033 the group
recognizes the net amount
owing under the contract.
(ii) Financial Liabilities
Bank overdrafts The bank overdrafts are Rates of interest pay-
carried at the principal able are disclosed at
amount. Interest is note 30(b). Overdraft
charged as an expense as for the most part is
it accrues. payable on demand.
Bank loans The bank loans are carried Rates of interest pay-
at the principal amount. able are disclosed at
36
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Financial Instruments Accounting Policies Terms and Conditions
- --------------------- --------------------------- ------------------------
Interest is charged as an note 30(b). A breakdown
expense as it accrues. of loan maturity terms
are also disclosed at
note 30(b).
Other loans Other loans are carried Rates of interest pay-
at the principal amount. able are disclosed at
Interest is charged as an note 30(b).
expense as it accrues.
Trade creditors, Liabilities are recognized Trade liabilities are
other creditors for amounts to be paid in settled on an average
and accruals the future for goods and 75-day term.
services received, whether
or not billed to the
economic entity.
37
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(b) Interest Rate Risk
The BTR Packaging entity's exposure to interest rate risks and effective
interest rates of financial assets and financial liabilities, both
recognized and unrecognized at the balance date are as follows:
Fixed Interest Rate Weighted Average
------------------- Effective
Less More Interest Rate
Non- Variable Than 1 than ----------------
Interest Interest 1 to 5 5 Variable Fixed
Bearing Rate Year Years Years Total % %
-------- -------- ----- ----- ----- ------- -------- ------
(millions of Australian Dollars)
Financial
Assets
Cash 368.2 4.6 372.8 6.02% 5.42%
Term
Deposits 29.4 9.2 38.6 5.40% 5.80%
Trade
Receiva-
bles 268.4 268.4
Other
Receiva-
bles 8.7 2.6 11.3 5.28%
Invest-
ments/
Partner-
ship
Interests 121.2 121.2
Contracts
of Sale 35.2 35.2
Amounts
receiv-
able from
related
parties
and
associates 1,653.8 1,558.8 3,212.6 8.98%
-------- -------- ----- ----- ----- -------
Total
Financial
Assets 2,087.3 1,959.0 13.8 0.0 0.0 4,060.1
======== ======== ===== ===== ===== =======
38
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Fixed Interest Rate Weighted Average
------------------- Effective
Less More Interest Rate
Non- Variable Than 1 than ----------------
Interest Interest 1 to 5 5 Variable Fixed
Bearing Rate Year Years Years Total % %
-------- -------- ----- ----- ----- ------- -------- -----
(millions of Australian Dollars)
Bank
Overdraft 178.1 178.1 8.66%
Bank
Loans 1,240.3 26.9 1,267.2 5.49% 15.00%
Other
Loans 0.1 741.5 200.0 941.6 5.30%
Finance
Lease
Liabil-
ities 0.7 0.7 8.58%
Trade
Creditors 201.4 201.4
Other
Creditors 28.9 0.5 29.4 11.60%
Amounts
payable
to related
parties
and
associates 1,878.8 185.9 2,064.7 6.22%
-------- -------- ----- ----- ----- -------
Total
Financial
Liabil-
ities 2,109.2 1,605.0 768.4 200.5 0.0 4,683.1
======== ======== ===== ===== ===== =======
39
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(c) Net Fair Values
The net fair value of a financial asset or a financial liability is the
amount at which the asset could be exchanged, or liability settled in a
current transaction between willing parties after allowing for
transaction costs. The carrying amount of financial assets and financial
liabilities recorded in the balance sheet approximates net fair values.
The following methods and assumptions are used to determine the net fair
values of financial assets and liabilities:
1. The fair value of investments in resource venture partnerships
(A$120.5 million) are determined at 1992 Directors' valuation, based
on market price, plus share of profits less cash drawings. Shares in
unlisted corporations (A$0.7 million) are not material.
2. In respect of other financial assets and financial liabilities see
note 30(a) to the combined financial statements.
(d) Objectives for Holding Derivative Financial Instruments
The economic entity enters into forward foreign exchange contracts to
manage its exposure to foreign exchange rate risk.
The economic entity does not enter into or trade derivative financial
instruments for speculative purposes.
(e) Forward Foreign Exchange Contracts
It is the policy of the economic entity to enter into forward foreign
exchange contracts, under which the economic entity agrees to exchange
specified amounts of various currencies at an agreed future date at a
specified exchange rate.
40
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
The following table details the forward foreign currency contracts
outstanding as at 31 December 1997:
Average
Total Exchange
Principal Rate
Outstanding Contracts Amount 1997
--------------------------------- --------- --------
(millions of
Australian dollars)
Buy U.S. Dollars
Not longer than 1 year 26.9 0.6769
Sell U.S. Dollars
Not longer than 1 year (7.6) 0.7019
Longer than 1 year (0.1) 0.7019
Buy Pound Sterling
Not longer than 1 year 0.6 0.3975
Buy Italian Lira
Not longer than 1 year 1.1 1,122.43
Buy German Deutschmark
Not longer than 1 year 1.1 1.1656
Sell Hong Kong Dollars
Not longer than 1 year (11.7) 5.6985
Buy Belgium Francs
Not longer than 1 year 0.1 22.8921
Buy Swiss Francs
Not longer than 1 year 0.5 1.0732
Buy French Francs
Not longer than 1 year 0.2 3.8360
Buy Dutch Guilders
Not longer than 1 year 0.5 1.3073
Buy Japanese Yen
Not longer than 1 year 0.7 81.3000
Buy Australian Dollars (non-Australian
entities only)
Not longer than 1 year 2.2 0.8630
---------
14.5
41
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(f) Hedges of Anticipated Future Transactions
As indicated above the economic entity has entered into a number of
unrecognized forward foreign exchange contracts to hedge the exchange
rate risk arising from the following types of anticipated future
transactions:
1. Purchase of finished goods and raw materials where the currency of
payment is not the units' functional currency.
2. Sale of inventory to where the currency of sale is not the units'
functional currency.
3. Purchase of capital equipment where the currency of payment is not
the units' functional currency.
The economic entity has entered into forward foreign exchange contracts
for periods not exceeding 12 months.
As at reporting date the net amount of unrealized losses under forward
foreign exchange contracts relating to anticipated future transactions is
A$0.2 million. Such unrealized losses will be realized during the 1998
financial year when the future transactions take place.
(g) Credit Risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the economic
entity. The economic entity has adopted the policy of dealing with
creditworthy counterparts and obtaining sufficient collateral or other
security where appropriate, as a means of mitigating the risk of
financial losses from defaults.
The carrying amount of financial assets recorded in the consolidated
balance sheet, net of any provisions for losses, represents the economic
entity's maximum exposure to credit risk.
The economic entity does not have any significant credit risk exposure to
any single counterparty or any group of counterparties having similar
characteristics.
42
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(h) Non-Hedged Foreign Currency Balances
The Australian dollar equivalent of foreign currency balances included
within the accounts which are not effectively hedged are as follows:
Chinese Pounds Hong Kong Other
AUD* USD RMB Sterling Dollars Currency Total
---- ---- ------- -------- --------- -------- -----
(millions of Australian dollars)
Accounts
Receivable
Current 0.7 11.5 1.3 0.0 4.5 0.8 18.8
Non-Current 0.0 0.0 0.0 0.0 0.0 0.0 0.0
---- ---- ------- -------- -------- ------- -----
Total 0.7 11.5 1.3 0.0 4.5 0.8 18.8
==== ==== ======= ======== ======== ======= =====
Accounts Payable
Current 14.3 26.4 0.0 0.3 0.0 1.4 42.4
Non-Current 1.3 0.6 0.0 0.0 0.0 0.0 1.9
---- ---- ------- -------- -------- ------- -----
Total 15.6 27.0 0.0 0.3 0.0 1.4 44.3
==== ==== ======= ======== ======== ======= =====
*Included in the accounts of non-Australian reporting units.
43
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
31. Reconciliation with U.S. Generally Accepted Accounting Principles (US
GAAP)
These combined financial statements have been prepared in accordance with
Australian Generally Accepted Accounting Principles ("Australian GAAP").
Australian GAAP differs in some significant respects to US Generally Accepted
Accounting Principles ("US GAAP"). Differences which have a significant
effect on combined net income and division equity are as follows:
Profit and Loss Statement
1997 1996 1995
----------------------------------
(millions of Australian dollars)
Operating profit after income tax
attributable to the owners of the
economic entity as reported 125.6 109.3 195.6
Approximate Adjustments to accord with
US GAAP:
Amortization of goodwill (16.7) (4.3) (13.8)
Amortization of tradenames (20.9) (20.9) (20.9)
Amortization of other intangibles (1.0) (3.8) (0.9)
Depreciation (0.9) 0.1 (4.3)
Executive options (3.3) (7.1) (13.6)
Spare parts -- (5.4) --
Pension plans 14.1 12.8 7.4
Reorganization provisions (5.9) 5.9 --
Taxation 21.4 19.1 12.2
----------------------------------
Total adjustment (13.2) (3.6) (33.9)
----------------------------------
Approximate Adjusted Profit According
to US GAAP 112.4 105.7 161.7
==================================
44
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Division Owners' Equity
1997 1996 1995
----------------------------------
(millions of Australian dollars)
Division Owners' Equity as Reported 3,323.4 3,060.0 4,232.0
Approximate Adjustments Required to
Accord with US GAAP:
Outside equity interest (57.6) (57.9) (59.7)
Goodwill (2.3) 12.0 16.5
Tradenames 16.0 36.7 57.7
Other intangibles (7.8) (6.6) (2.9)
Future income tax benefit (8.4) (9.8) (17.7)
Revaluation of investments (79.4) (65.2) (69.6)
Property, plant and equipment (35.7) (31.5) (26.6)
Prepaid pension plans 13.5 5.3 (3.7)
Provision for stock options (54.9) (41.3) (36.5)
Provision for dividends 31.5 -- --
Reorganization provisions -- 5.9 --
Deferred tax liability (105.4) (114.5) (119.2)
----------------------------------
Total adjustment (290.5) (266.9) (261.7)
----------------------------------
Approximate Adjusted Equity According
to US GAAP 3,032.9 2,793.1 3,970.3
==================================
The following is a summary of the significant adjustments made to the combined
net income and Division equity to reconcile the Australian results with US
GAAP.
1 - Executive Option Scheme
A stock option plan was created for certain executives on acquisition of a
subsidiary. Under Australian GAAP, the costs of issuing shares under the plan
have been capitalized into the cost of the investment. Any goodwill arising
on combination is amortized over 20 years.
Under US GAAP, the option plan constitutes a form of executive compensation
and therefore a liability in respect of the unexercised options is recognized
at the end of each period. The liability is reduced as options are exercised.
A charge is made to the profit and loss statement as options are issued or
their exercise value alters.
45
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2 - Capitalized management fees
Certain general overheads are capitalized into plant and equipment where the
project to build, install and commission will take more than 6 months and
exceed A$2 million in costs. Under US GAAP these costs would be expensed as
incurred. An adjustment has been made to depreciation expense of A$0.6
million, A$(1.0) million and A$3.9 million and to Property, plant and
equipment of A$(19.5) million, A$(18.4) million and A$(17.8) million for 1997,
1996 and 1995, respectively.
3 - Contributions to Pension Plans
BTR Packaging charges against income and contributions made to pension plans
as and when they are paid. Where the pension plans are in surplus no
contribution is charged against income. Under US GAAP the net periodic pension
cost is charged against income in accordance with US Statement of Financial
Accounting Standards No. 87 assuming BTR Packaging first adopted this policy
at the beginning of 1995 since it was not feasible to apply the actuarial
basis at an earlier period. The amount of the transition obligation is
insignificant.
4 - Capitalized start up and commissioning costs
Certain costs relating to the start up of plant and equipment after
commissioning are capitalized into the cost of the plant and equipment for
Australian GAAP. Under US GAAP such start up costs would be expenses as
incurred. An adjustment has been made to depreciation expense of A$(1.5)
million, A$1.1 million and A$(0.4) million and to Property, plant and
equipment of A$(16.2) million, A$(13.2) million and A$(14.2) million for 1997,
1996 and 1995, respectively.
5 - Other Intangibles and deferred costs
For Australian GAAP certain costs such as research and development have been
capitalized and are amortized over the period in which the entity is to
receive the benefits. Under US GAAP these costs would be expensed as
incurred.
6 - Reorganization provisions
A provision for labor redundancies within the BTR Packaging Group's operations
was charged against profit in 1996. In accordance with Australian GAAP, a
provision for redundancies can be recognized where positions have been
identified as being surplus to requirements, provided the circumstances are
such that a quantifiable liability exists.
The requirements of EITF 94-3 were not met in 1996. Therefore the costs would
be expensed in 1997.
46
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7 - Amortization of Intangibles
In accordance with Australian GAAP goodwill should be amortized over the
period in which benefits are expected to be generated. This period cannot
exceed 20 years. Goodwill is presently being amortized over 20 years. Until
1996 amortization was calculated on a derivation of the inverted sum of the
digits method. Since August 1995, amortization has been charged on a
straight-line basis over the remaining amortization period. Trade names have
not been amortized as management believes that they have an indefinite life.
For US GAAP all intangible assets should be amortized over the periods
estimated to benefit from the asset on a straight-line basis. The period of
amortization would be determined by reference to pertinent factors, however,
the amortization period should not exceed 40 years. For BTR Packaging this
period is estimated to be 20 years.
8 - Dividends
For Australian GAAP, dividends declared by BTR Packaging are provided for in
the combined financial statements at year end if declaration date was prior to
the financial statements being signed. Under US GAAP, such amounts provided
are added back to Division equity where declaration has not occurred at
balance date.
9 - Income Tax
Under Australian GAAP, deferred tax assets (referred to as future income tax
benefits) relating to timing differences are recognized where realization of
the benefits through future assessable income is beyond reasonable doubt. In
the case of deferred tax assets arising from carried forward tax losses the
benefits may only be recognized where realization of the benefits through
future assessable income is virtually certain. US GAAP adopts a lower level
of probability using a threshold of "more likely than not" for all deferred
tax assets.
In accounting for purchase transactions, US GAAP requires that deferred tax
assets and liabilities be raised in respect of the difference between the tax
basis of assets acquired and liabilities assumed, and their fair values. No
such deferred tax adjustments are required under Australian GAAP. The
creation of these tax balances under US GAAP will therefore impact the
resultant goodwill on acquisition which is amortized over the estimated period
of future benefits.
47
<PAGE>
BTR Packaging
NOTES TO AND FORMING PART OF
THE COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
10 - Revaluations
Australian GAAP allows non current assets to be revalued upwards with
increments taken to the asset revaluation reserve. Revaluations are not
required to be undertaken on a regular basis.
US GAAP does not permit non current assets to be valued at above historical
cost. Investments in partnerships has been restated to reflect the historical
cost.
11 - Outside equity interests
Outside equity interests are included as part of the Division equity under
Australian GAAP. Under US GAAP these amounts are excluded from Division
equity.
12 - Capitalized spare parts
For Australian GAAP in 1995 A$5.4 million of spare parts which were allocated
a nil value on acquisition were recorded as plant and equipment. For US GAAP
these items would have been recognized as part of the fair value adjustment on
acquisition. Therefore the income effect has been reversed.
13 - Cash and Cash Equivalents
For Australian GAAP cash flow purposes, cash is defined to be amounts
convertible to cash with two business days net of bank overdrafts. Under US
GAAP, cash and cash equivalents include cash readily converted to cash within
three months while borrowing facilities which are not subject to any term
facility are treated as a financing activity. In order to show the "Statement
of Cash Flows" under US GAAP, no change would be required to "Net cash
provided by operating activities" or "Net cash used in investing activities",
however "Net cash used in financing activities" would for 1997 be A$21.8
million, 1996 A$(248.8) million and 1995 A$345.1 million. Cash at the end of
the year would be for 1997 A$411.4 million, 1996 A$214.1 million and 1995
A$369.1 million.
48
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
<PAGE>
Item 7 (b) Unaudited pro forma financial information.
The following pro forma condensed consolidated balance sheet and pro forma
condensed consolidated statement of results of operations give pro forma
effect to the following transactions: (i) the acquisition of the worldwide
glass and plastics packaging businesses of BTR for a cash purchase price
currently estimated to be approximately $3.6 billion; (ii) the initial
financing of the acquisition with borrowings under a lending commitment
provided by a group of banks which participate in the Company's existing
credit agreement; (iii) the probable required divestiture of a portion of the
acquired businesses in connection with obtaining certain regulatory approvals
of the acquisition; and (iv) the application of the estimated $0.6 billion
proceeds from such divestiture as a reduction of the initial amount borrowed.
For purposes of the pro forma condensed consolidated balance sheet, the
transactions are assumed to have occurred on December 31, 1997, whereas for
purposes of the pro forma condensed consolidated statement of results of
operations, the transactions are assumed to have occurred on January 1, 1997.
Approximately two-thirds of the estimated purchase price is denominated in
Australian dollars. The estimated purchase price has been calculated based on
the exchange rate in effect at December 31, 1997. Changes in such rate could
affect the ultimate U.S. dollar price at the time of closing. In addition,
the portion of the acquired businesses which is ultimately divested as well as
the proceeds received from such divestiture may differ from the assumptions
made for pro forma purposes. Also, the cost of financing the acquisition may
be higher than that assumed for pro forma purposes depending on actual
interest rates and the extent to which the initial amount borrowed is
refinanced through the issuance of debt and equity securities.
The acquisition will be accounted for under the purchase method of accounting.
The total purchase cost will be allocated to the tangible and identifiable
intangible assets acquired and liabilities assumed based upon their respective
fair values. Such allocations will be based upon valuations and studies that
have not been finalized. Accordingly, the allocation of the purchase cost
included in the accompanying pro forma condensed consolidated balance sheet is
preliminary and, among other things, no adjustment has been made to the
historical values of property, plant and equipment. The unallocated excess of
purchase cost over the historical carrying value of net assets acquired is
being amortized over 35 years in the pro forma condensed consolidated
statement of results of operations. Such period is an estimate of the average
life of the tangible and intangible assets to which the excess purchase cost
will be assigned.
The pro forma financial statements do not purport to represent what the
Company's financial position or results of operations would have actually been
if all of the above transactions had actually occurred on the dates indicated,
or to project the Company's financial position or results of operations for
any future date or period.
1
<PAGE>
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Balance Sheet
December 31, 1997
(Millions of U.S. Dollars)
Acquired Purchase
Businesses Accounting Adjusted
Company Historical and Financing Company
Historical Amounts (1) Adjustments (2) Pro Forma
Assets ---------- ----------- --------------- ---------
Current assets:
Cash and short
term investments $ 234.3 $ 234.3
Receivables, net 681.6 $ 202.3 883.9
Inventories 592.4 182.1 774.5
Prepaid expenses 140.0 140.0
Total current -------- -------- ---------
assets 1,648.3 384.4 2,032.7
Investments and other
assets 861.2 130.1 991.3
Prepaid pension 635.3 12.6 647.9
Excess of purchase cost
over net assets
acquired 1,294.9 1,172.7 $ 728.6 3,196.2
Property, plant, and
equipment, net 2,405.4 913.9 3,319.3
-------- -------- -------- ---------
Total assets $6,845.1 $2,613.7 $ 728.6 $10,187.4
======== ======== ======== =========
Liabilities and
Share owners' Equity
Current liabilities:
Short-term loans and
long-term debt due
within one year $ 176.9 $ 176.9
Accounts payable
and other
liabilities 866.9 $ 160.2 1,027.1
Total current -------- -------- ---------
liabilities 1,043.8 160.2 1,204.0
Long-term debt 3,146.7 $3,000.0 6,146.7
Deferred taxes and
other liabilities 1,066.2 144.7 1,210.9
Minority share owners'
interests 246.5 37.4 283.9
Share owners' equity 1,341.9 2,271.4 (2,271.4) 1,341.9
Total liabilities -------- -------- -------- ---------
and share owners'
equity $6,845.1 $2,613.7 $ 728.6 $10,187.4
======== ======== ======== =========
See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet.
2
<PAGE>
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(1) Acquired Businesses Historical Amounts -- Represents the historical
carrying value of the assets and liabilities of the acquired businesses, less
the assets and liabilities of the portion of the acquired businesses which the
Company considers probable for divestiture. The financial statements of the
acquired businesses are reported in Australian dollars. Balances at December
31, 1997, have been translated using the exchange rate at that date of .65
U.S. dollars per Australian dollar. The amount shown in the audited financial
statements of the acquired businesses as "Net Assets" at December 31, 1997,
can be reconciled to the net assets amount included herein as follows (in
millions):
Net assets per audited combined balance sheet $AUD 3,323.4
Effect of U.S. GAAP adjustments (290.5)
Net assets of probable divested portion of
acquired businesses (439.6)
Capitalization of cash, debt, intercompany accounts
and related balances per agreement 901.1
-------------
$AUD 3,494.4
Currency exchange rate x .65
-------------
Net assets included herein $USD 2,271.4
=============
(2) Purchase Accounting and Financing Adjustments -- The estimated purchase
price of $3.6 billion has been reduced by the estimated proceeds of
$0.6 billion from the probable divestiture. The resulting excess of purchase
cost over the historical value of net assets acquired is $1,901.3 million.
Such excess will be allocated based upon the fair value of the assets acquired
and liabilities assumed, the determination of which has not been completed.
Therefore, the amounts reflected are preliminary estimates and subject to
further refinements.
3
<PAGE>
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Statement of Results of Operations
Year Ended December 31, 1997
(Millions of U.S. Dollars, except per share amounts)
Acquired
Businesses Purchase
Historical Accounting Adjusted
Company Results of and Financing Company
Historical Operations (1) Adjustments (2) Pro Forma
Revenues: ---------- -------------- --------------- ---------
Net sales $4,658.5 $1,217.2 $5,875.7
Other 169.9 34.6 204.5
-------- -------- --------
4,828.4 1,251.8 6,080.2
Costs and expenses:
Manufacturing,
shipping, and
delivery 3,666.4 876.6 4,543.0
Research, engineering,
selling, and
administrative 291.6 64.0 355.6
Interest 302.7 $ 183.3 486.0
Other 115.4 143.3 (43.7) 215.0
-------- -------- ------- --------
4,376.1 1,083.9 139.6 5,599.6
-------- -------- ------- --------
Earnings before
income taxes,
minority share owners'
interests and
extraordinary items 452.3 167.9 (139.6) 480.6
Provision for income
taxes 148.5 82.3 (70.1) 160.7
Minority share owners'
interests 31.4 (7.0) 24.4
-------- -------- ------- --------
Earnings before
extraordinary items $ 272.4 $ 92.6 $ (69.5) $ 295.5
======== ======== ======= ========
Earnings per share
before extraordinary
items:
Basic $2.03 $2.20
===== =====
Diluted $2.01 $2.18
===== =====
Weighted average shares:
(in thousands)
Basic 133,597 133,597
======= =======
Diluted 135,676 135,676
======= =======
See accompanying Notes to Pro Forma
Condensed Consolidated Statement of Results of Operations.
4
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF RESULTS OF OPERATIONS
(1) Acquired Businesses Historical Results of Operations -- Reflects the
historical results of operations of the acquired businesses, less the results
of the portion of the acquired businesses which the Company considers probable
for divestiture. The Australian dollar amounts have been translated using an
average exchange rate for 1997 of .74 U.S. dollars per Australian dollar.
The amount shown in the audited financial statements of the acquired
businesses as "Operating profit after income tax attributable to owners of the
economic entity" for the year ended December 31, 1997, can be reconciled to
the similar amount included herein as follows (in millions):
Operating profit after income tax attributable to
owners of the economic entity per audited combined
combined profit and loss statement $AUD 125.6
Effect of U.S. GAAP adjustments (13.2)
Amount related to probable divested
portion of acquired businesses (36.3)
Elimination of interest income and expense
and other charges per agreement 49.0
------------
$AUD 125.1
Currency exchange rate x .74
------------
Earnings before extraordinary items included herein $USD 92.6
============
(2) Purchase Accounting and Financing Adjustments -- Includes the following
increases (decreases) in earnings (in millions of U.S. dollars):
Year ended
December 31, 1997
-----------------
Incremental interest cost assuming the acquisition and
the probable divestiture occurred on January 1, 1997 $(183.3)
Amortization of the aggregate excess of purchase cost
over tangible net assets acquired over 35 years (54.3)
Goodwill amortization included in historical accounts 98.0
-------
Net amortization adjustment 43.7
-------
Effect on earnings before income taxes (139.6)
Tax benefit related to the incremental interest
cost, at incremental U.S. statutory rates 70.1
-------
Effect on net earnings before extraordinary items $ (69.5)
=======
5
<PAGE>
Financing for the acquisition has been assumed to be provided by borrowings
under a lending commitment, made by a group of banks which participate in the
Company's existing credit agreement, at the same rates which have historically
applied to the Company's credit agreement. The average rate for 1997 was
6.11%. In the event actual interest rates are higher or a portion of the
acquisition is financed or refinanced with borrowings from other domestic or
foreign sources, the incremental interest cost may be higher than that shown
in the pro forma condensed consolidated statement of results of operations.
6
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
2.1 Share Disposition Agreement among BTR plc, Owens-Illinois, Inc. and
the Other Parties Named Herein dated as of 1 March 1998
23.1 Consent of Ernst & Young, Melbourne, Australia
<PAGE>
Exhibit 2.1
==============================================================================
SHARE DISPOSITION AGREEMENT
among
BTR plc,
OWENS-ILLINOIS, INC.
and
THE OTHER PARTIES NAMED HEREIN
Dated as of 1 March 1998
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Terms . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.3 Other Definitional Provisions . . . . . . . . . . . . . 17
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Sold Shares. . . . . . . . . . . . 18
Section 2.2 Purchase Price; Debt/Cash Balance Adjustment. . . . . . 18
Section 2.3 Allocation of the Aggregate Purchase Price. . . . . . . 23
Section 2.4 Closings; Delivery and Payment. . . . . . . . . . . . . 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization of Seller and Selling Companies. . . . . . 26
Section 3.2 Authority of Seller and the Selling Companies; Bind-
ing Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.3 Title . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.4 Organization and Structure of the Packaging Compa-
nies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.5 Non-Contravention . . . . . . . . . . . . . . . . . . . 30
Section 3.6 Consents and Approvals. . . . . . . . . . . . . . . . . 30
Section 3.7 Financial Information . . . . . . . . . . . . . . . . . 31
Section 3.8 Absence of Certain Changes or Events. . . . . . . . . . 31
Section 3.9 Litigation and Claims . . . . . . . . . . . . . . . . . 34
Section 3.10 Compliance with Laws . . . . . . . . . . . . . . . . . 34
Section 3.11 Environmental Matters. . . . . . . . . . . . . . . . . 35
Section 3.12 Material Contracts . . . . . . . . . . . . . . . . . . 36
Section 3.13 Non-Packaging Operations . . . . . . . . . . . . . . . 39
Section 3.14 Intellectual Property. . . . . . . . . . . . . . . . . 39
Section 3.15 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.16 Employee Benefits. . . . . . . . . . . . . . . . . . . 42
Section 3.17 Labor Matters. . . . . . . . . . . . . . . . . . . . . 48
Section 3.18 Board Members. . . . . . . . . . . . . . . . . . . . . 50
Section 3.19 Brokers, Finders Fees. . . . . . . . . . . . . . . . . 50
Section 3.20 Real Property and Leases . . . . . . . . . . . . . . . 50
Section 3.21 Insurance. . . . . . . . . . . . . . . . . . . . . . . 51
Section 3.22 Product Liability. . . . . . . . . . . . . . . . . . . 52
Section 3.23 Transactions with Certain Persons. . . . . . . . . . . 52
Section 3.24 Absence of Undisclosed Liabilities . . . . . . . . . . 53
i
<PAGE>
Section 3.25 Customers and Suppliers. . . . . . . . . . . . . . . . 53
Section 3.26 No Other Representations or Warranties . . . . . . . . 54
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization and Qualification. . . . . . . . . . . . . 55
Section 4.2 Authority of Purchaser; Binding Effect. . . . . . . . . 55
Section 4.3 Non-Contravention . . . . . . . . . . . . . . . . . . . 55
Section 4.4 Consents and Approvals. . . . . . . . . . . . . . . . . 56
Section 4.5 Financial Capability. . . . . . . . . . . . . . . . . . 56
Section 4.6 Securities Act. . . . . . . . . . . . . . . . . . . . . 56
Section 4.7 Investigation by Purchaser; Certain Financial Infor-
mation; No other Representations or Warranties . . . . . . . . 56
Section 4.8 Litigation and Claims . . . . . . . . . . . . . . . . . 57
ARTICLE V
COVENANTS
Section 5.1 Access. . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 5.2 Conduct of Business . . . . . . . . . . . . . . . . . . 58
Section 5.3 Covenants pertaining to Specified Consents, Autho-
rizations and Closings . . . . . . . . . . . . . . . . . . . . 61
Section 5.4 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.5 Post-Closing Obligations to Employees . . . . . . . . . 90
Section 5.6 Certain Dividends, Intergroup Financial and Trading
Amounts, Etc . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 5.7 Securities; Insurance . . . . . . . . . . . . . . . . 100
Section 5.8 Certain Provisions Relating to the Restructuring. . . 101
Section 5.9 Retained Companies; Interim Period. . . . . . . . . . 103
Section 5.10 Further Assurances . . . . . . . . . . . . . . . . . 106
Section 5.11 Resignations; Meetings . . . . . . . . . . . . . . . 106
Section 5.12 Use of Corporate Names . . . . . . . . . . . . . . . 107
Section 5.13 Shareholder Meeting. . . . . . . . . . . . . . . . . 110
Section 5.14 Confidentiality. . . . . . . . . . . . . . . . . . . 110
Section 5.15 Notification of Certain Matters. . . . . . . . . . . 111
Section 5.16 No Solicitations . . . . . . . . . . . . . . . . . . 111
Section 5.17 Additional Financial Statements, Reconciliations . . 112
Section 5.18 Post-Closing Cooperation . . . . . . . . . . . . . . 113
Section 5.19 Consent to Future Transfers. . . . . . . . . . . . . 114
Section 5.20 Corporate Books. . . . . . . . . . . . . . . . . . . 115
Section 5.21 Permanent Establishments . . . . . . . . . . . . . . 115
Section 5.22 Treatment of Debt Other External Obligations . . . . 115
Section 5.23 Share Registrations. . . . . . . . . . . . . . . . . 116
ii
<PAGE>
Section 5.24 Intercompany Arrangements. . . . . . . . . . . . . . 116
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Purchaser and Seller 116
Section 6.2 Conditions to the Obligations of Purchaser. . . . . . 118
Section 6.3 Conditions to the Obligations of Seller . . . . . . . 119
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival. . . . . . . . . . . . . . . . . . . . . . . 119
Section 7.2 Indemnification by Purchaser. . . . . . . . . . . . . 120
Section 7.3 Indemnification by Seller . . . . . . . . . . . . . . 121
Section 7.4 Indemnification Procedures. . . . . . . . . . . . . . 124
Section 7.5 Computation of Losses Subject to Indemnification. . . 126
Section 7.6 Certain Other Matters . . . . . . . . . . . . . . . . 126
ARTICLE VIII
TERMINATION
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . 127
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . 128
iii
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . 129
Section 9.2 Amendment; Waiver; Invalidity . . . . . . . . . . . . 130
Section 9.3 Assignment . . . . . . . . . . . . . . . . . . . . . 130
Section 9.4 Entire Agreement . . . . . . . . . . . . . . . . . . 130
Section 9.5 Fulfillment of Obligations . . . . . . . . . . . . . 131
Section 9.6 Parties in Interest . . . . . . . . . . . . . . . . . 131
Section 9.7 Public Disclosure . . . . . . . . . . . . . . . . . . 131
Section 9.8 Return of Information . . . . . . . . . . . . . . . . 132
Section 9.9 Expenses . . . . . . . . . . . . . . . . . . . . . . 132
Section 9.10 Schedules . . . . . . . . . . . . . . . . . . . . . 132
Section 9.11 Governing Law . . . . . . . . . . . . . . . . . . . 132
Section 9.12 Counterparts . . . . . . . . . . . . . . . . . . . . 133
Section 9.13 Headings . . . . . . . . . . . . . . . . . . . . . . 133
EXHIBITS
SELLER EXHIBITS
A-1 Opinion of Skadden, Arps, Slate, Meagher & Flom
A-2 Opinion of Clayton Utz
A-3 Opinion of Slaughter & May
A-4 Opinion of Nauta Dutilh
PURCHASER EXHIBITS
B-1 Opinion of Simpson Thacher & Bartlett
B-2 Opinion of Allen Allen & Hemsley
B-3 Opinion of Freshfields
B-4 Opinion of Stibbe Simont Monahan Duhot
iv
<PAGE>
SHARE DISPOSITION AGREEMENT, dated as of 1 March 1998,
among BTR plc, a company incorporated under the laws of England and
Wales ("Seller"), the Selling Companies (as defined below) and
Owens-Illinois, Inc., a Delaware corporation ("Purchaser"), and the
Purchasing Companies (as defined below).
W I T N E S S E T H :
WHEREAS, Seller through certain of its Subsidiaries (as
defined below) is engaged in the Packaging Business (as defined
below);
WHEREAS, the Selling Companies are the direct or indi-
rect, record and beneficial owners of the issued share capital of
certain Subsidiaries of Seller listed on Schedule 3.4(b) (each such
entity, a "Packaging Company");
WHEREAS, on the terms and subject to the conditions set
forth herein the parties hereto desire that Seller shall cause the
Selling Companies to, and the Selling Companies shall, sell and
transfer the Packaging Companies to the Purchasing Companies and
that Purchaser shall cause the Purchasing Companies to acquire the
Packaging Companies from the Selling Companies by purchasing all of
the Sold Shares (as defined below); and
WHEREAS, after giving effect to the Restructuring (as
defined below), the Packaging Business will be conducted by the
Packaging Companies;
NOW, THEREFORE, in consideration of the mutual covenants
and undertakings contained herein, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as fol-
lows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions. As used in this
Agreement, the following terms shall have the meanings set forth or
as referenced below:
"ACCC" shall have the meaning set forth in Section 6.1(c)(ii).
1
<PAGE>
"ACI Glass" shall mean the Packaging Business excluding Rockware and
PET Operations.
"ACI Staff Superannuation Fund" means the fund of that name estab-
lished by a trust deed dated 1 July 1930 (as amended).
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under
common control with, such Person at any time during the period
for which the determination of affiliation is being made.
"Aggregate Purchase Price" shall have the meaning set forth in
Section 2.2(a).
"Agreement" shall mean this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms
hereof.
"Allocation" shall have the meaning set forth in Section 2.3 hereto.
"Australian" refers to either a Plan, Superannuation Commitments or
the portion of the Packaging Business which is primarily
subject to, and governed by, the Laws of Australia and its
political subdivisions or to an Employee of such portion of
the Packaging Business.
"Balance Sheet" shall have the meaning set forth in Section 3.7.
"Barclay's LIBOR" shall mean the one-month LIBOR London interbank
offered rate as specified by Reuters, at 12:00 noon GMT on any
day, for Australian dollars or U.S. dollars, as applicable.
"BTR Nylex" shall mean BTR Nylex Ltd., an Australian company.
"BTR Nylex Executive Superannuation Fund" shall mean the fund of
that name established by a trust deed dated 27 June 1995 (as
amended).
"Business Day" shall mean any day other than a Saturday, a Sunday or
a day on which banks in New York City, London or Melbourne,
Australia are authorized or obligated by law or executive
order to close or are otherwise generally closed.
"Claim" shall have the meaning set forth in Section 7.4.
"Claim Notice" shall have the meaning set forth in Section 7.4.
2
<PAGE>
"Closing" shall mean the payment of the Closing Purchase Price and
delivery of the Sold Shares (other than those the transfer of
which has been suspended) and the Convertible Notes pursuant
to Section 2.4.
"Closing Debt/Cash Balance" shall have the meaning set forth in
Section 2.2(c)(iii).
"Closing Purchase Price" shall mean the Aggregate Purchase Price
after adjustment for the Convertible Notes in accordance with
Section 2.2(a) and the Estimated Debt/Cash Balance in accor-
dance with Section 2.2(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Companies Act" shall mean the Companies Act 1985 (as amended).
"Competition Laws" shall mean statutes, rules, regulations, orders,
decrees and other laws that are designed or intended to pro-
hibit, restrict or regulate actions having the purpose or
effect of monopolization, creation or strengthening of a
dominant market position, lessening of competition or re-
straint of trade.
"Confidentiality Agreement" shall mean the Confidentiality and
Standstill Agreement, dated October 30, 1997 between Kohlberg
Kravis Roberts & Co., LP and Seller as supplemented by a
letter from Purchaser to Seller of the same date.
"Continental" shall mean Continental PET Technologies, Inc. and its
subsidiaries.
"Controlling Party" shall have the meaning set forth in Section
5.4(g)(ii).
"Convertible Notes" shall mean the 9% Convertible Subordinated Non-
Maturing Loan Notes issued by BTR Nylex.
"Copyrights" shall mean copyrights (including without limitation
copyrights for computer software, databases, and all related
materials and documentation, but excluding Seller Manuals) and
registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof.
"CPA Firm" shall mean Arthur Andersen LLP.
3
<PAGE>
"Current Superannuation Funds" shall mean the superannuation funds
known as (i) BTR Nylex Limited Accumulation Fund established
by trust deed dated 10 May 1989 (as amended); and (ii) BTR
Nylex Limited Superannuation Fund established by a proposal
dated 15 December 1964, subsequently replaced by trust provi-
sions dated 10 May 1989 (as amended).
"Debt" of any Person shall mean, without duplication, all obliga-
tions of such Person (i) for borrowed money; (ii) evidenced by
notes, bonds, debentures or similar instruments; (iii) for
long-term (in excess of twelve months) payment obligations
with respect to the deferred purchase price of goods or ser-
vices (including the current portion of any long-term obliga-
tion); (iv) for capital leases (with terms in excess of twelve
months) classified as indebtedness pursuant to GAAP (including
the current portion of any long-term capital lease obliga-
tion); and, in any such case, excluding, for the avoidance of
doubt, for purposes of clauses (i) and (ii) above, (a) indebt-
edness between Packaging Companies, (b) Intergroup Payables
(including, for the avoidance of doubt, amounts payable in
respect of the Convertible Notes) and (c) amounts payable in
respect of Tax (which is separately treated under Section
5.4); provided that, for the avoidance of doubt, Debt de-
scribed in clauses (i) and (ii) hereof shall not include trade
payables incurred in the ordinary course.
"Debt/Cash Balance" shall mean as at the Scheduled Closing Date (i)
the aggregate amount of cash (excluding cash received or to be
received in respect of Intergroup Receivables pursuant to Section
2.2(b)), marketable debt securities and cash equivalents, in each
case as recorded in the accounting records/books of the Packaging
Companies (excluding that portion of the cash, marketable debt
securities and cash equivalents of Joint Venture Companies equal to
the percentage of the share capital of such Joint Venture Companies
not owned directly or indirectly by any Selling Company), less (ii)
the aggregate amount of Debt of the Packaging Companies (excluding
that portion of the Debt of Joint Venture Companies equal to the
percentage of the share capital of such Joint Venture Companies not
owned directly or indirectly by any Selling Company; provided that
in calculating Debt/Cash Balance, only those Joint Venture Companies
that are consolidated in accordance with GAAP shall be deemed to be
Joint Venture Companies).
"Deeds of Cross Guarantee" shall mean (i) the Deed of Cross Guaran-
tee dated 9 September 1992 between the parties named therein
as "Group Companies" and ACI Finance Limited as trustee in
which BTR Nylex is named as the "Holding Company" in the first
4
<PAGE>
schedule thereto; and (ii) the Deed of Cross Guarantee dated 9
December, 1992 between the parties named therein as "Group
Companies" and ACI Finance Limited as trustee and in which ACI
International Limited is named as the Holding Company in the
first schedule thereto.
"Design Rights" means (i) design rights registered or registerable
under the Australian Designs Act or any other applicable Law
and (ii) unregistered design rights arising under the Copy-
right Designs and Patents Act of 1988.
"Determination Date" shall have the meaning set forth in Section
2.2(c)(v).
"Due Date" shall mean, with respect to any Tax Return, the date such
return is due to be filed (taking into account all applicable
extensions).
"Employee(s)" shall mean any employee of a Packaging Company.
"Environmental Law" shall mean any law (including, without limita-
tion, common law) or regulation of any Governmental Authority
as in effect on the date hereof (including, for the avoidance
of doubt, the proposed U.K. Contaminated Land Regime), relat-
ing directly or indirectly to (x) the protection of the envi-
ronment, or (y) the presence, use, storage, transport, treat-
ment, handling or disposal of any material regulated as capa-
ble of causing harm or injury to human health or the environ-
ment.
"Environmental Permits" shall mean all material permits, approvals,
licenses, and authorizations required under any applicable
Environmental Law to conduct the Packaging Business as it is
presently being conducted.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any trade, business or other entity
(whether or not incorporated) that together with any Selling
Company would have been deemed a "single employer" within the
meaning of Section 4001(b) of ERISA or Section 414 of the Code
at any time within the five-year period ending on the Sched-
uled Closing Date.
"Estimated Debt/Cash Balance" shall have the meaning set forth in
Section 2.2(c)(i).
5
<PAGE>
"Estimated Intergroup Payables" shall mean the amount estimated by
Seller on the fourth Business Day prior to the Scheduled Closing
Date to be the Intergroup Payables.
"Estimated Intergroup Receivables" shall mean the amount estimated
by Seller on the fourth Business Day prior to the Scheduled
Closing Date to be the Intergroup Receivables.
"Estimated Net Intergroup Payables" shall mean the Estimated Inter-
group Payables less the Estimated Intergroup Receivables.
"Excluded Liabilities" shall mean Liabilities of Seller, BTR Nylex,
BTR Nylex Holdings N.Z. Ltd and ACI America Holdings Inc. or any
other Affiliate of Seller, including the Packaging Companies, to the
extent, incurred in or relating to the conduct of businesses (in-
cluding formerly owned, leased or operated properties, whether or
not part of the Packaging Business) other than the Packaging Busi-
ness (but not including any Liabilities of the Packaging Companies
arising after the Scheduled Closing Date in respect of any non-
Packaging Business) and other than Intergroup Payables that are
provided for in Section 2.4 and other than Debt that reduces the
Aggregate Purchase Price pursuant to Section 2.2(c) and is reflected
in the Debt/Cash Balance.
"Expert" shall mean Arthur Andersen LLP.
"Final Debt/Cash Balance" shall have the meaning set forth in Sec-
tion 2.2(c)(iv).
"Financial Statements" shall have the meaning set forth in Section
3.7.
"GAAP" shall mean Australian generally accepted accounting princi-
ples and practices (including, where applicable, prescribed
accounting standards) in effect from time to time.
"GAR" shall mean the BTR Group Accounts Returns being the quarterly
financial statements of the Packaging Companies used in the
preparation of the consolidated accounts of Seller.
"Governmental Authority" shall mean any domestic or foreign nation-
al, state, provincial, municipal or other local, multi-nation-
al or supra-national judicial, legislative, executive, admin-
istrative or regulatory authority or any governmental or
private body exercising any regulatory or tax authority.
6
<PAGE>
"Governmental Authorization" shall mean all permits, approvals,
licenses and authorizations required to carry on the Packaging
Business as currently conducted under the applicable laws,
ordinances or regulations of any Governmental Authority.
"Governmental Order" shall mean any order, writ, judgment, injunc-
tion, decision, administrative act or decree entered, adopted
or taken by or with any Governmental Authority of competent
jurisdiction.
"Group Relief" shall mean any advance corporation Tax, loss, allow-
ance, credit or other amount available to any corporation that
is either eligible for surrender to any other corporation in
accordance with the provisions of section 240 ICTA or is
eligible for surrender to a group of corporations in accor-
dance with the provisions contained in sections 402 to 413
ICTA or is eligible for setting off or deduction from the
income, profits, gains, or Tax liability of any other corpora-
tion under the Tax laws of any country other than the United
Kingdom, so that any reference in this Agreement to "surren-
der" shall include any such setting off or deduction that is
permissible under the Tax laws of any country other than the
United Kingdom; provided that such term shall not apply for
purposes of United States federal, state and local Tax Law.
"GST Act" shall have the meaning set forth in Section 3.15(l).
"Hazardous Materials" shall mean all materials regulated by applica-
ble Environmental Laws as capable of causing harm or injury to
human health or the environment, including without limitation
(a) any hazardous substances or any pollutant, contaminant or
constituent so designated under any applicable Environmental
Law, (b) substances and preparations which are dangerous for
the environment as defined in Council Directive 92/32/EEC of
the European Community or (c) materials expressly designated
as carcinogens or reproductive toxicants by applicable Envi-
ronmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"ICTA" shall mean the Income and Corporation Taxes Act of 1988.
"Indemnified Parties" shall mean the Purchaser Indemnified Parties
and the Seller Indemnified Parties collectively.
7
<PAGE>
"Indemnifying Party" shall have the meaning set forth in Section
7.4.
"Information Technology Systems" shall mean computer and data pro-
cessing systems, including all dedicated power supplies,
printing facilities and network cabling together with any
bureau, disaster recovery and facilities management arrange-
ments relating thereto.
"Intellectual Property" shall mean intellectual or property of a
similar nature including without limitation Trademark Rights,
Patent Rights, Copyrights, Design Rights, Proprietary Informa-
tion and all other intellectual property rights, including,
without limitation, inventions, processes, formulae, technolo-
gy, know-how, techniques or other data and information, confi-
dential and proprietary trade secrets, computer software,
technical manuals and documentation used in connection with
any of the foregoing, and licenses and rights with respect to
the foregoing or property of like nature.
"Intergroup Payables" shall mean as at the Scheduled Closing Date
the aggregate of the amounts then owing from each Packaging
Company to any member of the Seller Group, in each case as
converted from relevant local currencies into U.S. dollars at
the closing midpoint for the Scheduled Closing Date, as pub-
lished in the Financial Times.
"Intergroup Receivables" shall mean as at the Scheduled Closing Date
the aggregate of the amounts then owing from any member of the
Seller Group to any Packaging Company, in each case as con-
verted from relevant local currencies into U.S. dollars at the
closing midpoint for the Scheduled Closing Date, as published
in the Financial Times.
"Interim Period" shall have the meaning set forth in Section 5.9(a).
"Joint Venture Company" shall mean a Packaging Company that is a
direct or indirect Subsidiary of any Selling Company but is
not wholly owned, directly or indirectly, by Selling Compa-
nies; provided that "Joint Venture Company" shall not include
any Packaging Company in which Persons who are not members of
the Seller Group own, directly or indirectly, less than 1% of
the share capital of such Packaging Company.
"Knowledge of Seller" shall mean the actual knowledge of the indi-
viduals set forth on Schedule 1.1(a). If any Person set forth
on Schedule 1.1(a) shall cease to serve in the position set
8
<PAGE>
forth next to such Person's name on such Schedule, such Perso-
n's successor shall also be deemed to be included as a Person
listed on such Schedule.
"Law(s)" shall mean any law, statute, ordinance, rule, regulation,
order, writ, judgment, injunction or decree of any Governmen-
tal Authority.
"Liabilities" shall mean any and all debts, liabilities and obliga-
tions, whether accrued or fixed, known or unknown, absolute or
contingent, matured or unmatured or determined or determina-
ble.
"Liens" shall mean any lien, security interest, mortgage, pledge,
charge, encumbrance, assignment by way of security, or option.
"Losses" shall have the meaning set forth in Section 7.2(a).
"Material Adverse Effect" shall mean an effect that is materially
adverse to the business, assets, results of operations or
financial condition of either the Packaging Companies or the
Packaging Business as currently conducted and, in each case,
taken as a whole, but shall exclude any effect resulting from
general economic conditions.
"Material Contracts" shall have the meaning set forth in Section
3.12(a).
"MR" shall mean the monthly management accounting report prepared by
the Packaging Companies for inclusion in the Seller Group
monthly management accounting report.
"Net Intergroup Payables" shall mean the Intergroup Payables less
the Intergroup Receivables.
"Non-Controlling Party" shall have the meaning set forth in Section
5.4(g)(ii).
"Non-Packaging Assets" shall have the meaning set forth in Section
5.8(a).
"Notice Period" shall have the meaning set forth in Section 7.4.
"NZ Packaging Company" shall mean any Packaging Company that is
incorporated in New Zealand.
9
<PAGE>
"Packaging Business" shall mean except for the excluded operations
identified in Schedule 1.1(b) Seller's worldwide business
(including any indirect equity investment or interest therein)
of manufacturing and marketing glass containers and plastic
packaging and closures and the extraction, transportation,
manufacture, sale and purchase of related materials and ser-
vices, and related licensing and research activities as con-
ducted from time to time on or prior to the date hereof (in-
cluding without limitation, any operations relating to glass
tableware, soda ash, sand, dolomite or other industrial mate-
rials used in the Packaging Business , and also including the
trusteeship of the Superannuation Funds, but excluding (i)
Seller's interest in Nylex (Malaysia) Bhd. and Nylex Corpora-
tion Limited ("Seaford") and (ii) operations relating to the
mining of materials primarily used in businesses other than
the manufacture of glass containers, plastic packaging and
closures.
"Packaging Companies" shall have the meaning set forth in the pream-
ble hereto.
"Patent Rights" means patents, patent applications, invention dis-
closures, petty patents and supplementary protection certifi-
cates in any jurisdiction together with any extensions or
renewals, divisions, continuations, continuations-in-part,
reexaminations and reissues of such patents.
"Permits" shall have the meaning set forth in Section 3.10(b).
"Permitted Liens" shall mean (i) Liens identified in Schedules
3.20(a) and 3.20(b) or specifically identified on the Finan-
cial Statements (including in the notes thereto); (ii) all
Liens approved in writing by Purchaser, (iii) Liens arising
out of operation of Law with respect to a liability incurred
in the ordinary course of business, (iv) such Liens and other
imperfections in title as do not materially detract from the
value or impair the use of the property subject thereto, and
(v) Liens for taxes not yet subject to penalties for non-
payment or which are being actively contested in good faith by
appropriate proceedings.
"Person" shall mean an individual, a corporation, a limited liabili-
ty company, a partnership, an association, a trust or other
entity or organization.
"PET" shall mean polyethylene terephthalate, a plastic resin.
10
<PAGE>
"PET Operations" shall mean that portion of the Packaging Business
constituting Seller's worldwide business of manufacturing and
marketing PET packaging and related research and licensing
activities, including without limitation, the PET businesses
located in the United States, Australia, New Zealand, Mexico,
the Netherlands, Hungary, China, Saudi Arabia, Brazil and the
United Kingdom and the manufacture, sale and purchase of
related materials and services, as currently conducted.
"Plan" shall mean any "employee benefit plan" (within the meaning of
Section 3(3) of ERISA), or stock purchase, stock option, stock
appreciation right, restricted stock, severance, change-in-
control, fringe benefit, bonus, incentive, deferred compensa-
tion or other employee benefit or compensation plan, agree-
ment, program, policy or other arrangement, whether or not
subject to ERISA, whether formal or informal, oral or written,
legally binding or not, maintained (or contributed to or re-
quired to be contributed to) by Seller, any Selling Company,
or any of their ERISA Affiliates, and in which any current or
former Employee or director of a Packaging Company partici-
pates. Unless otherwise specified, the term "Plans" shall
include Plans established in the U.K., U.S., Australia and
other countries.
"Post-Closing Period" shall mean any taxable period beginning after
the Scheduled Closing Date and the portion of any Straddle
Period beginning after the Scheduled Closing Date.
"Pre-Closing Period" shall mean any taxable period ending on or
prior to the Scheduled Closing Date and the portion of any
Straddle Period ending on the Scheduled Closing Date.
"Preparer" shall have the meaning set forth in Section 5.4(h).
"Proposed U.K. Contaminated Land Regime" shall mean Part IIA of the
Environmental Protection Act 1990 (as enacted in the Environ-
ment Act 1995) when it comes into force, including the first
complete set of regulations and guidance under Part IIA to
come into force or effect, but not any amendments to Part IIA
or any subsequent regulations or guidance.
"Proprietary Information" shall mean the trade secrets, proprietary
technology, know-how and other confidential information relat-
ing principally to the Packaging Business.
11
<PAGE>
"Purchase Price" means the Closing Purchase Price after adjustment
for the Final Debt/Cash Balance in accordance with Section
2.2(c).
"Purchaser" shall have the meaning set forth in the recitals.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 7.3(a).
"Purchaser's Carry Back Relief" shall mean any Tax Benefit available
to any Packaging Company which can be carried back from a
Post-Closing Period.
"Purchaser's Group Relief" shall mean any amount of Group Relief
available to any of the Purchaser Indemnified Parties (other
than any Packaging Company) which is surrendered to a Packag-
ing Company in order to reduce or eliminate that company's
liability for Taxes for a Straddle Period and any amount of
Group Relief which is surrendered to a Packaging Company
pursuant to Section 5.4(d)(v).
"Purchaser's Interest Relief" shall mean any Tax Benefit available
to any Packaging Company in respect of interest accruing in a
Post-Closing Period.
"Purchaser's Tax Benefit" shall mean the aggregate of any Purchase-
r's Group Relief, any Purchaser's Interest Relief and any
Purchaser's Carry Back Relief.
"Purchasing Companies" shall mean United Glass, Ltd., a corporation
organized under the laws of England and Wales; Owens-Illinois
International B.V., a corporation organized under the laws of
the Netherlands; and Owens-Illinois (Australia) Pty Limited, a
corporation organized under the laws of Australia.
"Regulatory Authorities" shall have the meaning set forth in Section
5.3(c).
"Regulatory Authorization" shall have the meaning set forth in
Section 5.3(b).
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal or discharge into the environ-
ment, or into or out of any property.
"Remedial Action" shall mean any action required by an Environmental
Law to (a) undertake appropriate investigations of, cause the
12
<PAGE>
removal of or otherwise appropriately address any Hazardous
Materials or (b) correct or prevent a violation of an Environ-
mental Law.
"Restructuring" shall have the meaning set forth in Section 5.8(a).
"Retained Company" shall have the meaning set forth in Section
2.4(a).
"Rockware" shall mean Rockware Group Limited and its subsidiaries.
"Rockware Restructuring" shall mean that restructuring defined in
the indemnity letter agreement, dated 27 February 1998, be-
tween Purchaser and Seller.
"Scheduled Closing Date" shall have the meaning set forth in Section
2.4(a).
"Security" means a bond, deposit, guarantee, surety, indemnity,
letter of comfort or set-off or similar commitment.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the recitals hereto.
"Seller Group" shall mean Seller and each of its Subsidiaries and
Affiliates, including the Selling Companies and excluding the
Packaging Companies.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 7.2(a).
"Seller Manuals and Policy Documents" means the Seller Group finan-
cial and management procedures manuals, documents and software
identified on Schedule 1.1(d) which are located at any Packag-
ing Company or in the possession of any Employees or are
otherwise used in the operation of its business, but excluding
those financial and management procedures manuals, documents
and software used principally in the Packaging Business (whet-
her or not listed on Schedule 1.1(d)).
"Seller's Carry Forward Relief" shall mean any Tax Benefit available
to any Packaging Company which can be carried forward from a
Pre-Closing Period.
"Seller's Group Relief" shall mean any amount of Group Relief avail-
able to any Seller Indemnified Party which is surrendered to a
13
<PAGE>
Packaging Company in order to reduce or eliminate the Packag-
ing Company's liability for Taxes or Tax loss for a Straddle
Period but excluding any Group Relief which is surrendered to
a Packaging Company on the making of a claim by a Packaging
Company pursuant to Section 5.4(d)(v).
"Seller's Interest Relief" shall mean any Tax Benefit available to
any Packaging Company in respect of interest accruing in a
Pre-Closing Period.
"Seller's Tax Benefit" shall mean the aggregate of any Seller's
Group Relief, any Seller's Interest Relief and any Seller's
Carry Forward Relief.
"Selling Companies" shall mean the entities listed on Schedule
1.1(e).
"Sold Company(ies)" shall mean the companies listed on Schedule
1.1(f) or any of such companies, as the context requires.
"Sold Shares" shall mean all of the issued shares of the Sold Compa-
nies.
"Specified Consent(s)" shall mean: (A) if Purchaser's acquisition of
the Packaging Business (the "Acquisition") is a concentration
with a Community dimension within the meaning of Council
Regulation (EEC) No. 4064/89 ("ECMR"): (i) a decision (wheth-
er or not subject to conditions) under Article 6(1)(B) or
(8)(2) ECMR or a deemed clearance under Article 10(6) ECMR
declaring the Acquisition compatible with the common market;
and (ii) following a referral back of all or part of the
Acquisition to the competent authorities of the United Kingdom
pursuant to Article 9(3)(b) or Article 9(5) ECMR, receipt of
confirmation in the terms of clause (B) below; or (B) if the
Acquisition is not a concentration with a Community dimension,
or in the circumstances specified in clause (A)(ii) above:
receipt of written confirmation (whether or not subject to
conditions) that the Secretary of State for Trade and Industry
has decided not to refer any part of the Acquisition to the
Monopolies and Mergers Commission (the "MMC") or, following an
MMC reference of any part of the Acquisition (the "UK Acquisi-
tion"), receipt of written confirmation from the Secretary of
State for Trade and Industry (whether or not subject to condi-
tions) that the UK Acquisition may proceed.
"Straddle Period" shall mean any taxable period that begins before
and ends after the Scheduled Closing Date, with respect to
14
<PAGE>
which liability for Taxes shall be apportioned according to
Section 5.4(c).
"Subsidiary" shall mean a Person as to which a designated Person
owns directly or indirectly 50% or more of the voting equity
or otherwise holds the ability to direct the management and
control of the entity.
"Superannuation Commitments" shall mean any legal liability (whether
arising pursuant to an industrial award or agreement or other-
wise) or voluntary commitment to make contributions to any
Australian superannuation fund, pension scheme or other ar-
rangement which provides directors or employees of any Packag-
ing Company or their respective dependents with pensions,
annuities, lump sums or any other payments upon retirement or
earlier death or otherwise.
"Superannuation Funds" shall mean the superannuation funds known as
(i) BTR Packaging Superannuation Fund established by trust
deed dated 28 January 1998 and (ii) BTR Packaging Accumulation
Fund established by trust deed dated 28 January 1998.
"Tax Audit" shall have the meaning set forth in Section 5.4(g)(i)
hereto.
"Tax Authority" shall mean any competent Governmental Authority
responsible for the determination, assessment or collection of
Taxes.
"Tax Benefits" shall mean any losses, deductions, credits, or other
Tax benefits.
"Tax Benefit Amount" shall mean the amount by which the Tax liabili-
ty of the relevant party or an Affiliate thereof or any com-
bined, consolidated or unitary group of corporations including
the party or such Affiliate is reduced (including, without
limitation, by deduction, reduction of income, refund, credit
or otherwise) plus any related interest received from a Tax
Authority.
"Tax Item" shall mean, with respect to Taxes, any item of income,
gain, deduction, loss or credit or any other tax attribute.
"Tax Law" shall mean any Law relating to Taxes.
"Tax Returns" shall mean all reports and returns (including, without
limitation, any schedules, elections or other documents and
15
<PAGE>
all supporting records) required to be filed with a Tax Au-
thority or required to be prepared and retained with respect
to Taxes relating to and including the operations of the
Packaging Business as currently conducted.
"Tax Sharing Agreement" shall mean any written agreement or other
arrangement between any Packaging Company and Seller or an
Affiliate thereof (other than another Packaging Company)
providing for the allocation or apportionment of Taxes.
"Taxes" shall mean all national, federal, state, local or foreign
taxes, including, but not limited to, income, gross receipts,
consumption, stamp and transfer (other than Transfer Taxes),
windfall profits, alternative minimum, value added, severance,
property (except, for U.K. tax purposes, rates), production,
sales, use, license, excise, franchise, employment, withhold-
ing or similar taxes (including, without limitation, goods and
services Taxes of New Zealand and accident compensation levies
of New Zealand), together with any interest or penalties with
respect thereto and any interest in respect of such penalties.
"Trademark Rights" shall mean trademarks, trade dress, service
marks, brand names, certification marks, logos, registrations
and applications and all extensions and renewals thereof in
any jurisdiction of the foregoing, and the goodwill of any
portion of the Packaging Business symbolized thereby.
"Transfer Taxes" shall mean all excise, ad valorem, sales, use,
transfer (including real property transfer or gains), stamp,
documentary, filing, recordation and other similar taxes
together with any interest, additions or penalties with re-
spect thereto and any interest in respect of such additions or
penalties directly or indirectly resulting from or arising out
of the transactions contemplated by this Agreement.
"Transferred Business" shall have the meaning set forth in Section
5.8(a).
"Trust Deeds" shall mean the trust deeds (as amended) referred to in
the definition of Superannuation Funds under which the Super-
annuation Funds were established and are administered.
"U.K." refers to either a Plan or the portion of the Packaging
Business which is primarily subject to, and governed by, the
Laws of the United Kingdom and its political subdivisions or
to an Employee of such portion of the Packaging Business.
16
<PAGE>
"U.S." refers to either a Plan or the portion of the Packaging
Business which is primarily subject to, and governed by, the
Laws of the United States of America and its political subdi-
visions or to an Employee of such portion of the Packaging
Business.
Section 1.2 Other Terms. Other terms may be defined
elsewhere in the text of this Agreement and, unless otherwise
indicated, shall have such meaning throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", "hereto" and "hereun-
der" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provi-
sion of this Agreement.
(b) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) The terms "U.S. dollars" and "U.S.$" shall mean
United States dollars; the terms "Australian dollars" and "A$" shall
mean Australian dollars and the terms "Pounds" and "(Pounds Sterling
Sign" shall mean English pounds sterling.
(d) The term "control" shall mean, as applied to any
Person, the possession directly or indirectly of the power to direct
or cause the direction of the management of such Person through the
ownership of voting securities or otherwise and the terms "control-
ling" and "controlled" have the correlative meanings.
(e) Whenever the words "include", "includes", or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation" unless the context
requires otherwise.
17
<PAGE>
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Sold Shares. On the
terms and subject to the conditions set forth herein, on the Sched-
uled Closing Date, Seller agrees to cause the Selling Companies to
sell to the Purchasing Companies all of the Sold Shares, each of the
Selling Companies agrees to sell to the Purchasing Companies the
Sold Shares owned by it, and Purchaser agrees to cause the Purchas-
ing Companies to purchase from each of the Selling Companies all of
the Sold Shares and each of the Purchasing Companies agrees to
purchase the Sold Shares from the Selling Companies as set forth on
Schedule 2.1. Notwithstanding the foregoing, the obligation of the
parties hereto to purchase and sell the Sold Shares shall be subject
to and effective only upon the receipt of approval of such sale and
purchase described in Section 6.1(a)(i). On the terms and subject
to the conditions set forth herein, on the Scheduled Closing Date,
Seller agrees to cause BTR Australia Limited to sell to Owens-
Illinois (Australia) Pty Limited and Purchaser agrees to cause
Owens-Illinois (Australia) Pty Limited to purchase from BTR Austra-
lia Limited all of the outstanding principal amount of the Convert-
ible Notes.
Section 2.2 Purchase Price; Debt/Cash Balance Adjust-
ment.
(a) Aggregate Purchase Price. In consideration of the
sale and transfer of the Sold Shares, Purchaser shall pay, or shall
cause the Purchasing Companies to pay, to Seller (as agent for the
benefit of the Selling Companies), an aggregate amount equal to the
sum of A$3 billion and U.S.$1.6 billion (the "Aggregate Purchase
Price"), subject to adjustment only as described in this Section 2.2
below and as otherwise provided herein, and allocated as set forth
in Section 2.3 below.
At the Scheduled Closing, Owens-Illinois (Australia) Pty
Limited shall purchase from BTR Australia Limited, by payment in
Australian dollars, all of the outstanding principal amount of the
Convertible Notes for a purchase price equal to the outstanding
principal amount thereof, and the Aggregate Purchase Price shall be
reduced by the amount so paid.
(b) Payment of Estimated Intergroup Payable and Receiv-
ables. At the Scheduled Closing, Purchaser shall cause the Packag-
ing Companies to pay the Estimated Intergroup Payables and Seller
18
<PAGE>
shall cause the members of the Seller Group to pay the Estimated
Intergroup Receivables, provided that, to the extent possible, such
Estimated Intergroup Payables and Estimated Intergroup Receivables
shall be offset "dollar-for-dollar" against each other in lieu of
cash payments, with the balance of any amount due being paid in cash
as provided immediately above. If the amount of (i) Estimated
Intergroup Receivables to be paid pursuant to this Section 2.2(b)
exceeds the amount of Estimated Intergroup Payables to be paid
pursuant to this Section 2.2(b), then the Aggregate Purchase Price
shall be increased by the amount of such excess or (ii) Estimated
Intergroup Payables to be paid pursuant to this Section 2.2(b)
exceeds the amount of Estimated Intergroup Receivables to be paid
pursuant to this Section 2.2(b), then the Aggregate Purchase Price
shall be reduced by the amount of such excess, and any adjustment
hereunder shall be allocated in respect of the Sold Shares to which
it relates.
(c) Debt/Cash Balance Adjustment.
(i) On the fourth Business Day prior to the
Scheduled Closing Date, Seller will cause to be prepared and
delivered to Purchaser an estimate of the Debt/Cash Balance
together with the workpapers of Seller used in the preparation
thereof (the "Estimated Debt/Cash Balance") as of the Sched-
uled Closing Date. The Estimated Debt/Cash Balance shall be
prepared on a basis consistent with the information included
in the Financial Statements and by applying the same account-
ing principles, policies and practices utilized in preparing
the Financial Statements in the underlying local currencies
for the relevant assets and obligations and shall include a
translation of all such amounts (A) into U.S. dollars with
respect to all assets and liabilities relating to Continental
and (B) into Australian dollars with respect to assets and
liabilities relating to all other Packaging Business opera-
tions, in each case at the closing midpoint for the second
Business Day immediately preceding delivery of the Estimated
Debt/Cash Balance, as published in the Financial Times.
(ii) The Aggregate Purchase Price paid by Pur-
chaser to Seller (as agent for the benefit of the Selling
Companies) at the Closing pursuant to Section 2.4(b) shall be
reduced by the amount, if any, that each of the U.S. dollar
and Australian dollar portions of the Estimated Debt/Cash
Balance is less than zero (reflecting net debt positions) by
deduction of those amounts (if any) from the corresponding
U.S. dollar and Australian dollar portions of the Aggregate
Purchase Price. The Aggregate Purchase Price paid by Purchas-
19
<PAGE>
er to Seller (as agent for the benefit of the Selling Compa-
nies) at the Closing pursuant to Section 2.4(b) shall be
increased by the amount, if any, that each of the U.S. dollar
and Australian dollar portions of the Estimated Debt/Cash
Balance is greater than zero (reflecting net cash positions)
by adding those amounts (if any) to the corresponding U.S.
dollar and Australian dollar portions of the Aggregate Pur-
chase Price. Such adjustments shall be made in Australian
dollars and U.S. dollars in amounts equal to the Australian
dollar and U.S. dollar net balances shown on the Estimated
Debt/Cash Balance after translation into such currencies as
set forth in Section 2.2(c)(i) above and shall be allocated in
respect of the Sold Shares to which they relate.
(iii) Promptly, and in any event within thirty-
five Business Days following the Scheduled Closing Date,
Purchaser shall prepare and deliver to Seller a statement of
(x) the actual Debt/Cash Balance of the Packaging Companies on
a combined basis (the "Closing Debt/Cash Balance") as of the
Scheduled Closing Date, together with workpapers of Purchaser
used in the preparation thereof and (y) the Intergroup Receiv-
ables and the Intergroup Payables. The Closing Debt/Cash
Balance, the Intergroup Receivables and the Intergroup Payab-
les shall be prepared on a basis consistent with the informa-
tion included in the Financial Statements and by applying the
same accounting principles, policies and practices utilized in
preparing the Financial Statements and the Estimated Debt/Cash
Balance, the Estimated Intergroup Receivables and the Estimat-
ed Intergroup Payables in the underlying local currencies for
the relevant assets and obligations and shall include a trans-
lation of all such amounts (A) into U.S. dollars with respect
to all assets and liabilities relating to Continental and (B)
into Australian dollars with respect to assets and liabilities
relating to all other Packaging Business operations, in each
case at the closing midpoint for the Scheduled Closing Date,
as published in the Financial Times.
(iv) If Seller in good faith disagrees with the
amount of the Closing Debt/Cash Balance delivered pursuant to
Section 2.2(c)(iii) hereof, Seller may, within thirty-five
Business Days after its receipt thereof, deliver a written
notice of disagreement to Purchaser. Any such notice of
disagreement shall specifically identify the elements of the
Closing Debt/Cash Balance that Seller believes were miscalcu-
lated, identifying all alleged uncounted or improperly includ-
ed items, and Seller shall be deemed to have agreed with all
other items and amounts contained in the Closing Debt/Cash
20
<PAGE>
Balance. If a notice of disagreement shall be timely deliv-
ered pursuant to this paragraph (iv) hereof, the parties
shall, during the ten (10) Business Days following such deliv-
ery, use their reasonable best efforts to reach agreement on
the disputed items. In the absence of such agreement, the
determination of such Final Debt/Cash Balance may be referred
by either Seller or Purchaser for determination to the Expert
and the Expert shall be instructed to notify both Seller and
Purchaser of its determination within fourteen (14) Business
Days of such referral. In connection therewith, the Expert
shall consider only those items or amounts in the Closing
Debt/Cash Balance as to which Seller has disagreed and those
items raised for review by Purchaser in response to the items
disputed by Seller. In making its determination, the Expert
shall act as expert and not arbitrator and its determination
shall, in the absence of manifest error, be deemed to have
been accepted and approved by Seller and Purchaser and shall
be deemed to constitute the relevant Final Debt/Cash Balance
for all purposes of this Agreement. The Expert shall deliver
to Seller and Purchaser a report setting forth its adjust-
ments, if any, to the Closing Debt/Cash Balance and the calcu-
lations supporting such adjustments. The fees and costs of the
Expert shall be paid as directed by the Expert. As used
herein, "Final Debt/Cash Balance" shall mean (x) if no notice
of disagreement is delivered by Seller within the period
provided in this Section 2.2(c)(iv), the Closing Debt/Cash
Balance as shown in Purchaser's calculation delivered pursuant
to Section 2.2(c)(iii) or (y) if such a notice of disagreement
is delivered by Seller, either (1) as agreed in writing by
Purchaser and Seller or (2) as shown in the Expert's calcula-
tion delivered pursuant to this Section 2.2(c)(iv).
(v) On the date each of the Final Debt/Cash
Balance and the Intergroup Receivables and Intergroup Payables
is determined as provided in Section 2.2(c)(iv) above (the
"Determination Date"), the assets and obligations set forth in
each of the Final Debt/Cash Balance and the Intergroup Receiv-
ables and Intergroup Payables shall be translated at the
closing midpoint for the Scheduled Closing Date, as published
in the Financial Times (A) into U.S. dollars with respect to
all assets and liabilities relating to Continental and (B)
into Australian dollars with respect to assets and liabilities
relating to all other Packaging Business operations.
(vi) If the amount of either the U.S. dollar or
Australian dollar portions of the Final Debt/Cash Balance is
(or are) higher (or, if less than zero, less negative) than
21
<PAGE>
the corresponding amount set forth in the Estimated Debt/Cash
Balance, then Purchaser shall pay the difference to Seller (as
agent for the benefit of the Selling Companies), as an adjust-
ment to the Closing Purchase Price, in the manner and with
interest as provided in Section 2.2(c)(vii). If the amount of
either the U.S. dollar or Australian dollar portions of the
Final Debt/Cash Balance is (or are) lower (or, if less than
zero, more negative) than the Estimated Debt/Cash Balance,
then Seller (as agent for the benefit of the Selling Compa-
nies) shall pay the difference to Purchaser, as an adjustment
to the Closing Purchase Price, in the manner and with interest
as provided in Section 2.2(c)(vii).
(vii) Payments made pursuant to Section 2.2(c)(-
vi) shall be made by wire transfer (to accounts designated by
Seller or Purchaser, as the case may be) of immediately avail-
able funds on the third Business Day following the Determina-
tion Date: (A) in U.S. dollars with respect to the portion of
the adjustment provided in the preceding paragraph relating to
the PET Operations and (B) in Australian dollars with respect
to the portion of the adjustment provided in the preceding
paragraph relating to all other Packaging Business operations.
The amount of any such payments shall bear interest for the
period from and including the Scheduled Closing Date to but
excluding the payment date at Barclay's LIBOR rate for the
applicable currency on the Scheduled Closing Date. Such
interest will be payable at the same time as the payment to
which it relates and shall be calculated daily on the basis of
a year of 365 days with respect to Australian dollars and 360
days with respect to U.S. dollars and, in either event, the
actual number of days for which interest is due. Payments
made pursuant to this Section 2.2(c)(vii) shall be allocated
in respect of the Sold Shares for each Sold Company as set
forth in Section 2.3 below.
(viii) For the purposes of determining and agree-
ing on any Final Debt/Cash Balance, Purchaser shall cause each
Packaging Company to give Seller, its representatives and the
Expert reasonable access at reasonable times to all personnel,
books and records of Seller or the Selling Companies to the
extent relating to the Packaging Business, or of the Packaging
Companies.
(d) At the Closing, Seller shall pay Purchaser A$14.6
million in satisfaction of the net amount due as of the Scheduled
Closing Date in respect of the payment or satisfaction of the
following line items set forth in Schedule 3.7 in respect of the
22
<PAGE>
Packaging Companies: "Superannauation Accruals," "Overheads Expense
Accruals," "C/PET-Olive Branch Closure", "BTR Nylex-Corporate
Creditors, Clearing and Accruals," "Workers Compensation Provi-
sions", "Long service leave" (whether for head office personnel or
otherwise, and including both the current and non-current portion
thereof) (the foregoing items being referred to herein as the
"Section 2,2(d) Liabilities"), it being understood that amounts
received in respect of the following accounts may be retained by
Purchaser: "Rockware-Flacconage Disposal", "BTR Nylex Corporation
Receivables /Prepayments" and "Insurance Claims."
Section 2.3 Allocation of the Aggregate Purchase Price.
Seller and Purchaser have agreed to the allocation of the Aggregate
Purchase Price among the Sold Shares to be purchased hereunder as
set forth in Schedule 2.3 (the "Allocation"), subject to adjustment
to reflect any adjustments or payments made pursuant to Sections
2.2, 5.4 or Article VII. Each of Seller and Purchaser shall (a) be
bound by the Allocation for purposes of determining any Taxes, (b)
prepare and file, and cause its Subsidiaries to prepare and file,
its and their Tax Returns on a basis consistent with the Allocation
and (c) take no position, and cause its Subsidiaries to take no
position, inconsistent with the Allocation on any applicable Tax
Return or in any proceeding before any Tax Authority or otherwise.
In the event that the Allocation is disputed by any Tax Authority,
the party receiving notice of the dispute shall promptly notify the
other party hereto of the receipt of such notice and consult with
such other party in the resolution of the dispute.
Section 2.4 Closings; Delivery and Payment.
(a) (i) The Closing shall take place at the offices
of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017, at 10:00 A.M., New York City time, as soon as practica-
ble after the date hereof upon (A) the fifth Business Day following
the satisfaction or waiver of the conditions precedent specified in
Article VI or (B) at such other time and place as the parties hereto
may mutually agree (such date the "Scheduled Closing Date").
(ii) If the Specified Consent(s) have not been
obtained prior to the satisfaction or waiver (provided such
waiver is permitted under applicable Law) of the conditions
set forth in Sections 6.1, 6.2 and 6.3, the parties shall
proceed with the Closing pursuant to this Section 2.4; provid-
ed that at the Closing, Purchaser shall not acquire, and the
applicable Selling Company shall not sell and shall retain
share certificates for any Packaging Company (each such Pack-
aging Company, a "Retained Company") that is not then permit-
23
<PAGE>
ted to be transferred to Purchaser as a result of the Speci-
fied Consents not having been obtained or the relevant waiting
period not having expired. Following the Closing and subject
to Section 5.9(g), the transfer and delivery of the shares of
any Retained Company (a "Suspended Transfer") shall occur at
the time and place set forth in accordance with Section 5.9
(with respect to any such transfer and delivery the "Suspended
Closing Date").
(b) On the Scheduled Closing Date,
(i) Seller shall cause each Selling Company to
and the Selling Companies shall (x) deliver to Purchaser (A)
duly executed share transfers and certificates representing
the Sold Shares with all required New York State stock trans-
fer tax stamps affixed, (B) the Convertible Notes, (C) all
documents required to be delivered by Seller to Purchaser
pursuant to Article VI including, without limitation, the
certificates required to be delivered by Seller pursuant to
Sections 6.2(a) and 6.2(c) (provided that Seller shall not
transfer and shall retain certificates and transfers for the
shares of any Retained Company), and (D) with respect to
entities for which registration of transfer cannot be made
immediately following the Scheduled Closing Date, irrevocable
proxies to vote the Sold Shares so transferred in the form
attached hereto as Schedule 2.4(b) and (y) immediately there-
after make, or cause to be made, the payments required to be
made by Seller or any member of the Seller Group pursuant to
Section 2.4(c) below; and
(ii) Purchaser shall, or shall cause the Purchas-
ing Companies to, (x) deliver to Seller (a) (as agent for the
benefit of the Selling Companies) the full amount of the
Closing Purchase Price less the Estimated Net Intergroup
Payables in immediately available funds by wire transfer to an
account or accounts at such bank or banks as specified in
writing by Seller at least two Business Days prior to the
Closing and (b) all documents required to be delivered by
Purchaser to Seller pursuant to Article VI, including, without
limitation, the certificates required to be delivered by
Purchaser pursuant to Sections 6.3(a) and 6.3(c), and (y)
immediately thereafter make, or cause to be made, the payments
required to be made by Purchaser or the Packaging Companies
pursuant to Section 2.4(c).
(c) On the Scheduled Closing Date, Seller shall cause
to be paid in full the amount of the Estimated Intergroup Receiv-
24
<PAGE>
ables and Purchaser shall cause to be paid in full the amount of the
Estimated Intergroup Payables as provided in Section 2.2(b).
(d) On each Suspended Closing Date, the applicable
Selling Company shall deliver to Purchaser duly executed share
transfers and certificates representing the shares of the relevant
Retained Company with all required New York State stock transfer tax
stamps affixed and, with respect to entities for which registration
of transfer cannot be made immediately following such Suspended
Closing, irrevocable proxies to vote the Sold Shares so transferred
in the form attached hereto as Schedule 2.4(b).
(e) In relation to the Intergroup Payables:
(i) if the Intergroup Payables are greater than
the corresponding Estimated Intergroup Payables, then Purchas-
er, as agent for the relevant Packaging Companies, shall pay
an amount equal to such difference to the Seller (as trustee
for the members of the Seller Group to which the relevant
Intergroup Payables are owed) within seven (7) days of the
agreement or determination of such Intergroup Payables against
(by way of offset and so that no funds shall pass) payment by
Seller to Purchaser of an amount equal thereto as an adjust-
ment to the allocation of the Purchase Price as between Net
Intergroup Payables and the Sold Shares and against delivery
of releases from all relevant members of the Seller Group of
all sums so due; and
(ii) if the Intergroup Payables are less than the
corresponding Estimated Intergroup Payables, then Seller, as
agent for the relevant members of the Seller Group, shall pay
an amount equal to such difference to Purchaser (as trustee
for the relevant Packaging Company) within seven (7) days of
the agreement or determination of such Intergroup Payables
against (by way of offset and so that no funds shall pass)
payment by Purchaser to Seller of an amount equal thereto as
an adjustment to the allocation of the Purchase Price as
between Net Intergroup Payables and the Sold Shares.
(f) In relation to the Intergroup Receivables:
(i) if the Intergroup Receivables are greater
than the corresponding Estimated Intergroup Receivables, then
Seller shall (as agent for the relevant members of the Seller
Group) pay an amount equal to such difference to Purchaser (as
trustee for the Packaging Companies, to which the relevant
Intergroup Receivables are owed) within seven (7) days of the
25
<PAGE>
agreement or determination of such Intergroup Receivables
against (by way of offset and so that no funds shall pass)
payment by Purchaser to Seller of an amount equal thereto as
an adjustment to the allocation of the Purchase Price as
between Net Intergroup Payables and the Sold Shares and
against delivery of releases from all relevant Packaging
Companies of all sums so due; and
(ii) if the Intergroup Receivables are less than
corresponding Estimated Intergroup Receivables, then Purchaser
shall, as agent for the relevant Packaging Company, pay an
amount equal to such difference to Seller (as trustee for the
relevant members of the Seller Group) within seven (7) days of
the agreement or determination of such Intergroup Receivables
against (by way of offset and so that no funds shall pass)
payment by Seller to Purchaser of an amount equal thereto as
an adjustment to the allocation of the Purchase Price as
between Net Intergroup Payables and the Sold Shares.
(g) Seller (as agent for the members of the Seller
Group) and the Purchaser (as agent for the Packaging Companies) may
set off the amount of the Estimated Intergroup Payables against the
amount of the Estimated Intergroup Receivables and the amount of the
Intergroup Payables against the amount of the Intergroup Receivables
after giving effect to changes based on currency movements, to
produce in each case a net sum resulting in an adjustment to the
allocation of the Purchase Price between Net Intergroup Payables and
the Sold Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Selling Companies hereby represent and
warrant to Purchaser as follows:
Section 3.1 Organization of Seller and Selling Compa-
nies. Each of Seller and each Selling Company is a corporation duly
incorporated under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority to carry on its
business as conducted and, in the case of the Selling Companies, to
own the Sold Shares. Schedule 3.1 contains true and complete copies
of the memorandum and articles of Seller and each Selling Company.
Section 3.2 Authority of Seller and the Selling Compa-
nies; Binding Effect.
26
<PAGE>
(a) Seller and each Selling Company has the requisite
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder, subject only to the
approval of this Agreement and the transactions contemplated hereby
by a majority of the holders of ordinary shares of Seller at a duly
called general meeting of such shareholders (the "Shareholder
Approval"). The execution and delivery by Seller and each Selling
Company of this Agreement and the performance by each of such
parties of its obligations hereunder and the consummation by each of
such parties of the transactions contemplated hereby (including the
Restructuring) have been duly authorized by all requisite corporate
action on its part, except for receipt of the Shareholder Approval.
Other than the Shareholder Approval, no other corporate proceedings
on the part of Seller or any Selling Company are required in connec-
tion with the execution, delivery and performance by any of such
parties of this Agreement or the consummation by each of such
parties of the transactions contemplated hereby (including the
Restructuring).
(b) This Agreement has been duly executed and delivered
by Seller and each Selling Company and, assuming due authorization,
execution and delivery of this Agreement by Purchaser, this Agree-
ment constitutes a valid and legally binding obligation of Seller
and each Selling Company enforceable against Seller and each Selling
Company in accordance with its terms except to the extent enforce-
ability (i) may be limited by bankruptcy, insolvency, reorganiza-
tion, moratorium or similar laws relating to creditors rights
generally and (ii) is subject to general equitable principles.
Section 3.3 Title.
(a) The authorized and issued share capital of each
Sold Company is set forth in Schedule 3.3. All of the Sold Shares
(i) have been duly authorized and validly issued and (ii) are fully
paid and nonassessable or, in the case of any Sold Company incorpo-
rated under the laws of England and Wales, Hong Kong, or the State
of Victoria, Australia, are fully paid or properly credited as fully
paid. With respect to each Sold Share, such Sold Share is owned
beneficially and of record solely by the Selling Company indicated
on Schedule 3.3 as the owner of such Sold Share and each such
Selling Company has the right to transfer legal and beneficial title
to the Sold Shares owned by it, free and clear of all Liens. The
Sold Shares constitute all of the authorized and issued share
capital of the Sold Companies. The Sold Shares have not been issued
in violation of any purchase option, call, warrant, right of first
refusal, preemptive, subscription or similar rights under any
provision of applicable Law, the organizational documents of any
27
<PAGE>
Selling Company, or any contract, agreement or instrument to which
any Selling Company, Seller or any other Affiliate thereof is
subject or by which any of such Persons is bound. Except as set
forth in Schedule 3.3, (i) there are no outstanding options, war-
rants, rights, calls, preemptive rights, agreements, convertible or
exchangeable securities or other commitments (other than this
Agreement) pursuant to which any Sold Company, Selling Company,
Seller or any of its other Affiliates is or may become obligated to
issue, sell, purchase, return, transfer, otherwise dispose of,
redeem or repurchase any shares in the capital of or other securi-
ties or interests of any Sold Company or which provides for any
stock appreciation or similar right with respect to any Sold Compa-
ny. Upon payment for the Sold Shares as herein provided and subject
to registration of transfer where applicable, Purchaser will acquire
valid title to, and full legal and beneficial ownership of, the Sold
Shares, free and clear of any Lien, other than Liens created by
Purchaser and Purchaser shall be entitled to exercise all rights
attached or accruing to the Sold Shares including, without limita-
tion, the right to receive all dividends, distributions or any
return of capital declared, paid or made by any of the Sold Compa-
nies, from and after the Scheduled Closing Date (except as a result
of actions taken by Purchaser) subject to applicable Laws and (ii)
there are no voting trusts to which the Sold Shares are subject or
any agreements or understandings affecting the voting rights, right
to transfer or other incidents of record or beneficial ownership
pertaining to the Sold Shares.
(b) All of the Convertible Notes have been duly autho-
rized and validly issued and are owned beneficially and of record by
BTR Australia Limited and A$239,625,000 aggregate principal amount
of the Convertible Notes are outstanding. Upon payment for the
Convertible Notes as herein provided, Owens-Illinois (Australia) Pty
Limited will acquire valid title to, and full legal and beneficial
ownership of, all of the Convertible Notes, free and clear of any
Lien, other than Liens created by Owens-Illinois (Australia) Pty
Limited and Owens-Illinois (Australia) Pty Limited shall be entitled
to exercise all rights attached or accruing to the Convertible Notes
including, without limitation, the right to receive all payments and
distributions, from and after the Scheduled Closing Date (except as
a result of actions taken by Owens-Illinois (Australia) Pty Limit-
ed).
(c) The Packaging Companies have valid title to, and
full legal and beneficial ownership of, all of the share capital,
partnership interest or other equity interest set forth on Schedule
3.3(c), which constitutes all of the share capital, partnership
interest or other equity interest of Persons (other than Packaging
28
<PAGE>
Companies) in which any Packaging Company owns of record or benefi-
cially a direct or indirect interest, in each case, free and clear
of any Lien.
Section 3.4 Organization and Structure of the Packaging
Companies.
(a) Each Packaging Company is duly incorporated and, in
the case of Packaging Companies incorporated in the United States,
validly existing and in good standing, under the laws of its juris-
diction of organization, with the requisite corporate power and
authority to own, operate or lease the properties and assets owned,
operated or leased by such Packaging Company and to carry on its
business as currently conducted, and is qualified to do business in
each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such qualification necessary,
except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect.
(b) Schedule 3.4(b) lists all of the Packaging Compa-
nies together with, with respect to each of the Packaging Companies:
(i) the jurisdiction of its organization, (ii) each jurisdiction in
which such Packaging Company conducts business, (iii) the authorized
and issued, and, in the case of Packaging Companies incorporated in
the United States, all outstanding, share capital of each Packaging
Company and (iv) the registered owner(s) of all the issued share
capital of each Packaging Company (identifying the share capital
owned by each such registered owner). All issued shares in the
capital of the Packaging Companies (i) have been duly authorized and
validly issued and (ii) are fully paid and nonassessable or, in the
case of any Packaging Company incorporated under the laws of England
and Wales, Hong Kong, or the laws of any State or Territory of
Australia, are fully paid or properly credited as fully paid.
Except as set out in Schedule 3.4(b), there are no outstanding
options, warrants, rights, calls, preemptive rights, agreements,
convertible or exchangeable securities or other commitments (other
than this Agreement) pursuant to which any Packaging Company,
Selling Company, Seller or any of its other Affiliates is or may
become obligated to issue, sell, return, transfer, otherwise dispose
of, redeem or repurchase any shares in the capital or other securi-
ties or interests of any Packaging Company or which provides for any
stock appreciation or similar right with respect to any Packaging
Company. Except as disclosed in Schedule 3.4(b), no Packaging
Company (i) owns of record or beneficially a direct or indirect
equity interest in any Person that is not a Packaging Company or
(ii) is a member of any partnership or other Person or (iii) in
Australia, is the manager, trustee or representative of any trust or
29
<PAGE>
scheme involving prescribed interests (within the meaning of the
Australian Corporations Law).
(c) Schedule 3.4(c) contains true and complete copies
of the memorandum, articles of association and any other organiza-
tional documents of the Sold Companies and Seller has made available
to Purchaser true and complete copies of the minute books and stock
transfer records of each of the Packaging Companies since such
Companies have been wholly owned Subsidiaries of Seller.
(d) Each Sold Company is a Packaging Company and each
Packaging Company is, or upon completion of the Restructuring shall
be, a Sold Company or, except as disclosed on Schedule 3.4(d), a
wholly owned direct or indirect Subsidiary of a Sold Company.
Section 3.5 Non-Contravention. Except as set forth in
Schedule 3.5, the execution, delivery and performance of this
Agreement by Seller or any Selling Company and the consummation by
Seller or any Selling Company of the transactions contemplated
hereby (including the Restructuring) does not and will not (i)
violate any provision of the memorandum and articles of association,
certificate of incorporation, by-laws or any other organizational
documents of Seller, any Selling Company or any Packaging Company or
(ii) result in the breach, violation, suspension or termination of,
give rise to any right of termination, purchase or amendment under,
require consent or notification under, result in the loss of any
benefit, right or license under, increase or accelerate the Liabili-
ty of any party under, result in the creation of a Lien on the Sold
Shares or any assets of the Packaging Companies or constitute a
default under (in each case, with or without the giving of notice or
the lapse of time or both) any provision of any agreement, contract,
instrument, commitment, license, franchise or Permit to which
Seller, any Selling Company or any Packaging Company is a party or
is subject or by which any assets of any of them is bound, except as
would not, individually or in the aggregate, (i) result in a Materi-
al Adverse Effect or (ii) reasonably be expected to prevent or
materially interfere with or delay the consummation of the transac-
tions contemplated hereby.
Section 3.6 Consents and Approvals. Other than as set
forth in Schedule 3.6, the execution, delivery and performance of
this Agreement by Seller or any Selling Company and the consummation
by Seller and each Selling Company of the transactions contemplated
hereby (including the Restructuring) does not and will not violate
or require any consent, approval, filing or notice under any Law or
arbitration award applicable to Seller, any Selling Company, any
Packaging Company or any of their respective assets or require any
30
<PAGE>
consent, approval, license, Permit, order or authorization of, or
declaration, filing or registration with, any Governmental Authori-
ty, except where such violation or the failure to obtain such
consent, approval, license, Permit, order or authorization or make
such declaration, filing or registration would not (i) result,
individually or in the aggregate, in a Material Adverse Effect or
(ii) reasonably be expected to prevent or materially interfere with
or delay the consummation of the transactions contemplated hereby.
Section 3.7 Financial Information. The audited special
purpose financial statements comprising the combined balance sheets
of the Packaging Companies as at December 31, 1995, 1996 and 1997
such balance sheet as at December 31, 1997 being referred to herein
as the "Balance Sheet" and the related combined profit and loss
accounts and statements of cash flows for each of the three years
ended December 31, 1995, 1996 and 1997, including the notes thereto
set forth in Schedule 3.7 (the "Financial Statements") (excluding
the unaudited reconciliation with U.S. generally accepted accounting
principles) present fairly, in accordance with GAAP applied on a
consistent basis except as set out in Note 1 of those financial
statements or as otherwise described in Schedule 3.7, the combined
financial position of such economic entity as at December 31, 1995,
1996 and 1997 and combined results of its operations and its cash
flows for each of the three years ended December 31, 1995, 1996 and
1997, on the basis of preparation and presentation as set out in
Note 1 of those special purpose financial statements.
Section 3.8 Absence of Certain Changes or Events.
Except to the extent arising out of the transactions expressly
contemplated by this Agreement (including the Restructuring) or as
set forth in Schedule 3.8, since December 31, 1997, the Packaging
Business has been conducted in all material respects in the ordinary
course consistent with past practice and there has not occurred any
event, change or development which has had, or which would reason-
ably be expected to have, individually or in the aggregate, a
Material Adverse Effect or which would, individually or in the
aggregate, reasonably be expected to prevent or materially interfere
with or delay the consummation of the purchase of the Sold Shares
contemplated hereby. Without limiting the generality of the forego-
ing, since December 31, 1997, except as otherwise disclosed in
Schedule 3.8 or except to the extent expressly contemplated by this
Agreement (including the Restructuring), neither any Selling Company
nor any Packaging Company with respect to the Packaging Business
has:
(i) made any material change in any financial
reporting or accounting policy or accounting practice by any
31
<PAGE>
Packaging Company, other than such changes required by law or
GAAP;
(ii) sold, transferred, leased or otherwise
disposed of, to any third party, any properties or assets
material to the operation of the Packaging Business other than
in the ordinary course of business consistent with past prac-
tice;
(iii) other than in the ordinary course consistent
with past practice, (A) entered into any employment, consult-
ing or severance agreements with any Employee or any director
or officer of the Packaging Companies or materially changed
the terms thereof, (B) materially increased benefits payable
under existing severance or termination pay policies or em-
ployment agreements with respect to senior management of the
Packaging Companies or (C) made any increase in, or commitment
or plan to increase, the wages, salaries, compensation, pen-
sion or other benefits or payments to any directors, officers
or employees of the Packaging Companies (except for increases
in the ordinary course of business consistent with past prac-
tice or as required under Plans or Material Contracts);
(iv) suffered any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting
the Packaging Business resulting in losses in excess of A$3
million;
(v) settled or agreed to settle any Action, which
settlements, individually or in the aggregate, would reason-
ably be expected to have a Material Adverse Effect;
(vi) with respect to the Packaging Business termi-
nated, discontinued, closed or disposed of any material facil-
ity or business operation or otherwise materially changed the
general character or conduct of its business;
(vii) declared, set aside or paid any dividend or
other distribution in respect of any capital stock of any
Packaging Company, other than any dividend or other distribu-
tion (A) pursuant to the Restructuring, (B) to the extent
payable in cash or by credit to an intercompany account or (C)
payable to a Sold Company or another Packaging Company direct-
ly or indirectly wholly-owned by the Sold Companies;
32
<PAGE>
(viii) redeemed, purchased or otherwise acquired
any shares of any Packaging Company, other than pursuant to
the Restructuring;
(ix) waived or released any claims or rights
(other than claims or rights in the nature of indebtedness)
which waivers or releases would, individually or in the aggre-
gate, reasonably be expected to have a Material Adverse Ef-
fect;
(x) incurred any material Lien (other than Permit-
ted Liens) on its assets outside of the ordinary course of
business;
(xi) made any binding commitments for capital
expenditures to be funded after the Closing Date in excess of
U.S.$5,000,000 individually;
(xii) merged or consolidated with, or acquired
securities or any equity interest in, any Person other than a
Packaging Company;
(xiii) made any material loan or advance to any
Person, other than a loan or advance from a Packaging Company
to another Packaging Company and other than trade receivables,
Intergroup Receivables and loans and advances to employees in
the ordinary course of business consistent with past practice;
(xiv) failed to pay any creditor any amount owed
to such creditor when due (after the expiration of any appli-
cable grace periods), except if any such amount is being
disputed in good faith and other than in the ordinary course
of business consistent with past practice;
(xv) written down the value of any inventory or
any other asset of the Packaging Business except in the ordi-
nary course of business consistent with past practice;
(xvi) issued and sold any new debt securities
(other than commercial paper) or entered into any new credit
facility (other than roll-overs under existing facilities); or
(xvii) entered into an agreement with, or made a
binding commitment to, any Person to do any of the foregoing.
33
<PAGE>
Section 3.9 Litigation and Claims. Except as set forth
in Schedule 3.9 and except for matters arising under Environmental
Laws (which are the subject of Section 3.11), there is no action,
suit, claim or proceeding (including arbitration or administrative
proceedings) ("Action") pending before any court or arbitration
tribunal or before any other Governmental Authority or, to the
Knowledge of Seller, threatened, against Seller, any Selling Company
or any Packaging Company which would, if adversely determined, have
a Material Adverse Effect. As of the date hereof there is no Action
pending or, to the Knowledge of Seller, threatened against Seller,
any Selling Company or any Packaging Company, which challenges the
transactions contemplated hereby, other than any such Action that
would not reasonably be expected to prevent or materially interfere
with or delay the consummation of the transactions contemplated
hereby.
Section 3.10 Compliance with Laws.
(a) Except as set forth in Schedule 3.10(a) and except
for compliance with Environmental Laws (which is the subject of
Section 3.11), Tax Laws (which is the subject of Section 3.15), Laws
relating to Employee benefits (which is the subject of Section 3.16)
and Laws relating to labor matters (which is the subject of Section
3.17), the Packaging Business is, and the Packaging Companies are,
conducted in compliance with all applicable Laws and Governmental
Orders except where such non-compliance would not, individually or
in the aggregate, be reasonably expected to (i) result in a Material
Adverse Effect or (ii) reasonably be expected to prevent or materi-
ally interfere with or delay the consummation of the purchase of the
Sold Shares contemplated hereby.
(b) Except as disclosed in Schedule 3.10(b) (and except
for Environmental Permits which are the subject of Section 3.11),
each Packaging Company holds all permits, licenses, rights, con-
sents, authorizations, certificates, exemptions and approvals of
Governmental Authorities (collectively, "Permits") necessary for the
ownership and conduct of the Packaging Business as it is currently
conducted and such Permits are in full force and effect except where
the failure to hold any such Permit in full force and effect would
not, individually or in the aggregate, (i) result in a Material
Adverse Effect or (ii) reasonably be expected to prevent or materi-
ally interfere with or delay the consummation of the purchase of the
Sold Shares contemplated hereby. None of Seller, any of the Selling
Companies or any of the Packaging Companies has Knowledge of, or has
received notice from any competent authority of revocation of or
default under any Permits or of any non-compliance with any applica-
ble Law or Governmental Order, which revocation, default or non-
34
<PAGE>
compliance would, if adversely determined, (i) have a Material
Adverse Effect or (ii) reasonably be expected to prevent or materi-
ally interfere with or delay the consummation of the transactions
contemplated hereby. Nothing in this Section 3.10(b) shall be
deemed to apply to Environmental Permits (which are the subject of
Section 3.11).
Section 3.11 Environmental Matters.
(a) Except as disclosed on Schedule 3.11 and other than
any exceptions to any of the following as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect:
(i) the Packaging Companies are, and have been
within all applicable statute of limitations periods, in
compliance with all applicable Environmental Laws and/or
Environmental Permits which relate to the conduct or operation
of the Packaging Business as currently conducted or as has
been conducted within all applicable statute of limitations
periods, and to the Knowledge of Seller, no Packaging Company
will be unable to comply with Environmental Laws and/or Envi-
ronmental Permits or will require any material increase in
expenses other than reasonably expected capital expenditure
requirements to comply in the future with Environmental Laws
and/or Environmental Permits;
(ii) the Packaging Companies hold all Environmen-
tal Permits required to conduct and operate the Packaging
Business as presently conducted and operated; to the Knowledge
of Seller, no Environmental Permits will be revoked, or will
not be timely renewed without incurring expense in excess of
customary analytical, preparatory, application and filing
expenses, and to the Knowledge of Seller, no Packaging Company
will be unable to obtain any Environmental Permit (or modifi-
cation, amendment, or other change thereof) as may be required
for any change in operations presently planned by any Packag-
ing Company, or will be required to incur material expenses to
obtain any such Environmental Permit in excess of customary
analytical, preparatory, application and filing expenses;
(iii) there are no notices, writs, injunctions,
decrees, orders or judgments outstanding, or any actions,
suits, proceedings or investigations involving any Environmen-
tal Law or Environmental Permit pending or, to the Knowledge
of Seller, threatened, relating to any Packaging Company;
35
<PAGE>
(iv) there are no Releases of Hazardous Materials
under circumstances that would require Remedial Action under
any applicable Environmental Laws at, on, under, or emanating
from any property currently or formerly owned, leased, or
otherwise used by any Packaging Company; and
(v) neither the Packaging Companies, nor any
entity for which any of them is or may be liable, has assumed
or retained, by contract or by operation of law, any Liabili-
ties with respect to any Environmental Law or any Hazardous
Materials.
(b) There are no material environmental Liens affecting
or relating to the property of any Packaging Company.
(c) Seller has provided to Purchaser all material
environmental audits, studies and reports in Seller's possession or
control that have been prepared in the past three years, or to the
Knowledge of Seller after due inquiry of the environmental managers
at each manufacturing facility, prior thereto, with respect to the
Packaging Business' currently or previously owned, leased or operat-
ed sites or any other location as to which any Packaging Company may
have liability under any Environmental Law.
Section 3.12 Material Contracts.
(a) Set forth on Schedule 3.12(a) is a true and com-
plete list of each of the following contracts and agreements of any
of the Packaging Companies as in effect on the date hereof, whether
written or oral (such contracts and agreements, "Material Con-
tracts"), other than (x) contracts and agreements incurred in the
conduct of, or relating to, businesses other than the Packaging
Business, (y) contracts and agreements solely between Packaging
Companies and (z) contracts and agreements between Packaging Compa-
nies on the one hand, and any members of the Seller Group on the
other hand, which will be terminated prior to the Closing:
(i) contracts and agreements for the purchase of
inventories by, or for the furnishing of services to, the
Packaging Companies that require or would reasonably be ex-
pected to require payments by the Packaging Companies in
excess of A$2,000,000 during the term of such contract or
agreement (or A$2,000,000 in the aggregate in the case of any
related series of contracts or agreements);
(ii) contracts and agreements for the sale of
inventories or other goods, or for the furnishing of services,
36
<PAGE>
by any of the Packaging Companies that require or may reason-
ably be expected to require payments to the Packaging Compa-
nies in excess of A$2,000,000 during the term of such contract
or agreement (or A$2,000,000 in the aggregate in the case of
any related series of contracts or agreements);
(iii) manufacturer's representative, sales agency
and distribution contracts and agreements for the sale or
distribution of goods that entail or may reasonably be expect-
ed to entail payments or receipts in excess of A$2,000,000
during the term of such contract or agreement (or A$2,000,000
in the aggregate in the case of any related series of con-
tracts or agreements);
(iv) contracts and agreements (including guaran-
tees by or for the benefit of any Packaging Company) relating
to Debt or the mortgaging, pledging or otherwise placing a
Lien (other than a Permitted Lien) on any Packaging Company,
sale and leaseback transactions, deferred purchase price of
property and other similar financing transactions of the
Packaging Companies to third parties in excess of A$2,000,000
principal amount, other than those contracts and agreements
related to the Restructuring that will be terminated, novated,
assigned or otherwise transferred prior to the Closing;
(v) joint venture, partnership, shareholder,
voting trust or similar contracts and agreements relating to
the Packaging Business;
(vi) contracts and agreements having continuing
obligations providing for the acquisition or disposition of
assets or securities having a value in excess of A$2,000,000,
other than purchases or sales of inventories in the ordinary
course of business and sales of obsolete equipment; and
(vii) licenses and agreements relating to Intel-
lectual Property, and research and development agreements, in
each case which are material to the Packaging Companies or
which would reasonably be expected to call for aggregate
commitments to be paid by or to a Packaging Company in excess
of A$2,000,000 during the term of any such license or agree-
ment (or A$2,000,000 in the aggregate in the case of any
related series of licenses or agreements);
(viii) collective bargaining agreements or other
agreements or contracts with any union;
37
<PAGE>
(ix) joint venture agreements, site or other asset
sharing agreements pertaining to assets having a value of more
than A$2,000,000 or that are otherwise material to the Packag-
ing Business and to which any Packaging Company is a party;
(x) contracts and agreements restricting the
ability of any Packaging Company after the date hereof (A) to
engage in any line of business in any geographic area or to
compete with any Person, including limitations on the ability
of any Packaging Company to enter into other contracts or (B)
to incur Debt;
(xi) contracts, agreements with, and any undertak-
ings or commitments to any Governmental Authority materially
affecting the Packaging Business and not made in the ordinary
course of business;
(xii) powers of attorney or similar instruments
granted to Persons outside the Packaging Companies which are
in force and effect other than those set forth on the share
registers of the Packaging Companies, with the exception of
powers of attorney required for the day to day management of
Intellectual Property rights;
(xiii) leases, subleases or other agreements
pursuant to which any Packaging Company leases, subleases or
otherwise occupies the Leased Real Property (the "Real Proper-
ty Leases"); and
(xiv) any contracts or agreements not otherwise
listed on Schedule 3.12(a) which provide for an aggregate
purchase price or payments of more than A$10,000,000 individu-
ally during the term thereof.
(b) Except as disclosed in Schedule 3.12(b), each
Material Contract is, as of the date hereof, in full force and
effect and no Packaging Company that is a party thereto is (and, to
the Knowledge of Seller, no other party is) in material breach of,
or material default under, any such Material Contract and, to the
Knowledge of Seller, no event has occurred that, with or without the
giving of written notice or the lapse of time or both, would result
in a breach or default under any Material Contract, except for such
failures to be in full force and effect breaches, defaults or
occurrences which would not, individually or in the aggregate, have
a Material Adverse Effect. As of the date hereof, none of Seller,
any Selling Company or any Packaging Company has delivered or
38
<PAGE>
received written notice of termination or an intention to terminate
any Material Contract.
Section 3.13 Non-Packaging Operations.
(a) Except for the Packaging Companies listed on
Schedule 3.13(a), to the Knowledge of Seller, the Packaging Compa-
nies have not conducted any activities other than the conduct of the
Packaging Business.
(b) Except as disclosed on Schedule 3.13(b), after
giving effect to the Restructuring and to any transfers provided for
pursuant to Section 5.8(d), (i) the assets, properties, interests
and rights of the Packaging Companies shall constitute all of the
assets, properties, interests and rights of every type and descrip-
tion, whether real, personal or mixed, tangible or intangible, that
are used in or held for use in the Packaging Business as currently
conducted and (ii) no member of the Seller Group shall own or have
an interest in any assets, properties, interests or rights that are
used in or held for use in the Packaging Business.
Section 3.14 Intellectual Property.
(a) With respect to Intellectual Property, the Packag-
ing Companies own, or possess licenses or other valid rights to use,
all Intellectual Property necessary to operate the Packaging Busi-
ness as currently conducted. Except as disclosed in Schedule
3.14(a), (i) the conduct of the business of the Packaging Companies
as currently conducted does not infringe or otherwise violate any
Intellectual Property of any third party except where such infringe-
ment would not have a Material Adverse Effect and (ii) to Seller's
Knowledge, no Person is infringing or otherwise violating any
Intellectual Property of the Packaging Companies except where such
infringement would not have a Material Adverse Effect. Except as
disclosed in Schedule 3.14(a), the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby will not result in the loss of, or any encumbrance on, the
rights of the Packaging Companies with respect to the Intellectual
Property owned or used by them, and (ii) no claims, Governmental
Orders or proceedings are pending or, to the Knowledge of Seller,
threatened, that seek to question the ownership or scope, cancel or
limit the scope or validity of the Intellectual Property owned or
used by the Packaging Companies or the rights of the Packaging
Companies therein except in each case for such Governmental Orders,
claims, proceedings, losses, encumbrances or rights as would not
have a Material Adverse Effect.
39
<PAGE>
(b) In respect of all Proprietary Information of the
Packaging Companies, no disclosure has been made to any third party
(other than employees and/or Purchaser) in such manner so as would
reasonably be expected to materially impair its value or confidenti-
ality. Each Packaging Company other than the Subsidiaries of ACI
Operations Pty Ltd (excluding Continental and its Subsidiaries) has
implemented policies and consistently followed practices regarding
the preservation of its Proprietary Information from unauthorized
disclosure to third parties and regarding the use and disclosure of
its Proprietary Information by its employees and contractors.
(c) Schedule 3.14(c) lists all material Intellectual
Property held or owned by any of the Packaging Companies that has
been issued or registered by, or filed with, any Governmental
Authority and all Intellectual Property licenses to which any of the
Packaging Companies is a party.
Section 3.15 Taxes. Except as set forth in Schedule
3.15:
(a) All material Tax Returns that are required to have
been filed or prepared and retained (taking into account applicable
extensions) by or on behalf of any Packaging Company have been
timely filed or prepared and retained in the manner prescribed by
the appropriate Tax Law and as of the time of filing or preparing
such Tax Returns were correct in all material respects.
(b) All material Taxes shown to be due on the Tax
Returns referred to in clause (a) of this Section 3.15 and all Taxes
relating to the Packaging Companies due, or claimed or asserted by
any Tax Authority to be due, for periods ending on or prior to
December 31, 1997 (including open years and years for which amended
Tax Returns have been filed) have been timely paid (to the extent
required to be paid) or recorded as reserves or liabilities on the
appropriate books and records of Seller, the Selling Companies or
the Packaging Companies (in accordance with their accounting proce-
dures set forth in Schedule 3.7 employed with respect to such books
and records).
(c) No material adjustments or deficiencies relating to
the Tax Returns referred to in clause (a) of this Section 3.15 have
been proposed, asserted or assessed in writing by the relevant
national, federal, state or local Tax Authority, except for such
material adjustments or deficiencies which have been fully paid or
finally settled.
40
<PAGE>
(d) No Tax Audit or other proceeding by any Court,
Governmental Authority or similar persons is pending (excluding such
pending Tax Audits or other proceedings for which neither Seller nor
the relevant Packaging Company has been notified in writing) with
respect to any Taxes due from or with respect to any of the Packag-
ing Companies or any Tax Return filed by or with respect to any of
the Packaging Companies.
(e) There are no Liens with respect to Taxes upon any
of the assets or properties of any of the Packaging Companies,
except for Permitted Liens or Liens recorded as reserves or liabili-
ties on the appropriate books and records of Seller, the Selling
Companies or the Packaging Companies (in accordance with their
accounting procedures set forth in Schedule 3.7 employed with
respect to such books and records).
(f) All material Taxes required to be withheld, col-
lected or deposited by or with respect to each of the Packaging
Companies have been duly and timely withheld, collected or deposit-
ed, as the case may be, and, to the extent required, have been paid
to the relevant Tax Authority.
(g) None of the Packaging Companies has agreed to make
and none has been notified in writing by any Tax Authority that it
is required to make any material adjustment under Section 481(a) of
the Code (or any similar provision of state, local or foreign law),
by reason of a change in accounting method.
(h) Without limiting the foregoing representations in
any way, each of the Packaging Companies has collected all material
sales, use and value-added Taxes required to be collected, and have
remitted, or will remit on a timely basis where required prior to
the Scheduled Closing Date, such amounts to the appropriate Tax
Authorities, or have been furnished properly completed exemption
certificates.
(i) Records which are complete and accurate in all
material respects and which are necessary or appropriate for compli-
ance with all Tax Laws have been maintained and retained by or on
behalf of each Packaging Company for the period required by applica-
ble Tax Law and all other information or evidence required or
necessary to support those records, including, but not limited to,
information in relation to franking credits and franking debits for
the purposes of the application of Part IIIAA of the Australian
Income Tax Assessment Act, 1936 have been so maintained and re-
tained.
41
<PAGE>
(j) None of the Packaging Companies is, or has since
December 31, 1994 been, the representative member of a group for
United Kingdom value added tax purposes.
(k) In the last three years, no action has been taken
by any Packaging Company in default of any obligation to obtain a
requisite consent from any Tax Authority, and where such a consent
has been obtained, any conditions attached thereto have been com-
plied with insofar as is material.
(l) As of the Scheduled Closing Date, each NZ Packaging
Company: (A) is a registered Person for purposes of the Goods and
Services Tax Act 1985 of New Zealand ("GST Act"); (B) has complied
in all material respects with the GST Act; and (C) is not in default
of any material obligation to make any payment or return or notifi-
cation under the GST Act.
(m) To the extent that, at any time prior to the
Scheduled Closing Date, any income Tax liability of a NZ Packaging
Company has been satisfied by the utilization of the tax losses of
another company by way of group offset and/or subvention payment as
provided for by the Income Tax Act 1976 of New Zealand or the Income
Tax Act 1994 of New Zealand, any such group offset and any such
subvention payment has been valid and effective.
(n) Neither the imputation credit account nor the
dividend withholding payment account of any NZ Packaging Company
will have a debit balance as of the Scheduled Closing Date.
(o) No consent to the application of Section 341(f) of
the Code (or any predecessor provision) has been made or filed by or
with respect to any of the Packaging Companies or any of their
respective assets or properties. None of the assets or properties
of any of the Packaging Companies is an asset or property that is or
will be required to be treated as described in Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immedi-
ately before the enactment of the Tax Reform Act of 1986, or tax-
exempt use property within the meaning of section 168(h)(1) of the
Code.
(p) Each transaction undertaken in the course of the
Restructuring has been or will be undertaken for a consideration of
not less than market value in respect thereof.
Section 3.16 Employee Benefits.
(a) As to Australian Superannuation Funds:
42
<PAGE>
(i) Copies of all Trust Deeds and the trust deed
of the ACI Staff Superannuation Fund and all amendments there-
to have been provided or made available to Purchaser.
(ii) To the Knowledge of Seller, each Packaging
Company has materially complied with all of its Superannuation
Commitments.
(iii) The Superannuation Funds are validly estab-
lished under the Trust Deeds, the Trust Deeds comply with the
requirements of the Superannuation Industry (Supervision) Act,
1993, no amendments have been made to the Trust Deeds other
than those disclosed to Purchaser before the date of this
Agreement, and those amendments have been validly made. There
are no proposals to amend the Trust Deeds.
(iv) The ACI Staff Superannuation Fund is validly
established under a trust deed, the trust deed complies with
the requirements of the Superannuation Industry (Supervision)
Act, 1993 and no amendments have been made to the trust deed
other than those disclosed to Purchaser before the date of
this Agreement.
(v) From the date the Superannuation Funds and the
ACI Staff Superannuation Fund became regulated superannuation
funds under the Superannuation Industry (Supervision) Act,
1993, to the best of Seller's Knowledge and belief, the trust-
ees of the Superannuation Funds and the ACI Staff Superannua-
tion Fund have complied with the Superannuation Industry
(Supervision) Act, 1993 and the regulations prescribed under
such Act.
(vi) The ACI Staff Superannuation Fund is fully
funded, as that term is defined in the Superannuation Industry
(Supervision) Act, 1993, and the Regulations prescribed under
that Act.
(vii) The provisions of the Trust Deeds of the
Superannuation Funds are substantially the same in all materi-
al respects as those contained in the respective trust deeds
of the Current Superannuation Funds.
(viii) No member of the ACI Staff Superannuation
Fund has any right or entitlement to have any benefit under
the fund augmented, increased or accelerated by reason of this
Agreement or by reason of any other arrangement, agreement or
understanding.
43
<PAGE>
(ix) All assets of the ACI Staff Superannuation
Fund are held in the name of the trustee of the fund.
(x) Neither the trustees of the Superannuation
Funds nor the trustee of the ACI Staff Superannuation Fund has
entered into or is bound by any arrangement, agreement or
understanding relating to the assets of the fund, the provi-
sion of administration or actuarial services or the provision
of advice or other services to the trustee other than as
disclosed by Seller to Purchaser.
(xi) The assets of the ACI Staff Superannuation
Fund include adequate provision for any Taxes which may be
payable by the trustee of the fund.
(xii) No undertaking or assurance has been given
to members of the ACI Staff Superannuation Fund as to the
introduction, increase or improvement of any benefits under
the fund.
(xiii) Seller has made available to Purchaser a
copy of the Trust Deed and the name of each of the trustees of
the Superannuation Funds and the ACI Staff Superannuation
Fund.
(xiv) Each Packaging Company will not be liable to
pay in the aggregate more than A$10,000 as the superannuation
guarantee charge under the Superannuation Guarantee Charge
Act, 1992 in respect of that company's directors, Employees or
subcontractors.
(b) As to U.S. Plans:
(i) All U.S. Plans are listed in Schedule 3.16(b).
Seller has provided or made available to Purchaser current,
accurate and complete copies (or, to the extent no such copy
exists, an accurate description) of (A) all documents embody-
ing each U.S. Plan, and the trust or funding agreements and
summaries with respect thereto, (B) the most recent actuarial
valuation with respect to any U.S. Plan, which accurately
specifies the actuarial and financial status of such Plan, (C)
the most recent annual report (Series 5500 and all schedules
thereto) required in connection with any U.S. Plan, (D) the
most recent Internal Revenue Service determination letter
received in respect of a U.S. Plan, (E) a list of all the
material terms of employment for each classification of Em-
ployees, including compensation and benefits, as of December
44
<PAGE>
31, 1996, (F) any summary plan description and other written
communications (or a description of any oral communications)
by Seller to any Employees concerning the extent of the bene-
fits provided under a U.S. Plan, and (G) for the most recent
year (I) audited financial statements and (II) attorney's
response to an auditor's request for information.
(ii) All U.S. Plans which are subject to ERISA,
are in substantial compliance with applicable law (including,
without limitation, ERISA and the Code (including the nondis-
crimination requirements of Section 401(a)(4) of the Code))
and have been administered and operated in all material re-
spects in accordance with their terms. Each U.S. Plan which
is an "employee pension benefit plan", within the meaning of
Section 3(2) of ERISA ("Pension Plan"), and which is intended
to be qualified under Section 401(a) of the Code, does so
qualify and has received a favorable determination letter from
the Internal Revenue Service, and nothing has occurred, wheth-
er by action or failure to act, and no condition exists, which
could result in revocation of any such favorable determination
letter. No Packaging Company or any other person has engaged
in a transaction with respect to any U.S. Plan that, would
subject any Packaging Company to a material tax or penalty
imposed by either Section 4975 of the Code or Section 409 or
502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title
IV of ERISA has been or is expected to be incurred by any
Packaging Company with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, which is a U.S. Plan, or the
single-employer plan of any ERISA Affiliates of any Packaging
Company. No notice of a "reportable event", within the mean-
ing of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed
for any U.S. Plan within the 12-month period ending on the
date hereof. No Packaging Company has contributed, or been
obligated to contribute, to a "multi-employer plan", within
the meaning of Section 3(37) of ERISA, at any time during the
current calendar year or the five calendar years preceding the
current calendar year. With respect to any multi-employer
plan to which Seller or any ERISA Affiliate has any liability
or contributes (or has at any time contributed or had an
obligation to contribute): (A) Seller and each of its ERISA
Affiliates has or will have, as of the Closing, made all
contributions to each such plan required by the terms of such
plan or any collective bargaining agreement; (B) neither
45
<PAGE>
Seller nor any of its ERISA Affiliates has incurred any with-
drawal liability under Title IV of ERISA; (C) no such plan is
in reorganization or insolvent (as those terms are defined in
ERISA Sections 4241 and 4245, respectively); and (D) neither
Seller nor any of its ERISA Affiliates has engaged in a trans-
action which could subject it to liability under Section
4212(c) of ERISA.
(iv) No U.S. Plan which is a single-employer plan
has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Sections 412 or 418B of the Code
or Section 302 of ERISA. No Packaging Company has provided,
or is required to provide, security to any U.S. Plan pursuant
to Section 401(a) of the Code.
(v) (A) No complete or partial termination of any
U.S. Plan covered by Title IV of ERISA has occurred and no
proceedings have been instituted to terminate or appoint a
trustee to administer any such Plan; (B) full payment has been
timely made of all amounts which Seller or any Packaging
Company is required under applicable law or under any U.S.
Plan to have paid as of the last day of the most recent fiscal
year of such Plan ended prior to the date hereof, and such
entities have made adequate provisions, in accordance with
GAAP, in their financial statements for all obligations and
liabilities under all Plans that have accrued but have not
been paid because they are not yet due under the terms of any
such Plan or applicable law; (C) neither Seller nor any of the
Packaging Companies has incurred any material liability (in-
cluding, without limitation, additional contributions, fines,
taxes, penalties or loss of tax deduction) as a result of a
failure to administer or operate any U.S. Plan that is a
"group health plan" (as such term is defined in Section 607(1)
of ERISA or Section 5000(b)(1) of the Code) in compliance with
the applicable requirements of Part 6 of Subtitle B of Title I
of ERISA or Section 4980B of the Code; (D) no liability,
claim, action, audit, examination or litigation has been made,
commenced or, to Seller's knowledge, threatened with respect
to any U.S. Plan (other than for benefits payable in the
ordinary course) except for such liabilities, claims, actions,
audits, examinations or litigations which would not, individu-
ally or in the aggregate, have a Material Adverse Effect; (E)
as of the date hereof, except as set forth in Schedule 3.16(-
b), no key managerial Employee (i.e., Employees identified in
the Confidential Memorandum with respect to the Packaging
Business dated November 26, 1997) has given, or has been
given, notice of termination of his or her employment; (F) no
46
<PAGE>
event has occurred and no condition exists that would subject
Seller, either directly or by reason of its affiliation with
its ERISA Affiliates, to any tax, fine or penalty imposed by
ERISA, the Code or other applicable laws, rules and regula-
tions except for such taxes, fines or penalties which would
not, individually or in the aggregate, have a Material Adverse
Effect; (G) all insurance premiums required to be paid with
respect to U.S. Plans as of the Closing have been or will be
paid prior thereto and adequate reserves have been provided
for on the Balance Sheet for any premiums (or portions there-
of) attributable to service on or prior to the Closing; (H) -
for each U.S. Plan with respect to which a Form 5500 has been
filed, no material change has occurred with respect to the
matters covered by the most recent Form since the date there-
of; (I) no U.S. Plan provides for a material increase in
benefits on or after the Closing; (J) except as set forth in
Schedule 3.16(b) and except as required by Section 4980B of
the Code, no U.S. Plan provides medical or insurance benefits
to current or former Employees or directors (or their eligible
dependents) beyond their retirement or other termination of
employment or service; (K) [clause intentionally omitted]; (L)
except as otherwise disclosed in Schedule 3.16(b) and except
to the extent required under existing Plans as in effect on
the date of this Agreement since December 31, 1997, Seller has
not increased the compensation or fringe benefits of any
Employees, except for increases in the ordinary course of
business and consistent with past practice; and (M) except as
disclosed in Schedule 3.16(b), no U.S. Plan or agreement with
any Employee or director exists which would result in the
payment to any current, former or future director or Employee
of any amount of money or other property or rights or acceler-
ate or provide any other rights or benefits to any such Em-
ployee or director as a result of the transactions contemplat-
ed by this Agreement, except for such payments that would not,
individually or in the aggregate, have a Material Adverse
Effect, whether or not (I) such payment, acceleration or
provision would constitute a "parachute payment" (within the
meaning of Section 280G of the Code), or (II) some other
subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered. The
representation made in the foregoing clauses (E), (G), (I),
(J), (L) and(M) shall apply with equal force and effect to the
U.K. and Other Country Plans, and to all non-U.S. Employees.
47
<PAGE>
(c) U.K. Plans. The representations with respect to
U.K. Plans are set forth in clause 2 of Schedule 5.5(c) to
this Agreement and are incorporated herein by reference.
(d) As to Other Country Plans:
(i) All material plans constituted under the laws
of jurisdictions other than Australia, the U.S. or the U.K.
(such jurisdictions "Other Countries" and such material plans,
"Other Country Plans") are listed in Schedule 3.16(d). True
and complete copies of all Other Country Plans, including, but
not limited to, any trust instrument or insurance contract
forming a part of any Other Country Plan, and all amendments
thereto, have been provided or made available to Purchaser.
(ii) As to each Other Country Plan, all of the
applicable requirements of the applicable Laws under which the
Plan is operated have been complied with in all material
respects.
(iii) If such Other Country Plan is a defined
benefit pension plan that is required under applicable Laws to
be funded, such other Country Plan is funded in material
compliance with the requirements of the Laws applicable to
such other Country Plan.
Section 3.17 Labor Matters. Other than as set forth in
Schedule 3.17:
(i) no Packaging Company is a party to, or bound
by, any collective bargaining agreement, contract or other
agreement, award or understanding with any labor organization
applicable to Employees or other representative of any of the
Employees, nor is such contract or agreement presently being
negotiated;
(ii) none of the Employees are represented by any
union or similar labor organization and to the Knowledge of
Seller, there are no current organizing activities among such
Employees;
(iii) there is no unfair labor practice charge or
complaint pending or, to the Knowledge of Seller, threatened
against any Packaging Company other than where such charge or
complaint, if determined adversely to a Packaging Company,
would not reasonably be expected to have a Material Adverse
Effect, nor to the Knowledge of Seller is any labor organiza-
48
<PAGE>
tion seeking to compel it to bargain with any labor organiza-
tion as to wages or conditions of employment;
(iv) there is no strike, work stoppage, slowdown
or lockout or other labor dispute involving any Packaging
Company pending or, to the Knowledge of Seller, threatened,
and since January 1, 1993 there has not been any such action;
(v) no Action, complaint, charge, arbitration or
inquiry by or before any Governmental Authority brought by or
on behalf of any employee, prospective employee, former em-
ployee, retiree, labor organization or other representative of
any Packaging Company's Employees is pending or, to the Knowl-
edge of Seller, threatened against any Packaging Company
which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect;
(vi) no grievance is pending or, to the Knowledge
of Seller, threatened against any Packaging Company which,
individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect;
(vii) no Packaging Company is a party to, or
otherwise bound by, any material consent decree with, or
citation by, any Governmental Authority relating to Employees
or employment practices;
(viii) each Packaging Company is in compliance
with all applicable agreements, contracts and policies relat-
ing to employment, employment practices, wages, hours, and
terms and conditions of employment except for failures so to
comply, if any, that individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect;
(ix) each Packaging Company has paid in full to
all Employees of such Packaging Company all wages, salaries,
commissions, bonuses, benefits and other compensation due and
payable to such Employees under any policy, practice, agree-
ment, plan, program or Law;
(x) each Packaging Company is in material compli-
ance with its obligations pursuant to the Worker Adjustment
and Retraining Notification Act of 1988, and all other materi-
al employee notification and bargaining obligations arising
under any collective bargaining agreement, statute or other-
wise; and
49
<PAGE>
(xi) except as required by law, no Packaging
Company is liable for any severance pay or other payments to
any Employee or former Employee arising from the termination
of employment under any benefit or severance policy, practice,
agreement, plan, or program of any Packaging Company or member
of the Seller Group, nor will any Packaging Company have any
Liability which exists or arises, or may be deemed to exist or
arise, under any applicable Law or otherwise, as a result of
or in connection with the transaction contemplated hereunder
or as a result of the termination by any Packaging Company of
any persons employed by any Packaging Company on or prior to
the Closing Date.
Section 3.18 Board Members. Schedule 3.18 hereto
contains a true and complete list of all members of the Boards of
Directors of each of the Packaging Companies.
Section 3.19 Brokers, Finders Fees. No Packaging
Company has employed any broker, finder, or intermediary in connec-
tion with the transactions contemplated by this Agreement which
would be entitled to a broker's, finder's or similar fee or commis-
sion in connection therewith or upon the consummation thereof or the
sale of any Packaging Company. No Packaging Company will be respon-
sible or in any way obligated for the payment of any fees, commis-
sions or expenses of Goldman Sachs International or any other
broker, finder or intermediary retained by Seller or any Selling
Company in connection with the transactions contemplated hereby
(other than in connection with the Rockware Restructuring).
Section 3.20 Real Property and Leases.
(a) Schedule 3.20(a) sets forth, by address, owner and
usage, a list of all of the real property owned by the Packaging
Companies (collectively, the "Owned Real Property"). No Person
other than a Packaging Company leases or occupies any Owned Real
Property. Except as set forth in Schedule 3.20(a), there are no
outstanding contracts or agreements for the sale of any of the Owned
Real Property, except Owned Real Property the value of which does
not exceed U.S.$500,000. Except as set forth on Schedule 3.20(a),
the Packaging Companies have good and marketable title to all real
property owned by the Packaging Companies, free and clear of all
Liens except for Permitted Liens.
(b) Schedule 3.20(b) sets forth, by address, lessee and
usage, a true and complete list of all real property which is
leased, subleased or occupied by any of the Packaging Companies (the
"Leased Real Property"; the Owned Real Property and the Leased Real
50
<PAGE>
Property collectively, the "Real Property"). The Packaging Compa-
nies hold good and valid leasehold title or, in the case of any
Leased Real Property located in China, registered land use right
(free and clear of all Liens encumbering such interest, except for
Permitted Liens) to the Leased Real Property, in each case subject
to the provisions of the applicable lease.
(c) The Packaging Companies have good title to or valid
leasehold interest in or other valid right to use all material
personal property of the Packaging Business reflected on the Balance
Sheet or acquired in the ordinary course of business since the date
of the Balance Sheet which would have been required to be reflected
on such Balance Sheet if acquired on or prior to such date, other
than personal property disposed of in the ordinary course of busi-
ness since such date. None of such material property (other than
Real Property) is subject to any Lien, except for Permitted Liens
and Liens incurred in the ordinary course of business the existence
of which, individually or in the aggregate, would not have a Materi-
al Adverse Effect. All material tangible personal property owned
and used by the Packaging Companies is in reasonable operating
condition and state of repair (ordinary wear and tear excepted) and
is suitable for the purposes for which it is currently used by the
Packaging Companies.
(d) Except as set forth in Schedule 3.20(d), there is
no pending or, to the Knowledge of Seller, threatened condemnation
or other governmental taking of any of the Real Property. Except as
set forth in Schedule 3.20(d), immediately following consummation of
the transactions contemplated hereby, neither Seller nor any Selling
Company shall own or lease any real property contiguous or adjacent
to any of the Real Property.
Section 3.21 Insurance. The insurance policies cur-
rently maintained by Seller or the Selling Companies with respect to
the Packaging Business and the Packaging Companies and their assets
and properties (the "Insurance Policies") are listed on Schedule
3.21, including a description of whether such Insurance Policies are
"occurrence based" or "claims made" policies. All such Insurance
Policies are in full force and effect and all premiums due and
payable thereon have been paid in accordance with their terms. No
insurer under any such policy has canceled or generally disclaimed
liability under any such policy or indicated any intent to do so or
to materially increase the premiums payable under or not renew any
such policy. All material claims of which notice has been given to
an insurance company under any of the Insurance Policies relating to
the Packaging Business or any of the Packaging Companies filed in
each of 1997 (through 30 September 1997), 1996, 1995 and 1994 (other
51
<PAGE>
than medical claims) are listed on Schedule 3.21 and have been filed
in a timely fashion and other than as described on such Schedule,
none of such claims are outstanding
Section 3.22 Product Liability.
(a) Schedule 3.22(a) sets forth a summary of each
Product Liability Claim (as defined below) in excess of A$350,000
paid by or on behalf of any Packaging Company during the past three
fiscal years, and each outstanding Product Liability Claim in excess
of A$350,000. There are no design or manufacturing defects in
products manufactured or sold prior to the Scheduled Closing Date
that would result in any Liability, cost or expense of Purchaser, a
Purchasing Company or a Packaging Company in respect of such prod-
ucts, and each product manufactured, sold, leased out or delivered
by any Packaging Company prior to the Scheduled Closing Date has
been manufactured, sold, leased out or delivered in such a manner as
not to result in any Liability, cost or expense of Purchaser, a
Purchasing Company or a Packaging Company with respect to such
product and in conformity with all applicable contractual commit-
ments and all express and implied warranties. For purposes of this
Section 3.22, the term "Product Liability Claim" shall mean any
claim arising out of any injury to an individual or property as a
result of the ownership, possession, or use of any product manufac-
tured, sold, or delivered by any Packaging Company.
(b) Schedule 3.22(b) sets forth a summary of each
Product Recall since January 1, 1993, describing in each case the
nature of the problem giving rise to such recall, whether such
recall was voluntary or by order of a Governmental Authority, the
number of products recalled, and the aggregate costs incurred for
each such Product Recall. For purposes of this Section 3.22(b), the
term "Product Recall" shall mean any recall of filled products
available to end-users and any recall of unfilled products other
than returns and recalls of unfilled products in the ordinary course
of business consistent with past practice, in any case, arising out
of or related to a defect in a product manufactured or sold by any
Packaging Company.
Section 3.23 Transactions with Certain Persons.
(a) Except as disclosed in Schedule 3.23, no officer,
director or Employee of Seller, any Selling Company or any Packaging
Company nor any member of any such Person's immediate family is a
party to any contract, agreement or binding arrangement with any
Packaging Company other than employment and similar agreements in
the ordinary course of business and other than under Plans, includ-
52
<PAGE>
ing, without limitation, any contract, agreement or binding arrange-
ment (i) providing for the furnishing of services, (ii) providing
for the rental of real or personal property or (iii) otherwise
requiring payments to (other than for services as an officer,
director or Employee of Seller, Selling Company or any Packaging
Company) any such Person.
(b) Schedule 3.23 sets forth all contracts, agreements
and binding arrangements which will remain in effect following the
Scheduled Closing Date (including, without limitation, the provision
of any services or the sale of any goods) between any Packaging
Company, on the one hand, and any member of the Seller Group, on the
other.
Section 3.24 Absence of Undisclosed Liabilities. No
Packaging Company has any Liability other than Excluded Liabilities
and Liabilities (i) in respect of normal trade payables or expenses
(including current accounts payable, current provisions for employee
entitlements, non-current accounts payable, non-current provisions
for employee entitlements and the Section 2.2(d) Liabilities), of
the same nature as shown in the Financial Statements and the notes
thereto set out in Schedule 3.7, the Liability in each case being
accrued in the books and records at the Scheduled Closing Date and
incurred in the ordinary course of business consistent with past
practice, (ii) relating to obligations under Material Contracts or
(iii) for Actions (which are addressed for all purposes in the
representations and warranties set forth in Section 3.9).
Section 3.25 Customers and Suppliers.
(a) Set forth on Schedule 3.25(a) is a list of the ten
largest customers and the ten largest suppliers of Rockware in each
case based on dollar volumes during the 1996 and 1997 years. Except
as set forth on Schedule 3.25(a), as of the date hereof, none of
such customers or suppliers have terminated or materially changed
its relationship with Rockware or has delivered written notice to
Seller, any Selling Company or Rockware of the intent to do any of
the foregoing.
(b) Set forth on Schedule 3.25(b) is a list of the ten
largest customers and the ten largest suppliers of Continental in
each case based on dollar volumes during the 1996 and 1997 years.
Except as set forth on Schedule 3.25(b), as of the date hereof, none
of such customers or suppliers have terminated or materially changed
its relationship with Continental or has delivered written notice to
Seller, any Selling Company or Continental of the intent to do any
of the foregoing.
53
<PAGE>
(c) Set forth on Schedule 3.25(c) is a list of the ten
largest customers and the ten largest suppliers of ACI Glass in each
case based on dollar volumes during the 1996 and 1997 years. Except
as set forth on Schedule 3.25(c), as of the date hereof, none of
such customers or suppliers have terminated or materially changed
its relationship with ACI Glass or has delivered written notice to
Seller, any Selling Company or ACI Glass of the intent to do any of
the foregoing.
Section 3.26 No Other Representations or Warranties.
(a) The representations and warranties made:
(i) in respect of the US and UK Plans and Austra-
lian Superannuation Commitments are solely those representa-
tions and warranties set forth in Sections 3.5, 3.8, 3.16 and
clause (xi) of 3.17 (it being understood that the foregoing
shall not be deemed to limit the representations and warran-
ties in Section 3.7) ; and
(ii) in respect of environmental matters are
solely those representations and warranties set forth in
Sections 3.5, 3.8 and 3.11 (it being understood that the
foregoing shall not be deemed to limit the representations and
warranties in Section 3.7).
None of the other representations or warranties shall be
deemed to be given in relation to Plans, Superannuation Commitments
or environmental matters.
(b) Except for the representations and warranties
contained in this Article III, none of Seller, the Selling Companies
nor any other Person makes any other express or implied representa-
tion or warranty on behalf of Seller, the Selling Companies or
otherwise in respect of the Packaging Companies or the Packaging
Business. Each of Seller and each of the Selling Companies acknowl-
edges it is not relying on any representation or warranty of Pur-
chaser except as set forth in Article IV or of any other Person.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and the Purchasing Companies hereby represent
and warrant to Seller as follows:
54
<PAGE>
Section 4.1 Organization and Qualification. Each of
Purchaser and each Purchasing Company is a corporation duly incorpo-
rated under the laws of the jurisdiction of its incorporation and
Purchaser has the requisite corporate power and authority to carry
on its business as conducted.
Section 4.2 Authority of Purchaser; Binding Effect.
(a) Purchaser and each Purchasing Company has the
requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution
and delivery by Purchaser and each Purchasing Company of this
Agreement and the performance by each of such parties of its obliga-
tions hereunder and the consummation by each of such parties of the
transactions contemplated hereby have been duly authorized by all
requisite corporate action on its part and no other corporate
proceedings on the part of Purchaser or any Purchasing Company are
required in connection with the execution, delivery and performance
by any of such parties of this Agreement or the consummation by any
of such parties of the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered
by Purchaser and each Purchasing Company and, assuming due authori-
zation, execution and delivery of this Agreement by Seller, this
Agreement constitutes a valid and legally binding obligation of
Purchaser and each Purchasing Company enforceable against Purchaser
and each Purchasing Company in accordance with its terms except to
the extent enforceability (i) may be limited by bankruptcy, insol-
vency, reorganization, moratorium or similar laws relating to
creditors rights generally and (ii) is subject to general equitable
principles.
Section 4.3 Non-Contravention. The execution, delivery
and performance by Purchaser or any Purchasing Company of this
Agreement and the consummation by Purchaser or any Purchasing
Company of the transactions contemplated hereby does not and will
not (i) violate any provision of the certificate of incorporation,
by-laws or other organizational documents of Purchaser or any
Purchasing Company or (ii) result in the breach, violation, suspen-
sion or termination of, give rise to any right of termination,
purchase or amendment under, require consent or notification under,
result in the loss of any benefit, right or license under, increase
or accelerate the Liability of any party under, result in the
creation of any Lien on any assets of Purchaser or any Purchasing
Company or constitute a default under (in each case, with or without
the giving of notice or the lapse of time or both) any provision of
any agreement, contract, instrument, commitment, license, franchise
55
<PAGE>
or Permit, to which Purchaser or any Purchasing Company is a party
or is subject or by which any assets of any of them is bound except
as would not, individually or in the aggregate, reasonably be
expected to prevent or materially interfere with or delay the
consummation of any of the transactions contemplated hereby.
Section 4.4 Consents and Approvals. Other than as set
forth in Schedule 4.4, and except for the Regulatory Authorizations,
the execution and delivery of this Agreement by Purchaser or any
Purchasing Company and the consummation by Purchaser and each
Purchasing Company of the transactions contemplated hereby (includ-
ing the Restructuring) does not and will not require any consent,
approval, license, Permit, order or authorization of or declaration,
filing or registration with, any Governmental Authority or other
Person, except where the failure to obtain such consent, approval,
license, Permit, order or authorization or make such declaration,
filing or registration would not individually or in the aggregate,
reasonably be expected to prevent or materially interfere with or
delay the consummation of any of the transactions contemplated
hereby.
Section 4.5 Financial Capability. Purchaser has
sufficient funds or has executed definitive documentation providing
for funds sufficient to pay the Closing Purchase Price on the terms
and conditions contemplated by this Agreement.
Section 4.6 Securities Act. Purchaser is acquiring the
Sold Shares solely for the purpose of investment (other than any
Sold Shares which Purchaser must divest in accordance with, or in
order to obtain, a consent decree or order of any Governmental
Authority) and not with a view to, or for sale in connection with,
any distribution thereof in violation of the Securities Act.
Purchaser acknowledges that the Sold Shares are not registered under
any securities laws and that such Sold Shares may not be transferred
or sold except pursuant to the registration and other provisions of
applicable securities laws or pursuant to an applicable exemption
therefrom.
Section 4.7 Investigation by Purchaser; Certain Finan-
cial Information; No Other Representations or Warranties.
(a) As part of its own investigation and evaluation of
the Packaging Business, Purchaser has received or has reviewed
operating, business and financial information including financial
statements, forecasts, projections and other oral or written infor-
mation and materials with respect to the Packaging Business made
available by Seller or its representatives. There are assumptions
56
<PAGE>
and uncertainties inherent in projections and forecasts for the
Packaging Business and Purchaser is familiar with such assumptions
and uncertainties. Purchaser has made its own evaluation of such
financial information and acknowledges that neither Seller nor any
other Person is making any representations or warranties with
respect to such operating, business or financial information except
for the specific representations and warranties set forth in Article
III.
(b) Except for the representations and warranties
contained in this Article IV, none of Purchaser, the Purchasing
Companies nor any other Person makes any other express or implied
representation or warranty on behalf of Purchaser. Each of Purchas-
er or each Purchasing Company acknowledge that it is not relying on
any representation or warranty of Seller or of any other Person
except as set forth in Article III.
Section 4.8 Litigation and Claims. As of the date
hereof, there is no Action pending or to the knowledge of an execu-
tive officer of Purchaser or any Purchasing Company, threatened
against Purchaser or any Purchasing Company which challenges the
transactions contemplated hereby other than any Action that would
not reasonably be expected to prevent or materially interfere with
or delay the consummation of the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Access.
(a) Prior to the Closing, subject in each case to the
provisions of Section 5.9(h) and the limitations required by or
advisable under the Competition Laws and other applicable legal
requirements, Seller shall permit Purchaser and its representatives
to have reasonable access, during regular business hours and upon
reasonable advance notice, to the assets, employees, books and
records (including, without limitation, any Tax-related information)
of the Packaging Companies, the Selling Companies and Seller relat-
ing to the Packaging Business and will procure that the Packaging
Companies and the Selling Companies will cooperate with regard to
such inspections as Purchaser may reasonably require and will cause
the officers of the Packaging Companies and the Selling Companies to
furnish Purchaser such existing financial and operating data and
other information (including Tax-related information) with respect
57
<PAGE>
to the business and properties of the Packaging Companies as Pur-
chaser may from time to time reasonably request.
(b) Except as otherwise provided in Section 5.9(i)
hereof, all information provided to Purchaser by or on behalf of
Seller, any Selling Company or Packaging Company in connection with
the Agreement and the transactions contemplated hereby will be held
by Purchaser and its Affiliates, agents and representatives as
Confidential Information, as defined in, and pursuant to the terms
of, the Confidentiality Agreement.
Section 5.2 Conduct of Business. During the period
from the date hereof to the Scheduled Closing, except as (i) ex-
pressly contemplated by this Agreement (including the Restructur-
ing), (ii) required by applicable Law or any Material Contract or
Plan or (iii) with the consent of the Purchaser (which shall not be
unreasonably withheld or delayed), Seller and the Selling Companies
agree to cause:
(a) each Packaging Company to conduct its business
(other than activities which are not part of the Packaging Business)
in the ordinary and usual course consistent with past practice to
preserve intact its business organization (to the extent relating to
the Packaging Business) and to maintain its customary relationships
with suppliers and customers of the Packaging Business;
(b) the Packaging Companies not to acquire or dispose
of any assets material to the operation of the Packaging Business
outside of the ordinary course of business consistent with past
practice;
(c) the Packaging Companies not to make any material
change in any financial reporting or accounting policy or accounting
practice by any Packaging Company, other than such changes required
by law or GAAP.
(d) the Packaging Companies not to, other than in the
ordinary course consistent with past practice, enter into any
employment, consulting or severance agreements with any Employee or
any present or future director or officer of the Packaging Companies
or materially change the terms thereof, grant any severance or
termination pay not currently required to be paid under existing
Plans, or increase benefits payable under existing severance or
termination pay policies or employment agreements with respect to
senior management of the Packaging Companies or make any increase
in, or commit or plan to increase, the wages, salaries, compensa-
tion, pension or other benefits or payments to any directors,
58
<PAGE>
officers or employees of the Packaging Companies (except for in-
creases in the ordinary course of business consistent with past
practice or as required under Plans or Material Contracts);
(e) the Packaging Companies not to terminate or amend
in any material respect any Material Contract;
(f) the Packaging Companies not to adopt, terminate or
amend in any material respect any Plan or collective bargaining
agreement, except as required by Law;
(g) the Packaging Companies not to (i) hire, except in
the ordinary course of business consistent with past practice and
not in the aggregate material (provided that the hiring of any
employee or consultant whose annual compensation is expected to be
in excess of U.S.$100,000 shall not be considered to be in the
ordinary course), any new management or consultants or (ii) grant or
award any option, restricted stock, stock award, phantom share,
stock appreciation right or other bonus or benefit (other than
benefits and bonuses in the ordinary course of business consistent
with past practice) not currently required to be granted or awarded
under any existing employment agreement or Plan;
(h) waive or release any claims or rights (other than
claims or rights in the nature of indebtedness) having a value to
any Packaging Company of U.S.$100,000 or more;
(i) incur any Lien on its assets, except for Permitted
Liens, outside of the ordinary course of business;
(j) make any capital expenditure not previously commit-
ted, individually in excess of A$3,000,000, or make any other
capital expenditures except as reflected in the 1998 capital expen-
diture plan of the Packaging Companies (a copy of which has been
furnished to Purchaser) in excess of U.S.$10,000,000 in the aggre-
gate;
(k) merge or consolidate with, or acquire securities or
an interest in, any Person except for acquisitions in the ordinary
course of business consistent with past practice, or enter into any
joint venture, partnership or similar arrangement;
(l) amend its memorandum, certificate of incorporation,
articles, by-laws or any other organizational document;
(m) make any loan or advance to any Person, other than
a loan or advance from a Packaging Company to another Packaging
59
<PAGE>
Company and other than trade receivables, Inter-Group Receivables
and loans and advances to employees in the ordinary course of
business consistent with past practice;
(n) fail to pay any creditor any amount owed to such
creditor when due (after the expiration of any applicable grace
periods), except if any such amount is being disputed in good faith
and other than in the ordinary course of business consistent with
past practice;
(o) settle or agree to settle any Action which settle-
ments, individually or in the aggregate, would reasonably be expect-
ed to have a Material Adverse Effect;
(p) with respect to the Packaging Business, terminate,
discontinue, close or dispose of any material facility or business
operation or otherwise materially change the general character or
conduct of its business;
(q) declare, set aside or pay any dividend or other
distribution in respect of any capital stock of any Packaging
Company, other than any dividend or other distribution (A) pursuant
to the Restructuring, (B) to the extent payable in cash or by credit
to an intercompany account or (C) payable to a Sold Company or
another Packaging Company directly or indirectly wholly-owned by the
Sold Companies;
(r) redeem, purchase or otherwise acquire any shares of
any Packaging Company, other than pursuant to the Restructuring;
(s) terminate or fail to take reasonable action to
renew any Permit, except where any such termination or failure would
not have, and would not be reasonably be likely to have, individual-
ly or in the aggregate, a Material Adverse Effect;
(t) write down the value of any inventory or any other
asset of the Packaging Business except in the ordinary course of
business consistent with past practice and required by GAAP;
(u) the Packaging Companies not to make any material
Tax election or settle any material Tax Audit without notifying
Purchaser of the making of such Tax election or settlement of such
Tax Audit; or
(v) issue or sell any new debt securities (other than
commercial paper) or enter into any new credit facility (other than
roll-overs under existing facilities).
60
<PAGE>
Section 5.3 Covenants pertaining to Specified Consents,
Authorizations and Closings.
(a) Seller and Purchaser will cooperate with respect to
the notices and filings to be made in connection with the consents,
approvals, waivers and authorizations required prior to Closing in
connection with the transactions contemplated hereby. Each of
Seller and Purchaser shall use its reasonable best efforts to
obtain, as promptly as practicable, the consents, approvals, waivers
and authorizations required to be obtained by it prior to Closing in
connection with the transactions contemplated hereby.
(b) Purchaser and Seller shall, within 10 Business Days
following the date of this Agreement (or such shorter period as
required by applicable Law), promptly file documentary materials
required to be filed by them in connection with the regulatory
authorizations referred to in Sections 6.1(a) and 6.1(c) and the
Specified Consents ("Regulatory Authorizations") and promptly file
any additional information actually required for such filings as
soon as practicable after receipt of request therefor. Each of
Purchaser and Seller further agrees that it will, and will cause its
Affiliates to, comply with any applicable post-Closing notification
or requirements of any antitrust, trade competition, investment or
control reporting or similar law or regulation or any Government
Authority having jurisdiction over the Packaging Business or the
Restructuring. Each of Purchaser and Seller agrees to cooperate
with and promptly to consult with, to provide any reasonably avail-
able information with respect to, and to provide the other party
(and its counsel) advance drafts and copies of all presentations and
filings to be made in connection with the Regulatory Authorizations.
(c) In addition to the agreements set forth in (a) and
(b) above, Purchaser shall use its best efforts to ensure that the
Specified Consents are obtained as promptly as practicable and that
any conditions set forth in or established by any of the antitrust,
cartel or foreign investment authorities from which Specified
Consents are required (the "Regulatory Authorities") are wholly
satisfied. In fulfillment of this covenant, Purchaser agrees, among
other steps or actions and without limiting the scope of Purchaser's
obligations, to offer to European Union competition authorities a
willingness to suspend the closing with respect to the transfer of
shares of any Retained Subsidiaries pursuant to Section 5.9.
61
<PAGE>
Section 5.4 Tax Matters.
(a) Tax Treatment. Purchaser may make an election
under Section 338(g) of the Code with respect to any Packaging
Company; provided that Purchaser shall provide Seller with written
notice specifying the company or companies with respect to which
such election was made within thirty (30) Business Days of making
such election. Notwithstanding anything to the contrary in this
Agreement, Purchaser shall indemnify the Seller Indemnified Parties
from, against, and in respect of any and all Losses and Taxes
Seller, or any of Seller's Affiliates may suffer resulting from,
arising out of, relating to or caused by any such election.
(b) Indemnification.
(i) Seller's Indemnification of Purchaser. Except
to the extent otherwise provided in this Section 5.4, Sell-
er shall, or shall cause the Selling Companies to, indemnify
Purchaser Indemnified Parties from, against, and in respect of
any and all Losses and Taxes (including Transfer Taxes to the
extent contemplated by subparagraph (C) below) Purchaser, any
of Purchaser's Affiliates, or any of the Packaging Companies
may suffer resulting from, arising out of, relating to, con-
sisting of or caused by any liability for (A) any Taxes of the
Packaging Companies for any Pre-Closing Period ending on or
before the Scheduled Closing Date; (B) any Taxes attributable
to any of the Non-Packaging Assets for any taxable period; (C)
any out-of-pocket fees, costs and expenses or any Taxes solely
attributable to the Restructuring (including (i) Transfer
Taxes arising in the course of the Restructuring; (ii) any
amount of or in respect of Victorian, Queensland or Western
Australian stamp duty (including fines, penalties or interest)
which becomes payable as a consequence of (x) guidelines
issued pursuant to s137R of the Victorian Stamps Act 1958 or
an undertaking given pursuant to those guidelines; (y) s49C of
the Queensland Stamp Act 1894; or (z) Part IIIBAAA of the
Western Australian Stamp Act 1921, having applied to the
Restructuring; and (iii) any Tax resulting from the applica-
tion of Section 160ZZ0A of the Australian Income Tax Assess-
ment Act 1936 (or any statutory re-enactment or replacement of
that provision) by reason of Section 160ZZ0 of that Act (or
any statutory re-enactment or replacement of that provision)
having applied in relation to the disposal of an asset to a
Packaging Company in the course of the Restructuring); (D) any
Taxes of the Packaging Companies for the portion of any Strad-
dle Period ending on the Scheduled Closing Date, computed in
accordance with the procedures and principles set forth in
62
<PAGE>
subsection (c) of this Section 5.4; (E) any Taxes arising out
of a breach of the representations and warranties contained in
Section 3.15; (F) any Taxes of any member of an affiliated,
consolidated, combined or unitary group (other than the Pack-
aging Companies) of which any of the Packaging Companies (or
any predecessor) is or was a member on or prior to the Sched-
uled Closing Date, by reason of the liability of any of the
Packaging Companies under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Tax Law),
or as a transferee or successor, by contract or otherwise; (G)
any payments required to be made after the Closing Date under
any Tax Sharing Agreement, to which any of the Packaging
Companies was obliged, or was a party, on or prior to the
Scheduled Closing Date; (H) any liability to repay to any
member of the Seller Group the whole or any part of any pay-
ment received for Group Relief pursuant to any agreement or
arrangement entered into by any of the Packaging Companies on
or before the Scheduled Closing Date (except to the extent
that such repayment is as a result of Purchaser, other than at
the direction of Seller, procuring the Packaging Company's
withdrawal of such surrender); and (I) any franking deficit
tax or franking additional tax or their equivalents applicable
to companies owned by non-residents of Australia as set forth
in the Treasurer's Announcement dated May 13, 1997 attribut-
able to a franking deficit of any of the Packaging Companies
as of the Scheduled Closing Date (except to the extent that
deficit is reduced by a subsequent payment of Tax which is
apportioned to Seller pursuant to Section 5.4(c) hereof or is
otherwise borne by Seller); and in each of (A) through (I)
above, to the extent not paid on or before the Scheduled
Closing Date; provided, however, that no Purchaser Indemni-
fied Party shall be entitled under this Section 5.4 to multi-
ple recovery for the same Losses or Taxes; provided, further,
that in no event shall any Purchaser Indemnified Party be
indemnified from and against any Taxes (including Transfer
Taxes) solely attributable to the Rockware Restructuring.
(ii) Purchaser's Indemnification of Seller.
Purchaser shall indemnify the Seller Indemnified Parties from,
against, and in respect of any and all Losses and Taxes Sell-
er, any of Seller's Affiliates, or any of the Packaging Compa-
nies may suffer resulting from, arising out of, relating to,
consisting of or caused by any liability for (A) any Taxes of
the Packaging Companies or any member thereof for any Post-
Closing Period; (B) any Taxes of the Packaging Companies for
any portion of any Straddle Period beginning after the Sched-
uled Closing Date, computed in accordance with the procedures
63
<PAGE>
and principles set forth in subsection (c) of this Section
5.4; (C) any out-of-pocket fees, costs and expenses or any
Taxes solely attributable to the Rockware Restructuring (in-
cluding Transfer Taxes arising in the course of the Rockware
Restructuring); and (D) any Taxes of any member of the Seller
Group which relates to corporation tax primarily assessable on
any of the Packaging Companies which Tax would not give rise
to a claim under Section 5.4 or Article VII hereof, but which
is assessed on any member of the Seller Group pursuant to
Section 767A ICTA and has not already been recovered by any
member of the Seller Group pursuant to Section 767B ICTA;
provided, however, that no Seller Indemnified Party shall be
entitled under Section 5.4 to multiple recovery for the same
Losses or Taxes; provided, further, that in no event shall any
Seller Indemnified Party be indemnified from and against any
Taxes (including Transfer Taxes) solely attributable to the
Restructuring, except for Taxes assessed on any member of the
Seller Group pursuant to Section 767A ICTA where Seller previ-
ously has paid or is liable to pay an amount equal to such
Taxes to Purchaser.
(iii) Tax Benefit and Tax Cost. If the amount
with respect to which any claim is made under Section 5.4(b)
or Article VII hereof (an "Indemnity Claim") gives rise to a
currently realizable Tax Benefit Amount to the party making
the claim, an Affiliate thereof, any Packaging Company, or any
combined, consolidated or unitary group of corporations in-
cluding the party or such Affiliate (collectively, the "Claim-
ing Party") the indemnity payment shall be reduced by the Tax
Benefit Amount available to the Claiming Party. Any indemnity
payment made pursuant to an Indemnity Claim shall be increased
to take account of any net Tax cost incurred by the Claiming
Party arising from the receipt of indemnity payments hereunder
(grossed up for such increase). To the extent such Indemnity
Claim does not give rise to a currently realizable Tax Benefit
Amount to the Claiming Party, if the amount with respect to
which any Indemnity Claim is made gives rise to a subsequently
realized Tax Benefit Amount to the Claiming Party, such party
shall refund to the indemnifying party such Tax Benefit Amount
when, as and if realized. Where a Claiming Party has Tax
Benefits available to it other than the Tax Benefits arising
from an Indemnity Claim ("Other Tax Items"), the determination
of any Tax Benefit Amount shall be calculated by utilizing the
Tax Benefits arising from an Indemnity Claim prior to utiliz-
ing any Other Tax Items. In the event that there should be a
determination disallowing part or all of the Tax Benefit
Amount, the indemnifying party shall be liable to refund to
64
<PAGE>
the Claiming Party the amount of any related reduction previ-
ously allowed or payments previously made to the indemnifying
party pursuant to this Section 5.4(b)(iii). Notwithstanding
anything in this Agreement to the contrary, the Indemnified
Parties shall claim to the fullest extent permissible on the
relevant Tax Returns all Tax Benefits arising from an Indemni-
ty Claim for the earliest possible taxable period.
(iv) Exceptions to Seller's Indemnification Obli-
gations. Notwithstanding anything in this Agreement to the
contrary, neither Seller nor the Selling Companies shall be
required to indemnify Purchaser Indemnified Parties from,
against, or in respect of:
(A) any Taxes that would not have arisen but for a
voluntary transaction, action or omission carried out or
effected by any Purchaser Indemnified Party or any of
the Packaging Companies or their Affiliates after the
Closing, except: (i) any such transaction, action or
omission carried out or effected under a legally binding
commitment created on or before the Scheduled Closing
Date or as part of or pursuant to the Restructuring;
(ii) any such transaction, action or omission carried
out or effected in the ordinary course of the business
carried on by the relevant Packaging Company (excluding,
for this purpose, changes in tax accounting methods,
principles or elections used or made by or with respect
to the Packaging Companies for a Pre-Closing Period);
(iii) any omission to take any action or make any elec-
tion or claim for any refund, relief or right to a
repayment of Tax arising in respect of any Pre-Closing
Period but only where the need or proposal for such
action, election or claim has not been advised to Pur-
chaser in writing within a reasonable time and in any
event before seven (7) Business Days of the date for the
taking of such action or the making of any such election
or claim or (iv) any such transaction, action or omis-
sion required by applicable Law or the relevant Tax
Authority or Governmental Authority other than transac-
tions, actions or omissions required by applicable Law
or the relevant Tax Authority or Governmental Authority
to effect a voluntary transaction, action or omission
otherwise described in this Section 5.4(b)(iv)(A);
(B) any Taxes arising or increased by reason of a
voluntary disclaimer by any of the Purchaser Indemnified
Parties or any of the Packaging Companies of any allow-
65
<PAGE>
ance, in whole or in part, to which any of the Packaging
Companies is entitled under Part II of the Capital
Allowances Act 1990 or equivalent legislation in any
country or by reason of the revocation (other than at
the request of Seller) by any of the Purchaser Indemni-
fied Parties or any of the Packaging Companies after the
Scheduled Closing Date of any claim for refund or relief
made (whether provisionally or otherwise) by any of the
Packaging Companies prior to the Scheduled Closing Date;
(C) any Taxes that have been compensated by insur-
ance or are otherwise without cost to any of the Pur-
chaser Indemnified Parties or any of the Packaging
Companies;
(D) any Tax arising or increased as a consequence
of any failure by any of the Purchaser Indemnified
Parties or any of the Packaging Companies following the
Closing to comply with any of their respective obliga-
tions under this Agreement;
(E) any Taxes assessed as a result of the applica-
tion of subdivision 165 of the Income Tax Assessment Act
1997 (Commonwealth of Australia) or Section 768 ICTA
that would not have arisen but for a cessation of, or
any change in the nature or conduct of, any trade or
business conducted by any of the Purchaser Indemnified
Parties or any of the Packaging Companies after the
Scheduled Closing Date;
(F) if any of the Packaging Companies was not, as
of the Scheduled Closing Date, wholly owned by a Seller
Corporation, the percentage of Taxes which corresponds
to the percentage of the ownership of the Packaging
Company by persons other than Affiliates of a Seller
Corporation; or
(G) any Taxes directly or indirectly resulting
from, arising out of, related to or caused by any elec-
tion made by Purchaser with respect to any Packaging
Company under Section 338(g) of the Code as described in
Section 5.4(a) hereof.
(v) Survival of Tax Indemnification. Any claim to
be made pursuant to this Section 5.4 must be made no later
than twenty (20) Business Days following the expiration of the
applicable statutes of limitations relating to the Taxes at
66
<PAGE>
issue (giving effect to applicable extensions and waivers
thereof).
(vi) Timing of Indemnification Payments. Where a
party becomes liable to make any payment under this Section
5.4, the due date for the making of that payment, unless
otherwise specified herein, shall be:
(A) in a case that involves an actual payment of
Tax by or in respect of a Packaging Company, (i) where
the claim arises before the due date for the payment of
the Tax, the date falling three (3) Business Days before
the date that is the last date on which Purchaser or the
relevant Packaging Company would have been required to
pay to the appropriate Tax Authority such Tax in order
to avoid incurring a liability for interest or a charge
or penalty in respect of such Tax and (ii) where the
claim arises after the due date for payment of the Tax,
within seven (7) Business Days after the date when the
indemnifying party has been notified in writing by the
indemnified party (or in the event of a dispute, the
auditors of the relevant Packaging Company or the CPA
Firm have certified) that at the request of the indemni-
fied party or the relevant Packaging Company, that the
indemnifying party has a liability to pay a determinable
amount hereunder;
(B) in any other case, the date falling seven (7)
Business Days after the date when the indemnifying party
has been notified in writing by the indemnified party
that the auditors of the relevant Packaging Company or
the CPA Firm have certified, at the request of the
indemnified party or the relevant Packaging Company,
that the indemnifying party has a liability to pay a
determinable amount hereunder.
Any such payment to be made with respect to an actual
payment of Tax may be paid by Seller to Purchaser or at Seller's
option directly to the appropriate Tax Authority on behalf of
Purchaser or the relevant Packaging Company on the last date on
which Purchaser or the relevant Packaging Company would have been
required to pay to the appropriate Tax Authority such Tax in order
to avoid incurring a liability for interest or a charge or penalty
in respect of such Tax. It is acknowledged between Purchaser and
Seller that the provisions of this Section 5.4 have been agreed to
on the assumption that no accrual or reserve for Taxes is being
carried in the accounts of any Packaging Company as of 31 December
67
<PAGE>
1997. If the non-carrying of an accrual or reserve for Taxes as of
31 December 1997 with respect to any Packaging Company (i) would
result in that Packaging Company's auditors being likely to qualify
their opinion on the Packaging Company's accounts ended on that
date, or (ii) may (in the sole opinion of Seller) result in any Tax
Authority seeking to treat any indemnity payment hereunder as
taxable to the recipient of such payment, any Packaging Company or
any Affiliate thereof, then, upon Seller's request, (i) Purchaser
shall cause such Packaging Company to reinstate the appropriate
accrual for Taxes in the amount requested by Seller, (ii) Seller
shall satisfy its indemnification obligations under this Section 5.4
by paying to Purchaser any amounts due (which amounts shall not be
reduced by any reinstated accrual) in accordance with Section
5.4(b)(vi) hereof, and (iii) Purchaser shall cause the relevant
Packaging Company to timely remit such amount to the applicable Tax
Authority and debit such accrual in its accounts (and if such
accrual is exceeded by the payments, to charge such excess through
its profit and loss account). Purchaser shall be required to inform
Seller within five (5) Business Days in the event that (i) Purchaser
determines that any Packaging Company's auditors are likely to
qualify their opinion on the accounts of the Packaging Company as of
31 December 1997, as a result of the non-carrying of an accrual or
reserve for Taxes on such accounts or (ii) a Tax Authority is
seeking to treat any indemnity payment hereunder as taxable to the
recipient of such payment, any Packaging Company or any Affiliate
thereof, as described in the immediately preceding sentence. If any
payment required to be made by the indemnifying party hereunder is
not made by the due date as specified in this Section 5.4(b)(vi),
then, except to the extent that the indemnifying party's obligation
compensates the indemnified party for the late payment by virtue of
its extending to interest and penalties, that payment shall carry
interest at Barclay's LIBOR from such due date until the date when
the payment is actually made.
(vii) Neither Seller nor Purchaser shall make a
claim for indemnity against the other pursuant to this Section
5.4 until such party's claims pursuant to this Section 5.4
exceed, in the aggregate, US$50,000, at which time, all of
such party's claims may be brought against the other party.
The immediately preceding sentence shall be reapplied each
time the US$50,000 threshold set forth herein is satisfied.
Indemnity claims relating to any items set forth on Schedule
3.15 shall not be counted for purposes of determining whether
the US$50,000 threshold set forth above has been met.
68
<PAGE>
(c) Proration of Taxes.
(i) To the extent required by law, the taxable
years of each Packaging Company shall end on and include the
Scheduled Closing Date.
(ii) Taxes with respect to each Packaging Company
subject to taxation on the basis of income, profits or gain
for any Straddle Period shall be allocated, in the following
order, according to the following principles:
(A) Compute the taxable profit or loss for each
Packaging Company for the year without giving ef-
fect to any Purchaser's Tax Benefit or Seller's Tax
Benefit that may be used against such taxable prof-
its or loss.
(B) Allocate this taxable profit or loss be-
tween Seller and Purchaser as follows:
(I) capital profits, gains or losses,
other than those solely attributable to the
Restructuring and the Rockware Restructuring,
attributable to the disposal of capital assets
in the portion of such Straddle Period ending on
the Scheduled Closing Date shall be allocated to
Seller;
(II) capital profits, gains and losses,
other than those solely attributable to the
Restructuring and the Rockware Restructuring,
attributable to the disposal of capital assets
in the portion of such Straddle Period beginning
after the Scheduled Closing Date shall be allo-
cated to Purchaser;
(III) any profits, gains or losses solely
attributable to the Restructuring shall be allo-
cated to Seller;
(IV) any profits, gains or losses solely
attributable to the Rockware Restructuring shall
be allocated to Purchaser;
(V) any Tax Benefits attributable to any
payments described in Section 7.3(a)(v) hereof
shall be allocated to Seller; and
69
<PAGE>
(VI) other income, gain, profits or Tax
Benefits, excluding those referred to in (I),
(II), (III), (IV) and (V) above, shall be allo-
cated between Seller and Purchaser based upon
the number of days elapsing in the parts of the
Straddle Period ending on the Scheduled Closing
Date ("Pre-Closing Straddle Period) and begin-
ning after the Scheduled Closing Date ("Post-
Closing Straddle Period").
(C) Allocate Seller's Tax Benefits and Purchas-
er's Tax Benefits as follows:
(I) all Seller's Tax Benefits used against
the taxable profits or increasing the Tax loss
of a Packaging Company for a Straddle Period
shall be deducted from the profits or added to
the losses allocated to Seller, resulting in
"Seller's Taxable Profits or Losses"; and
(II) all Purchaser's Tax Benefits used
against the taxable profits or increasing the
Tax loss of a Packaging Company for a Straddle
Period shall be deducted from the profits or
added to the losses allocated to Purchaser,
resulting in "Purchaser's Taxable Profits or
Losses,"
(D) All Taxes for a Straddle Period shall be
allocated (i) to Seller in the ratio which Seller's
Taxable Profits or Losses bears to the total prof-
its and losses of the relevant Packaging Company
for the Straddle Period and (ii) to Purchaser in
the ratio which Purchaser's Taxable Profits or
Losses bears to the total profits and losses of
such Packaging Company for the Straddle Period,
provided that if either party's ratio determined
under (i) or (ii) above is a negative number, then
the entire amount of such Taxes shall be allocated
to the other party, and such other party shall pay
to the first party the amount by which such Taxes
were reduced as a result of utilizing Tax Benefits
allocated to the first party hereunder. Where any
of the Purchaser Indemnified Parties or any of the
Packaging Companies realizes a Tax Benefit Amount
in a Post-Closing Period which is attributable to
Tax Benefits allocated to Seller pursuant to this
70
<PAGE>
Section 5.4(c), Purchaser shall pay to Seller an
amount equal to such Tax Benefit Amount within five
(5) Business Days of realizing such Tax Benefit
Amount, provided that, where any of the Purchaser
Indemnified Parties or any of the Packaging Compa-
nies has Tax Benefits available other than those
Tax Benefits allocated to Seller pursuant to this
Section 5.4(c) or Tax Benefits allocated to Pur-
chaser pursuant to Section 5.4(c)(ii)(C)(II), the
calculation of the amount of any payments hereunder
shall be determined in accordance with the princi-
ples and methodology described in Section 5.4(b)(i-
ii) hereof, provided, further, that for purposes of
this Section 5.4(c), the Tax Benefit Amount real-
ized by any of the Purchaser Indemnified Parties or
any of the Packaging Companies with respect to the
Straddle Period shall include a reduction in the
amount that otherwise would have been payable by
Purchaser with respect to the Straddle Period pur-
suant to this Section 5.4(c) if any Tax Benefits
allocated to Seller pursuant to this Section 5.4(c)
did not exist.
(E) If more than one rate of Tax applies to the
taxable profits of a Packaging Company for a Strad-
dle Period, the calculations in respect of such
Straddle Period shall be made separately for the
profits taxable at each tax rate and such other
adjustments shall be made as are fair and reason-
able.
(F) Where any part of the Taxes for any Strad-
dle Period is due and payable in installments, it
shall be assumed that the portion of that part of
such Taxes that is apportioned to Seller shall be
paid first.
(G) Any Taxes for any Straddle Period which
have been paid by installment prior to the Sched-
uled Closing Date shall be apportioned to Seller.
(H) Where any part of the Taxes for any Strad-
dle Period is due and payable in installments and
one or more installments is due and payable after
the Scheduled Closing Date and prior to the time
when apportionment set out in subsection (iv) above
is calculated, the particular installment shall be
71
<PAGE>
paid by and apportioned to Seller to the extent
that the cumulative apportionments to Seller do not
exceed Seller's share of the total estimated Taxes
of the Packaging Company for all Straddle Periods,
as calculated hereunder.
(I) (I) Where any party receives a refund from
any Tax Authority with respect to any Straddle
Period, such refund shall be apportioned between
Seller and Purchaser. The amount of such refund
apportioned to Seller shall be the amount re-
quired to ensure that Seller bears the propor-
tion of the liability for Taxes for such Strad-
dle Period apportioned to Seller. If such re-
fund is received by Purchaser or any of its
Affiliates, Purchaser shall pay or cause to be
paid to Seller the amount of such refund appor-
tioned to Seller within five (5) Business Days
of receipt.
(II) Where the aggregate of (i) the sum
paid prior to the Scheduled Closing Date by or
on behalf of any Packaging Company with respect
to Taxes for any Straddle Period allocated to
Seller hereunder and (ii) any amounts paid by
Seller under this Section 5.4 in respect of such
Straddle Period exceed the amount of Taxes for
such Straddle Period Purchaser shall pay Seller
an amount equal to such excess within five (5)
Business Days after the amount of any such ex-
cess is determined.
(J) The parties hereto acknowledge that the
allocation made under this Section 5.4(c) is an
approximation. Any party may, at its own expense,
require the allocation to be carried out by assum-
ing that the taxable year or period of any Packag-
ing Company ended on and included the Scheduled
Closing Date, in which event the allocation princi-
ples set forth above shall not apply and the par-
ties shall negotiate in good faith and, in the
event of disagreement, the proper apportionment
shall be determined by the CPA Firm, whose determi-
nation shall be final and binding.
(K) Notwithstanding anything to the contrary in
this Agreement, all property Taxes for the Straddle
72
<PAGE>
Period shall be allocated between Seller and Pur-
chaser based on the number of days in the Straddle
Period elapsed in the Pre-Closing Period and in the
Post-Closing Period.
(d) Surrender of Group Relief.
(i) The Packaging Companies shall claim and sur-
render Group Relief among themselves to the maximum extent
possible prior to any other claims or surrenders of Group
Relief.
(ii) Purchaser shall cause each of the Packaging
Companies to surrender to Seller, as directed in writing by
Seller, Group Relief that is available for such surrender and
is not required to reduce the Tax liability of any Packaging
Company for any Pre-Closing Period.
(iii) Purchaser shall take, and shall cause to be
taken, any action reasonably required to give full effect to
the surrenders made under subsection (i) or (ii) hereof and to
ensure that such surrenders are allowed in full by the Inland
Revenue or any other Tax Authority, including, without limita-
tion, causing each of the Packaging Companies to sign and
submit to the Inland Revenue or any other Tax Authority all
notices of consent to surrender (including provisional or
protective notices of consent in cases where any relevant Tax
computation has not yet been agreed upon) and all such other
documents and Tax Returns as may reasonably be requested by
Seller.
(iv) Notwithstanding anything to the contrary
herein, Seller shall not be required to make any payment to
any Purchaser Indemnified Party in exchange for any such
surrender.
(v) Purchaser shall cause each of the Packaging
Companies to claim from Seller or its Subsidiaries as Seller
may specify all Group Relief as is available for surrender and
as Seller may, at its sole discretion, direct in writing.
(vi) Purchaser shall, and shall cause each Packag-
ing Company to, take any action reasonably required to give
full effect to the surrenders made under subsection (v) hereof
and to ensure that such surrenders are allowed in full by the
Inland Revenue or any other Tax Authority and, without preju-
dice to the generality of the foregoing, Purchaser shall cause
73
<PAGE>
each of the Packaging Companies to sign and submit to the
Inland Revenue all such claims (including provisional or
protective claims in cases where any relevant Tax computation
has not yet been agreed upon) and all such other documents and
returns as may be necessary to secure that full effect is
given to this subsection (vi).
(vii) In consideration of each of the claims to be
made under subsection (v) hereof, Purchaser shall cause each
Packaging Company to pay to the relevant Seller Corporation or
its Subsidiary a sum equal to the amount of corporation Tax
from which the Packaging Company that is the claimant company
in respect of such surrender has been relieved by virtue of
that surrender being validly and effectively made; provided
that the provisions of this subsection (vii) shall not have
effect if and to the extent that payment in respect of any
such surrender has been made on the basis specified in the
foregoing provisions of this subsection (vii) on or before the
date hereof.
(viii) Any sum payable under subsection (vii)
hereof shall be paid on the date on which any corporation Tax
chargeable on the taxable profits of the company that is the
claimant company in respect of the surrender in question for
the accounting period to which that surrender relates becomes
due and payable (or would have become due and payable had the
claimant company incurred any liability for corporation Tax in
respect of that accounting period).
(ix) In the event that any payment is made in
accordance with the foregoing provisions of this subsection
(d) in respect of any surrender of Group Relief made under
subsection (v) and corporation Tax falls nevertheless to be
charged in respect of the taxable profits that the relevant
surrender was intended to relieve from such Tax (whether as a
result of the Inland Revenue refusing to allow Group Relief or
subsequently withdrawing Group Relief in respect of the rele-
vant surrender or for any other reason whatsoever), Seller
shall cause the relevant surrendering company to repay to the
relevant claimant company either the sum previously paid in
respect of the relevant surrender in accordance with the
foregoing provisions of this subsection (d) or, as the case
may be, such part of that sum as is attributable to the ele-
ment of the surrender that did not have the effect of reliev-
ing from corporation Tax the taxable profits intended to be
relieved by virtue of that surrender.
74
<PAGE>
(e) Value-Added Tax.
(i) Seller shall take all actions necessary to
ensure that any Packaging Company that is a member of a value-
added tax ("VAT") group of Seller or any of its Affiliates
prior to the Scheduled Closing Date shall be excluded from
such group beginning on the date after the Scheduled Closing
Date.
(ii) Notwithstanding Section 5.4(f) hereof, the
responsibility for filing Tax Returns relating to VAT shall be
covered exclusively by this Section 5.4(e). Purchaser shall
promptly provide, or shall cause to be provided, to Seller all
information required with respect to any Packaging Company
that was a member of a VAT group of Seller or any of its
Affiliates prior to the Scheduled Closing Date in order to
prepare VAT Tax Returns with respect to supplies of such
Packaging Company which are treated as supplies of Seller or
any of its Affiliates. Seller shall prepare and file all such
VAT Tax Returns which include any Packaging Company required
to be filed with respect to all Pre-Closing Periods and all
Straddle Periods.
(iii) Purchaser shall promptly provide, or cause
to be provided, to Seller all information requested in order
to enable Seller or any of its Affiliates to respond to any
inquiry from, or claim by, H.M. Customs & Excise or the Dutch
Custom Authority in respect of any VAT Tax Return prepared by
Seller pursuant to this Section 5.4(e).
(iv) If any Packaging Company is or has been the
representative member of a VAT group to which Seller or any
other member of the Seller Group is a member, the provisions
of Sections 5.4(e)(ii), (iii) and (v) to (viii) shall apply
with the necessary changes so as to provide for the prepara-
tion and filing of VAT Tax Returns by, and for Seller to
furnish and pay, or procure the furnishing and payment of,
information and VAT Payable, to that Packaging Company.
(v) On or prior to March 24, 1998, Purchaser shall
pay or cause to be paid to BTR Industries Ltd any output Tax
less allowable input Tax ("VAT Payable") attributable to
imports and supplies of goods or services actually or deemed
made by or to each Packaging Company subject to taxation in
the United Kingdom from December 1997 to February 28, 1998,
inclusive which are treated as made to or by BTR Industries
Ltd less any payments that have already been made in respect
75
<PAGE>
of such amounts to BTR Industries Ltd as of the date hereof.
In the event that such allowable input tax exceeds such output
tax of any such Packaging Company BTR Industries Ltd shall pay
or cause to be paid to the relevant Packaging Company the
excess within five (5) Business Days of receiving credit
therefor, or payment from, H.M. Customs & Excise of such
excess (less any payments that have already been made in
respect of such amounts by BTR Industries Ltd).
(vi) In the event that the Scheduled Closing Date
is after February 28, 1998, but on or prior to June 23, 1998,
Purchaser shall pay or cause to be paid to BTR Industries Ltd
any amount of VAT Payable attributable to imports and supplies
of goods or services actually or deemed made by or to each
Packaging Company subject to taxation in the United Kingdom
from March 1, 1998 to May 31, 1998, including payments made to
or by BTR Industries Ltd (less any payments that have already
been made in respect of such amounts to BTR Industries Ltd)
and similarly for any subsequent quarterly VAT Tax Returns and
quarterly periods that fall partially or wholly before the
Scheduled Closing Date, adjusting the dates appropriately. In
the event that such allowable input tax exceeds such output
tax of any such Packaging Company, BTR Industries Ltd shall
pay or cause to be paid to such Packaging Company an amount
equal to the excess within five (5) Business Days of receiving
credit for, or payment from, H.M. Customs & Excise of such
excess (less any payments that have already been made in
respect of such amounts by BTR Industries Ltd).
(vii) On the due and payable dates, Purchaser
shall pay or cause to be paid to BTR Industries Ltd any VAT
Payable attributable to imports and supplies of goods or
services actually or deemed made by or to each Packaging
Company subject to taxation in Holland from 1 January 1998 to
the Scheduled Closing Date, inclusive which are treated as
made to or by BTR Industries Ltd less any payments that have
already been made in respect of such amounts to BTR Industries
Ltd of the date hereof. In the event that such allowable
input Tax exceeds such output Tax of any such Packaging Compa-
ny, BTR Industries Ltd shall pay or cause to be paid to the
relevant Packaging Company the excess within five (5) Business
Days of receiving credit therefor, or payment from, the Dutch
Customs Authority of such excess (less any payments that have
already been made in respect of such amounts by BTR Industries
Ltd).
76
<PAGE>
(viii) BTR Industries Ltd shall account for VAT
Payable to the Commissioners of Customs & Excise or to the
Dutch Customs Authority and shall pay or cause to be paid to
Purchaser any interest, penalties, surcharge or fine levied on
any Purchaser Indemnified Party arising from the failure of
BTR Industries Ltd to account for VAT Payable except to the
extent that such interest, penalty, surcharge or fine arises
from any delay or default of any Purchaser Indemnified Party.
(ix) Purchaser shall provide or cause to be pro-
vided all information and assistance requested by BTR Indus-
tries Ltd in connection with any appeal against the blocking
order applied by H.M. Customs & Excise to input tax incurred
on the purchase of motor cars, including, without limitation,
providing original invoices for motor cars purchase by any
Packaging Company and retaining purchase and sales invoices
and other relevant documents or records.
(x) If any Purchaser Indemnified Party or any
Packaging Company receives any payments in connection with
such appeal, the Purchase Price shall be increased by an
identical sum (less reasonable costs incurred in obtaining
such payment and any Tax imposed in respect of such payment),
which shall be paid by Purchaser to BTR Industries Ltd within
five (5) Business Days of the date it is received by such
Purchaser Indemnified Party or any Packaging Company.
(f) Tax Returns.
(i) Tax Returns for Periods Ending On or Prior to
the Scheduled Closing Date. Seller shall prepare, or cause to
be prepared, in a manner consistent with past practice, all
Tax Returns with respect to the Packaging Companies for all
taxable periods ending on or prior to the Scheduled Closing
Date and all Tax Returns relating to Transfer Taxes arising
from the Restructuring. Seller shall provide a copy of such
Tax Returns to Purchaser for Purchaser's review and comment
twenty (20) Business Days prior to filing such Tax Returns;
provided that, all Tax Items shall be reported on such Tax
Returns as determined by Seller in its sole discretion.
Seller shall file, or cause to be filed, such Tax Returns and
shall pay, or cause to be paid, all Taxes shown to be due on
such returns on a timely basis.
(ii) Straddle Periods and Taxable Periods Begin-
ning After the Scheduled Closing Date. Purchaser shall pre-
pare, or cause to be prepared, and file, or cause to be filed
77
<PAGE>
all Tax Returns with respect to the Packaging Companies for
(A) any Straddle Period (other than Tax Returns of any of
Seller's consolidated, combined or unitary groups that include
the Packaging Companies but do not include solely Packaging
Companies through the Scheduled Closing Date, which Tax Re-
turns shall be prepared and filed by Seller) and (B) any
taxable period beginning after the Scheduled Closing Date, and
in each of (A) and (B) above shall pay, or cause to be paid,
all Taxes shown to be due thereon on a timely basis. No later
than thirty (30) Business Days before the Due Date of any
Straddle Period Tax Return or any Tax Return that includes a
Tax Item relating to the Restructuring, Purchaser shall cause
to be delivered to Seller such Tax Return and any schedules,
work papers and other documentation then available that are
relevant to the portion of such return pertaining to Taxes for
which Seller is or may be liable hereunder and Seller shall
pay to Purchaser or the relevant Tax Authority the portion of
any Taxes shown to be due on such return for which Seller is
liable under Section 5.4 within the time period and in the
manner prescribed by Section 5.4(b)(vi), provided, however,
that (x) Seller shall have sole discretion as to the reporting
of any Tax Item relating to a Pre-Closing Period, the Restruc-
turing or any of the Non-Packaging Assets and (y) Purchaser
shall not file any such Tax Return without the prior written
consent of Seller, which consent shall not be unreasonably
withheld.
(iii) Disputes over Straddle Period Tax Items. If
Seller disagrees with the manner of reporting any Tax Item(s)
relating to a Straddle Period, the parties shall cooperate in
good faith in attempting to resolve their disagreement and
report such Tax Item(s) in a manner that is mutually accept-
able to the parties. If the disagreement has not been re-
solved at least twenty (20) days before the Due Date, the
matter shall be referred to the CPA Firm, which shall deter-
mine the manner of reporting the Tax Item(s) in dispute. If
the dispute is resolved before the Due Date, each disputed Tax
Item shall be reported on the Tax Return which is filed on or
before the Due Date in accordance with the CPA Firm's determi-
nation. If the dispute has not been resolved prior to the Due
Date, the Tax Return shall be filed as prepared by Purchaser
(and any Taxes relating thereto shall be paid pursuant to
Section 5.4(f)(ii) hereof) and, after final resolution of the
dispute, each disputed Tax Item shall be reported on an amend-
ed return in accordance with the CPA Firm's determination and
Seller shall pay to Purchaser, or Purchaser shall pay to
78
<PAGE>
Seller, as the case may be, any additional Taxes for which
such party has indemnified the other hereunder.
(g) Contest Provisions.
(i) Notification of Contests. Whenever any Tax
Authority sends a notice of an audit, initiates an examination
of a Packaging Company or otherwise asserts a claim, makes an
assessment or disputes the amount of Taxes (a "Tax Audit") for
any Pre-Closing Period or Straddle Period or with respect to a
Tax Item relating to the Restructuring, Purchaser shall promp-
tly notify Seller of the matters described in this paragraph.
(ii) Which Party Controls. Seller shall have the
right to control any Tax Audit with respect to (a) any taxable
period ending on or prior to the Scheduled Closing Date and
(b) the Restructuring and shall have sole discretion as to
whether and when to settle any such Tax Audit, including
settlement by way of surrendering Group Relief where such
claim for Taxes arises in respect of any Packaging Company
subject to taxation in the United Kingdom or any other juris-
diction. If the result of any Tax Audit relating to a Tax
Return described in the preceding sentence could reasonably be
expected to have an effect on the Tax liability of Purchaser,
any of Purchaser's Affiliates or any of the Packaging Compa-
nies for any taxable period ending after the Scheduled Closing
Date, to the extent reasonably requested by Purchaser, Seller
shall consult with Purchaser and keep Purchaser informed of
the status of the Tax Audit; provided that, Seller shall have
complete control over the conduct of such Tax Audit and sole
discretion as to whether and when to settle any such Tax
Audit. Purchaser shall have the right to control any Tax
Audit with respect to any taxable period beginning after the
Scheduled Closing Date and shall have sole discretion as to
whether and when to settle any such Tax Audit.
With respect to any Tax Audit relating to a Straddle
Period (other than a Tax Audit relating to the Restructuring),
Purchaser initially shall control such Tax Audit, provided, however,
that:
(A) Purchaser shall keep Seller informed of any
discussion or negotiations in relation to such Tax
Audit;
(B) Purchaser shall provide Seller with copies of
all documents, notices and correspondence received in
79
<PAGE>
relation to such Straddle Period and with details of any
material discussions with the relevant Tax Authority;
and
(C) Purchaser shall, in relation to any matter
with respect to which liability for Taxes would be
wholly allocated to Seller hereunder, take such action
in connection with such matter as Seller may reasonably
and promptly request and, if so requested by Seller,
Purchaser shall allow Seller to take over the control of
such Tax Audit with respect to such matter, provided,
however, that (x) Purchaser shall be kept fully informed
of all matters occurring in the conduct thereof, and (y)
no material communication, written or otherwise (and in
particular no proposal for or consent to any settlement
or compromise) shall be transmitted to the relevant Tax
Authority without the same having been submitted to and
approved by Purchaser (such approval not to be unreason-
ably withheld or delayed); and
(D) In relation to any matter with respect to
which liability for Taxes would be allocated in part to
Seller and in part to Purchaser hereunder, the parties
shall endeavor to agree to a joint approach to the same
and the matter shall then be dealt with in accordance
with such agreement. If the parties cannot agree, the
matter shall be resolved by the CPA Firm which shall act
as an arbitrator to resolve all points of disagreement
and whose decision shall be final and binding upon all
persons involved and whose expenses shall be shared
equally by Seller and Purchaser (except to the extent
provided otherwise herein).
Out-of-pocket expenses in connection with any Tax Audit
shall be borne by the party that controls such Tax Audit hereunder
(the "Controlling Party"), except to the extent any such Tax Audit
relates to a Straddle Period (and does not relate to the Restructur-
ing) or affects the liability for Taxes hereunder of the other party
(the "Non-Controlling Party"), in which case such expenses shall be
allocated between the parties in proportion to each party's respec-
tive liability for the Tax Item(s) at issue in such Tax Audit. The
Non-Controlling Party shall promptly submit to the Controlling Party
a copy of all Tax Returns to which such Tax Audit relates as direct-
ed by the Controlling Party. Notwithstanding the foregoing, the
Non-Controlling Party may, at its expense, take control of any Tax
Audit, provided that the Controlling Party shall no longer be
required to indemnify the Non-Controlling Party hereunder from and
80
<PAGE>
against any claim for Taxes arising in connection with such Tax
Audit.
(iii) Indemnification of Purchaser by Seller for
Certain Tax Items. Seller shall, or shall cause the Selling
Companies to, indemnify the Purchaser Indemnified Parties to
the extent that, as a result of the settlement of any Tax
Audit, the Taxes of any Packaging Company (for which Purchaser
is responsible under this Agreement) are increased for any
Post-Closing Period as compared to the Taxes that would have
been payable by such Packaging Company for such Post-Closing
Period if the Tax Item at issue was ultimately treated as
reported on the relevant Tax Return (including any amendments
thereto) or Tax election or claim. The foregoing sentence
shall apply only to the extent that Seller had complete con-
trol and sole discretion (i) over the reporting of the appli-
cable Tax Item on the relevant Tax Return (including complete
control and sole discretion with respect to any amendments
thereto) under Section 5.4(f) hereof or Tax election or claim
and (ii) over the conduct and settlement of the Tax Audit as
it related to such Tax Item pursuant to this Section 5.4(g);
provided that this Section 5.4(g)(iii) shall not apply to any
Tax Items, Taxes or Tax Audits relating to transfer pricing or
other similar issues.
(h) Transfer Taxes. Notwithstanding any other provi-
sion of this Agreement, all Transfer Taxes pertaining to the sale of
the Sold Shares, this Agreement and the transactions and matters
contemplated by this Agreement (other than the Restructuring and the
Rockware Restructuring) shall be borne one-half by Purchaser and
one-half by Seller. Notwithstanding Section 5.4(f) hereof, the
responsibility for filing Tax Returns relating to Transfer Taxes
(other than those arising in connection with the Restructuring and
the Rockware Restructuring) shall be covered exclusively by this
Section 5.4(h). Any Tax Returns that must be filed in connection
with such Transfer Taxes shall be prepared and filed when due and
the Transfer Taxes shown thereon shall be paid by the party primari-
ly or customarily responsible under the applicable local law for
filing such Tax Returns (the "Preparer"), and the Preparer will use
its best efforts to provide such Tax Returns to the other party at
least twenty (20) Business Days prior to the Due Date for such Tax
Returns. If a party (the "Payor") is responsible for paying any
Transfer Taxes shown to be due on a Tax Return prepared and filed by
the other party, the Payor shall pay the amount of such Transfer
Taxes to the Preparer within three (3) Business Days prior to the
date such Tax Return is filed.
81
<PAGE>
(i) Certain Post-Closing Settlement Payments. Except
as otherwise provided in Section 5.4(c):
(i) Purchaser's Claiming, Receiving or Using of
Refunds and Overpayments. If any of the Purchaser Indemnified
Parties or any Packaging Company receives any refund of Taxes
(other than with respect to a carryback of Tax Benefits pursu-
ant to subclauses (ii) and (iii) of this Section 5.4(i)) or
utilizes the benefit of any overpayment of Taxes which, in
each case (x) relates to a Tax paid by any Packaging Company
or any of its Affiliates with respect to any Pre-Closing
Period or (y) is the subject of indemnification by Seller
under this Agreement, Purchaser shall promptly pay, or cause
to be paid, to Seller or the relevant Selling Company the
entire amount of the refund or overpayment received or uti-
lized by such Purchaser Indemnified Parties or such Packaging
Company (including any interest received from the relevant Tax
Authority) net of such Purchaser Indemnified Parties' or such
Packaging Company's reasonable out-of-pocket costs of obtain-
ing such refund (including any Taxes chargeable to or incurred
by such Purchaser Indemnified Parties or such Packaging Compa-
ny arising from the receipt of such refund); provided, howev-
er, that in the case of any such refund or overpayment relat-
ing to Taxes for a Straddle Period, Purchaser shall be enti-
tled to a portion of such refund or overpayment (including any
interest received from the relevant Tax Authority) relating
solely to Taxes of the Packaging Companies, other than Taxes
solely attributable to the Restructuring, in accordance with
the procedures and principles used in computing Purchaser's
liability for Taxes of the Packaging Companies for such Strad-
dle Period (excluding for this purpose any liability for Taxes
attributable to the Restructuring). Purchaser shall notify
Seller promptly after the discovery of a right to claim any
such refund or overpayment and the receipt of any such refund
or utilization of any such overpayment. Purchaser shall, as
promptly as practicable, claim any such refund or utilize any
such overpayment and shall furnish to Seller all information,
records and assistance necessary to verify the amount of the
refund or overpayment.
(ii) Purchaser's Carryback of Post-Closing Losses.
Purchaser or any Packaging Company shall be entitled to carry
back any Tax Item to any taxable period of Seller, any Seller
Corporation or any Packaging Company ending on or prior to the
Scheduled Closing Date only after receiving Seller's written
consent, which consent shall be within the sole discretion of
Seller. If Purchaser or any Packaging Company carries back
82
<PAGE>
any Tax Item from any taxable period beginning after the
Scheduled Closing Date after receiving such written consent,
Seller shall promptly pay, or cause to be paid, to Purchaser
the amount of any refund received by Seller or any of its
Affiliates (including any interest received from the relevant
Tax Authority) net of Seller's reasonable out-of- pocket costs
in obtaining such refund (including Taxes chargeable to or
incurred by Seller Indemnified Parties arising from the re-
ceipt of such refund) as a result of such carryback.
(iii) Carryback of Straddle Period Losses. Seller
shall be entitled to, or Purchaser shall at the request of
Seller, carry back any Tax Benefits of any Packaging Company
attributable to the Straddle Period to any taxable period of
Seller, any Seller Corporation or any Packaging Company ending
on or prior to the Scheduled Closing Date. Seller and Pur-
chaser shall be entitled to receive the amount of any refund
of Taxes (including interest received) from any Tax Authority
which is attributable to any carryback of such Tax Benefits in
proportion to the amount of such Tax Benefits allocable to
each such party in accordance with Section 5.4(c).
(j) Resolution of All Tax-Related Disputes. For
purposes of computing the amount of any payment due under this
Section 5.4 or the effect of any Tax Item for purposes of subsection
(b)(iii) of this Section 5.4, each party shall provide to the other,
as reasonably requested by the other, all reasonably available
information, records and assistance necessary to verify such amount
or effect. In the event that Seller or the relevant Selling Company
on the one hand, and Purchaser, on the other hand, cannot agree on
any calculation of any amount relating to Taxes or the interpreta-
tion or application of any provision of this Agreement relating to
Taxes, such dispute shall be resolved by the CPA Firm which shall
act as an arbitrator to resolve all points of disagreement and whose
decision shall be final and binding upon all persons involved and
whose expenses shall be shared by Seller and Purchaser in proportion
to each party's liability for the amount in dispute and, if no
amount is in dispute, such expenses shall be shared by Seller and
Purchaser equally.
(k) Closing and Post-Closing Actions which Affect
Seller's Liability for Taxes.
(i) Purchaser shall not, and shall not permit any
Purchaser Indemnified Party or any Packaging Company to, take
or fail to take any action on or after the Scheduled Closing
Date that could increase the liability for Taxes of any of
83
<PAGE>
Seller Indemnified Parties or increase Seller's indemnifica-
tion obligations pursuant to this Section 5.4, including,
without limitation, failing to make any Tax elections that
were assumed in the preparation of any Tax Return for which
Seller was responsible, or any Tax Return (or relevant part
thereof) which was prepared by Purchaser and reviewed by
Seller, or for which written notification was given by Seller
to Purchaser unless (i) at least thirty (30) Business Days
prior to taking any such action, Purchaser notifies Seller
that it has been advised in writing by the CPA Firm that such
action is required by the laws of the applicable jurisdiction
and provides the tax director of Seller with a copy of such
written advice and (ii) Seller provides Purchaser with written
consent to such action, which consent shall not be unreason-
ably withheld. To the extent that Purchaser takes, or permits
any Purchaser Indemnified Party or any Packaging Company to
take, any such action without complying with the preceding
sentence, then Purchaser shall pay to Seller the amount of
such increase in the liability for Taxes or Seller's indemni-
fication obligation shall be reduced by the amount of such
increase, as the case may be.
(ii) Purchaser shall not, without the prior writ-
ten consent of Seller (which consent shall be in the sole
discretion of Seller), amend any Tax Return filed by, or with
respect to, the Non-Packaging Assets, the Packaging Companies
or any member thereof for any Pre-Closing Period or any Strad-
dle Period, unless (i) at least thirty (30) Business Days
prior to amending such Tax Return, Purchaser notifies Seller
that it has been advised in writing by the CPA Firm that such
amendment is required by the laws of the applicable jurisdic-
tion and provides the tax director of Seller with a copy of
such written advice and (ii) Seller provides Purchaser with
written consent to such amendment, which consent shall not be
unreasonably withheld. To the extent that Purchaser so amends
any such Tax Return without complying with the previous sen-
tence, then Purchaser shall pay to Seller the amount of any
increase in the liability for Taxes or Seller's indemnifica-
tion obligation shall be reduced by the amount of such in-
crease, as the case may be, as a result of such amendment.
(iii) Purchaser shall indemnify the Seller Indem-
nified Parties for any increase in the liability for Taxes of
any of the Seller Indemnified Parties or an increase in Selle-
r's indemnification obligations under this Section 5.4 that is
solely attributable to Purchaser, any Packaging Company or any
Affiliate thereof applying for or receiving a ruling, determi-
84
<PAGE>
nation or other similar item from any Tax Authority with
respect to any Packaging Company.
(l) Maintenance of Books and Records. Until the
applicable statute of limitations (including applicable periods of
waiver) has run for all Tax Returns filed or required to be filed
with respect to Pre-Closing Periods and Straddle Periods, Purchaser
shall retain all of the books and records relating to the Packaging
Business in existence on the Scheduled Closing Date, and after the
Scheduled Closing Date will upon request and for a reasonable and
specific purpose provide Seller, the relevant Selling Company and
their representatives access to such books and records for inspec-
tion and copying by Seller, the relevant Selling Company and their
representatives during normal business hours. Seller shall reim-
burse Purchaser for any reasonable out-of-pocket expenses incurred
by Purchaser or the relevant Packaging Company in connection with
such inspection and copying of such books and records. After the
expiration of such period, no such books and records shall be
destroyed by Purchaser without first advising the tax director of
Seller in writing and giving Seller or the relevant Selling Company
at least sixty (60) Business Days to obtain possession thereof.
Purchaser shall, or shall cause the relevant Packaging Company to,
preserve and keep the books and records that Purchaser obtains
pursuant to the transactions contemplated by this Agreement, and
Seller shall preserve and keep any such books and records it may
retain with respect to the business of the Packaging Companies, for
a period of six (6) years after the Scheduled Closing Date or for
any longer period: (x) as may be required by any Tax Authority, (y)
as may be reasonably necessary in respect of the prosecution or
defense of any Tax Audit, suit, action, litigation or administra-
tive, arbitration or other proceeding or investigation that is then
pending or threatened. Such records shall be made available to
Seller or Purchaser, as the case may be, in accordance with Section
5.4(m) below. If either party wishes to destroy any records re-
ferred to herein after that time, it shall first give sixty (60)
Business Days prior written notice to the other, and the other party
shall have the option, upon written notice given to the party
providing the initial notice within such sixty (60) Business Day
period, to take possession of such records within sixty (60) Busi-
ness Days after the date of its notice requesting the same.
(m) Assistance and Cooperation. The parties agree
that, after the Scheduled Closing Date:
85
<PAGE>
(i) Each of Purchaser and Seller will provide the
other with such assistance as may reasonably be requested by
either of them in connection with the preparation of tax
accrual schedules ("T-Schedules"), any Tax Return, any Tax
Audit or other examination by any Tax Authority or any judi-
cial or administrative proceeding relating to liability for
Taxes, and each will retain and provide the other with any
records of information which may be relevant to such return,
audit or examination, proceeding or determination. Such
assistance shall include making employees available on a
mutually convenient basis to provide additional information
and explanation of any material provided hereunder and shall
include providing copies of any relevant Tax Return and sup-
porting work schedules. The party requesting assistance
hereunder shall reimburse the other for reasonable out-of-
pocket costs and expenses incurred by such party in providing
such assistance. Without limiting in any way the foregoing
provisions of this section, Purchaser shall retain, until the
appropriate statutes of limitation (including any extensions)
expire, copies of all Tax Returns, supporting work schedules
and other records or information which may be relevant to such
returns for all Pre-Closing Periods and Straddle Periods and
shall maintain such Tax Returns, supporting work schedules and
other records or information in accordance with "Purchaser's
Record Retention Policy", as such policy has been provided to
Seller prior to the date hereof.
(ii) For a period of six (6) years from and after
the Scheduled Closing Date, or for any longer period (a) as
may be required by a Tax Authority or (b) as may be reasonably
necessary in respect of the prosecution or defense of any Tax
Audit, suit, action, litigation or administrative, arbitration
or other proceeding or investigation that is then pending or
threatened, each party agrees to furnish or cause to be fur-
nished to the other party, its counsel and accountants, upon
reasonable request during normal business hours, after not
less than three (3) Business Days, prior written notice, such
information and assistance relating to any of the Packaging
Companies or the Packaging Business (including, without limi-
tation, the cooperation of officers and employees and reason-
able access to books, records and other data and the right to
make copies and extracts therefrom) as is reasonably necessary
(x) to facilitate the preparation for or the prosecution,
defense or disposition of any suit, action, litigation or
administrative, arbitration or other proceeding or investiga-
tion (other than one by or on behalf of one party to this
Agreement against the other party hereto), (y) as set forth in
86
<PAGE>
this Section 5.4 in connection with Taxes and (z) to prepare
and file any other documents required by a Tax Authority. The
party requesting such information and assistance shall reim-
burse the other party for all reasonable out-of-pocket costs
and expenses incurred by such party in providing such informa-
tion and assistance.
(iii) Without limiting in any way the generality
of the foregoing, as soon as reasonably practicable and, in
any event, within sixty (60) days after the Scheduled Closing
Date, Purchaser shall provide, or cause to be provided, to
Seller, in each case, within the time period and in the manner
prescribed by Law and in accordance with past practice of the
relevant Packaging Companies:
(A) all required BTR Group Standard Group Account
Returns and Tax Information returns with respect to any
Packaging Companies subject to taxation in the United
Kingdom for the taxable period ending on December 31,
1997, and any Straddle Period;
(B) BTR Group Standard Tax-related schedules for
any Packaging Companies subject to taxation in the
United States for the taxable period ending on December
31, 1997, and any Straddle Period;
BTR Group Standard Year-End schedules for any
Packaging Companies subject to taxation in Australia for
the taxable period ending on December 31, 1997, and any
Straddle Period;
(D) BTR Group Standard Overseas Tax Returns and
such information as is required to complete accounts and
file Tax Returns for any Packaging Companies required to
provide information for Tax purposes for the taxable
period ending on December 31, 1997 and any Straddle
Period;
(E) an MR pack with respect of the periods from
January 1, 1998 through the Scheduled Closing Date and
from the Scheduled Closing Date through December 31,
1998; and
(F) all officers' signatures, powers of attorney
and all other information or data required to complete
and file Tax Returns on a timely basis.
87
<PAGE>
(iv) The parties shall cooperate fully in prepar-
ing for any Tax Audits of, or disputes with Taxing Authorities
regarding, any Tax Returns and payments in respect thereof;
(v) The parties shall make available to each other
as reasonably requested and to any Tax Authority as required
by Law all relevant books and records relating to Taxes;
(vi) Each party shall furnish the other party with
copies of all relevant correspondence received from any Tax
Authority in connection with any Tax Audit or information
request relating to any Taxes referred to in subsection (g)(i)
of this Section 5.4.; and
(vii) Except as otherwise provided herein, the
party requesting assistance or cooperation shall bear the
other party's reasonable out-of-pocket expenses in complying
with such request to the extent that those expenses are at-
tributable to fees and other costs of unaffiliated third-party
service providers.
(n) Termination of Tax Sharing Agreements. Any exist-
ing Tax Sharing Agreements shall be terminated as of the Scheduled
Closing Date to the extent such agreements or arrangements bind any
Packaging Company. The preceding sentence shall not apply to any
agreement entered into in connection with this Agreement.
(o) Exclusivity. This Section 5.4 shall exclusively
govern the procedure for all Tax indemnification claims and other
Tax-related matters including with respect to any breach of the
representations set forth in Section 3.15.
(p) Adjustment to Purchase Price. Any payments pursu-
ant to this Section 5.4 shall be deemed an adjustment of the Pur-
chase Price for the Sold Shares of the relevant Selling Company that
owns, directly or indirectly, the relevant Packaging Company.
(q) Mitigation. Purchaser shall, at the written
direction of Seller, procure that any of the Packaging Companies
take all such steps as Seller may reasonably require to:
(i) use in the manner hereinafter mentioned all
such reliefs arising as a consequence of or by reference to
any event occurring (or deemed to occur) on or before the
Scheduled Closing Date or in respect of a taxable period
ending on or before the Scheduled Closing Date and not as a
consequence of or by reference to an event occurring (or
88
<PAGE>
deemed to occur) after the Scheduled Closing Date or in re-
spect of a taxable period beginning after the Scheduled Clos-
ing Date as are available to any of the Packaging Companies to
reduce or eliminate any Tax liability in respect of which
Purchaser would have been able to make a claim against Seller
under this Agreement (such reliefs including, without limita-
tion, reliefs made available to a Packaging Company by means
of a surrender from another company), the said use being to
effect the reduction or elimination of any such Tax liability
to the extent specified by Seller and permitted by law, and to
provide Seller, at Seller's expense, a certificate from the
auditors of any of the Packaging Companies confirming that all
such reliefs have been so used;
(ii) make all such claims and elections specified
by Seller (other than under the Tax Laws of the United States
or any state or political subdivision thereof) in respect of
any Taxes, Tax Items or Tax Returns (or portions thereof) of
any Packaging Company where Seller has complete control and
sole discretion over the reporting of the applicable Tax Items
on the relevant Tax Return (including complete control and
sole discretion with respect to any amendments thereto) under
Section 5.4(f) as have the effect of reducing or eliminating
any such Tax liability as mentioned in (i) above, provided,
however, that no such claim or election shall require any of
the Packaging Companies to use any relief which arises solely
as a consequence of or by reference to an event occurring (or
deemed to occur) after the Scheduled Closing Date or in re-
spect of a taxable period beginning after the Scheduled Clos-
ing Date; and
(iii) allow Seller to reduce or eliminate any Tax
liability by surrendering, or procuring the surrender by any
company other than any of the Packaging Companies, of Group
Relief to any of the Packaging Companies to the extent permit-
ted by law but without any payment being made in consideration
for such surrender.
(r) Restructuring. Solely for purposes of this Sec-
tion 5.4, the term "Restructuring" shall include (i) the grant by
Purchaser to Seller or one of its Affiliates of the license to use
the name and logo "ACI," pursuant to Section 5.12(b) and (ii) the
transfer of Purchaser Shared Intellectual Property to Seller and the
granting to Seller of a license to use the Seller Shared Intellectu-
al Property, pursuant to Section 5.12(d).
89
<PAGE>
Section 5.5 Post-Closing Obligations to Employees.
(a) Employment, Benefits and Compensation, Generally.
(i) Wherever in this Section 5.5, Purchaser makes
a covenant or undertakes an obligation, the Purchaser shall be
deemed to have promised to fulfill such covenant or obligation
itself or to cause one or more of its Affiliates to fulfill
such covenant or obligation.
(ii) As of the Scheduled Closing Date, Purchaser
shall, and shall cause the Packaging Companies to, continue
the employment in substantially comparable positions of all
Employees on such date (including without limitation, any
Employee who is, on the Scheduled Closing Date, absent on
short-term disability, long-term disability, authorized leave
of absence or Workers' Compensation).
(iii) Unless a longer period or different terms
are otherwise required by applicable Law, Purchaser shall, and
shall cause the Packaging Companies to, maintain for a period
of two years after the Scheduled Closing Date, without inter-
ruption, employee compensation and benefit plans, programs,
policies and arrangements (including fringe benefits) that, in
the aggregate as to each of Continental, Rockware and BTR
Nylex and its subsidiaries (other than Continental and its
subsidiaries) (the "Specified Business Units") (but without
restricting Purchaser's ability to vary particular employment
terms), will provide benefits to Employees of each Specified
Business Unit that are substantially comparable to or more
favorable than those provided to the Employees of such Speci-
fied Business Unit pursuant to the employee compensation and
benefit plans, programs, policies and arrangements (including
fringe benefits but excluding, as to the Employees of Conti-
nental, the Continental 1991 Stock Option Plan and, with
respect to all Employees, all equity-based arrangements), of
Seller and its Affiliates and as in effect on, the Scheduled
Closing Date.
(iv) Unless otherwise required by applicable Law,
Employees shall be given credit for all service with Seller
and its Affiliates (and predecessors) to the same extent as
such service was credited for such purpose by the respective
Packaging Company under (i) all employee benefit plans, pro-
grams and policies, and fringe benefits of Purchaser for
purposes of eligibility and vesting and (ii) severance plans,
90
<PAGE>
programs or policies for purposes of calculating the amount of
each Employee's severance benefits.
(v) Nothing in this Section 5.5(a) shall be deemed
to require the employment of any Employee to be continued for
any particular period of time after the Scheduled Closing
Date.
(vi) Seller and its Affiliates shall give Purchas-
er reasonable access to any and all records necessary to
administer all employee compensation and benefit plans.
(vii) With respect to the incentive plans and
management bonus plans participated in by Employees, but not
maintained by a Packaging Company, Seller shall pay to Pur-
chaser or the Employees all amounts accrued under such plans
as of the Closing Date.
(viii) (A) to the extent Purchaser assumes the
Packaging Companies' liabilities with respect to any disabled
Employees, Seller shall pay to Purchaser an amount adequate to
cover the present value of all future benefits payable to such
Employees, in accordance with generally accepted accounting
principles applicable in the relevant jurisdiction and (B) to
the extent Purchaser assumes the Packaging Companies' liabili-
ties with respect to self-insured health benefit plans, Seller
shall pay to Purchaser an amount adequate to cover the present
value of all future benefits payable to the Employees under
such plans, in accordance with generally accepted accounting
principles applicable in the relevant jurisdiction.
(ix) (A) The provisions of this clause (ix) shall
apply notwithstanding the other provisions of this Agreement
or the provisions of Schedule 5.5(c).
(B) Seller shall ensure that, as of the Scheduled Clos-
ing Date, full payment has been made to each Plan
of all contributions to be made with respect to
benefits accrued on or prior to such Date.
(C) In addition, except as provided below, Seller shall
pay Purchaser, within 90 days following the Clos-
ing, an amount (plus interest) equal to the sum of:
(I) with respect to each funded defined benefit
Plan to be assumed by Purchaser, the net amount
(whether positive or negative), if any, equal
91
<PAGE>
to (x) the aggregate of each such Plan's PBO,
minus (y) the fair market value of the assets
of each such Plan as of the Closing;
(II) the PBO of each unfunded defined benefit
Plan; and
(III) the amount necessary to satisfy all obliga-
tions and liabilities (calculated in accor-
dance with U.S. generally accepted account-
ing principles) under all other non-defined
benefit Plans arising from any benefit ac-
crued or claim incurred prior to the Clos-
ing, but with respect to which contribu-
tions to such Plans have not been made (or
benefits have not been paid) as of such
date.
(D) In addition, with respect to the BTR Nylex Execu-
tive Superannuation Fund, Seller shall pay Purchas-
er, within 90 days following the Closing, an amount
(plus interest) equal to the amount (whether posi-
tive or negative), if any, of (x) such Fund's PBO
with respect to Packaging Company Employees, minus
(y) the fair market value of the assets transferred
from such Fund to the superannuation fund nominated
by Purchaser in accordance with the provisions of
Section 5.5(b)(vii), below.
(E) In addition, with respect to the "BTR Scheme" (as
defined in Schedule 5.5(c)), Seller shall pay Pur-
chaser, within ten days immediately following the
date BTR Scheme assets are transferred to Purchase-
r's scheme in accordance with the provisions of
Schedule 5.5(c) (the "Date of Transfer"):
(I) an amount equal to the amount (whether positive
or negative), if any, of (x) the BTR Scheme's
PBO (plus interest) with respect to "Transfer-
ring Employees" (as defined in Schedule 5.5(c-
)), minus (y) the fair market value of the
assets transferred from the BTR Scheme to Purc-
haser's scheme on the Date of Transfer (each
party shall use its best efforts to cause the
Date of Transfer to occur as soon as possible,
but in no event more than 270 days following
the Closing); plus
92
<PAGE>
(II) the sum of the total amount of any contri-
butions Purchaser makes (with respect to
Transferring Employees), and the amount of
any contributions made by Transferring Em-
ployees, to the BTR Scheme following the
Closing and prior to the Transfer Date
(plus interest, which shall commence accru-
ing as of the date of each such contribu-
tion and terminate as of the Date of Trans-
fer); minus
(III) 1.25% of "Pensionable Pay" (as referred to
in Schedule 5.5(c)) (prorated for the "Tra-
nsitional Period" (as defined in Schedule
5.5(c))) with respect to Transferring Em-
ployees (plus interest, which shall accrue
in the same manner as specified above in
clause (E)(II)), representing expenses of
administration and insurance of risk bene-
fits.
(F) In addition, with respect to each other funded
defined benefit Plan (each, a "Transferor Plan")
which will be transferring assets to a plan main-
tained or to be established by Purchaser (each, a
"Transferee Plan"), Seller shall pay Purchaser, as
soon as possible (but in no event more than 120
days following the Closing):
(I) an amount equal to the net amount (whether
positive or negative), if any, of (x) the ag-
gregate of each Transferor Plan's PBO (plus
interest) (with respect to Employees on whose
behalf assets are being transferred from the
Transferor Plan to the Transferee Plan), minus
(y) the fair market value of the assets trans-
ferred from each such Transferor Plan to the
corresponding Transferee Plan (such transfers
shall occur prior to the payment specified in
this clause (F)); plus
(II) the total amount of any contributions Pur-
chaser and Employees make to each such Tra-
nsferor Plan following the Closing and pri-
or to the date of the asset transfer (plus
interest, which shall commence accruing as
93
<PAGE>
of the date of each such contribution); minus
(III) the total amount of any benefits paid by
each such Transferor Plan to Employees (to
the extent such benefits satisfy any obli-
gations included in the PBO calculation
referenced above in Clause (F)(I) or re-
late to contributions referenced above in
Clause (F)(II).
(G) A requirement under this clause (ix) that Seller
pay Purchaser a negative amount shall be construed
as a requirement that Purchaser shall pay Seller
such amount. Any payments required under clause
(ix)(C)-(F) shall be treated as a reduction in
Purchase Price (if the payment is from Seller to
Purchaser) or an increase in Purchase Price (if the
payment is from Purchaser to Seller). Nothing
herein shall prevent Seller from making any contri-
butions to any defined benefit Plan prior to Clos-
ing, provided such contribution does not result in
any such Plan possessing assets in excess of its
PBO, or transferring assets to a Plan maintained or
to be maintained by Purchaser in excess of the PBO
of such Plan related to the assets being so trans-
ferred. Seller shall use its best efforts, subject
only to applicable law (and, with respect to the
BTR Scheme, the applicable provisions of Schedule
5.5(c) including the Actuary's Letter attached
thereto), to ensure that each defined benefit Plan
to be assumed by Purchaser possesses assets equal
only to its PBO as of Closing, and that each de-
fined benefit Plan which will be transferring as-
sets to a Plan maintained or to be maintained by
Purchaser shall transfer to Purchaser's Plan assets
in an amount equal only to such Plan's PBO with
respect to the liabilities corresponding to the
assets to be so transferred. Any payments or asset
transfers required by this clause (ix) shall be
made in cash, unless Seller, Purchaser and any
other necessary parties agree otherwise.
(H) All PBO calculations required by this clause (ix)
shall be calculated as of the date of the Closing
and determined on the basis of benefits and service
credited under the applicable Plan with respect to
94
<PAGE>
the relevant Employees through the Closing and upon
the methods and assumptions specified in Schedule
5.5(a)(ix)(H).
(I) Any interest required to be paid under this clause
(ix) shall be at the annual rate of six-month LIB-
OR, compounded monthly, and shall commence accru-
ing as of the date of the Closing and terminate as
of the date the applicable payment is made, unless
otherwise specified.
(J) Prior to ten days following the Closing, Seller
shall ensure that each equity-based Plan or ar-
rangement in which any Employees participate or
participated, and that is maintained by a Packaging
Company or a Sold Company, including without limi-
tation the Continental 1991 Stock Option Plan, is
terminated and that all obligations thereunder are
fully satisfied. In addition, Seller shall retain
all liabilities with respect to each such Plan or
arrangement that is not maintained by a Packaging
Company or a Sold Company.
(K) Any asset transfers from a Plan retained by Seller
(or any of its affiliates) to a Plan maintained by
Purchaser (or any of its affiliates) shall include
interest from the date the transfer amount was
calculated until the actual date of transfer.
(x) Seller will not owe Purchaser any amount in
respect of the indemnification and reimbursement provisions
set forth in this Section 5.5 to the extent that such amounts
have been reflected in the amounts provided for and paid
pursuant to Section 2.2(d) in respect of the Section 2.2(d)
Liabilities.
Current Superannuation Funds and Superannuation
Funds
(i) Prior to the Scheduled Closing Date, Seller
shall use its best efforts to ensure that:
(A) each Australian employee of the Packaging Busi-
ness, who is a member of a Current Superannua-
tion Fund, becomes a member of the relevant
Superannuation Fund; and
95
<PAGE>
(B) with respect to each Australian employee of the
Packaging Business, who is a member of a Cur-
rent Superannuation Fund an amount calculated
in accordance with the trust deed for the rele-
vant Current Superannuation Fund (or assets
having a corresponding value), is transferred
by the trustee of the relevant Current Super-
annuation Fund to the relevant trustee of the
relevant Superannuation Fund, and that the
transfer is in accordance with the trust deed
of the relevant Current Superannuation Fund and
the Superannuation Industry (Supervision) Act,
1993 and the regulations made under that Act.
(ii) Seller agrees that it will take all actions
reasonably required by Purchaser to put Purchaser (or its
nominee), at the Scheduled Closing Date in the same position
in relation to the Superannuation Funds and the ACI Staff
Superannuation Fund as is Seller immediately prior to the
Scheduled Closing Date.
(iii) Seller agrees that it will ensure that both
before and after the Scheduled Closing Date, Purchaser is
provided with all existing records and information which
Purchaser (or any actuary appointed by Purchaser) may reason-
ably require (including detailed information about each of the
members and their participation in the relevant Superannuation
Fund or ACI Staff Superannuation Fund) in order to enable
Purchaser to assume responsibility for and administer superan-
nuation arrangements and Superannuation Commitments for mem-
bers. This obligation extends to any records, information or
systems which are recorded, maintained or otherwise dependent
on any computerized or similar system or service.
(iv) Seller shall use its best efforts to ensure
that, prior to the Scheduled Closing Date, each Packaging
Company of the Seller Group will continue to materially comply
with its Superannuation Commitments.
(v) Unless required by legislation to do so, no
Packaging Company of the Seller Group will increase its Super-
annuation Commitments between the date of this Agreement and
the Scheduled Closing Date without the written consent of
Purchaser.
(vi) Seller agrees that it will ensure that from
the Scheduled Closing Date no Packaging Company will have any
96
<PAGE>
further obligation to contribute to the Current Superannuation
Funds other than in respect of contributions which became due
before the Scheduled Closing Date and remain unpaid as at the
Scheduled Closing Date.
(vii) Seller shall use its best endeavors to
ensure that at the Scheduled Closing Date, the trustee of the
BTR Nylex Executive Superannuation Fund shall transfer to a
superannuation fund nominated by Purchaser and approved by the
relevant member, an amount determined in accordance with the
trust deed of the fund which represents that member's benefit
in the fund. However, before the transfer is made, the Pack-
aging Company by which the member is employed, must contribute
an amount which the actuary to the fund determines is the
proportion of the contribution which that Packaging Company
would have been required to make to the fund in accordance
with the usual contribution arrangements applying to the fund,
which relates to the period up to the Scheduled Closing Date.
(viii) Seller shall use its best endeavors to
ensure that at the Scheduled Closing Date:
(A) the BTR Packaging Superannuation Fund is fully
funded, as that term is defined in the Superan-
nuation Industry (Supervision) Act, 1993 and
the regulations prescribed under that Act;
(B) the assets of each of the Superannuation Funds
include adequate provision for Taxes and ex-
penses which may be payable by the trustee of
that fund;
(C) the trustee of the BTR Packaging Accumulation
Fund holds a policy of life insurance which
insures the lives of the members of that fund
and is intended to enable the Trustee to pro-
vide all or part of the death and disability
benefits in accordance with the relevant Trust
Deed on substantially the same terms as the
equivalent policy of insurance held by the
trustee of the relevant Current Superannuation
Fund;
(D) the trustee of the BTR Packaging Superannuation
Fund holds a policy of life insurance which
insures the lives of the members of that fund
(other than category X and Y members) and is
97
<PAGE>
intended to enable the Trustee to provide all
or part of the death and disability benefits in
accordance with the relevant Trust Deed on
substantially the same terms as the equivalent
policy of insurance held by the trustee of the
relevant Current Superannuation Fund;
(E) all members of the ACI Staff Superannuation
Fund and the Superannuation Funds are employees
or former employees (as that term is defined
under the Superannuation Guarantee (Administra-
tion) Act 1992) of Packaging Companies;
(F) all assets of each Superannuation Fund are held
in the name of the trustee of that fund;
(G) no undertaking or assurance has been or is
given to the members of the Superannuation
Funds as to the introduction, increase or im-
provement of any benefits under the funds; and
(H) no member of the Superannuation Funds has any
right or entitlement to have any benefit under
the funds augmented, increased or accelerated
by reason of this Agreement or any other ar-
rangement, agreement or understanding.
(c) U.K. Pension Plans. Purchaser and Seller agree to
treat U.K. Plans in accordance with Schedule 5.5(c) to this Agree-
ment.
(d) U.S. Medical and Welfare Plan Obligations. Pur-
chaser agrees to waive any limitations for preexisting conditions
under its U.S. medical and dental care and short-term disability and
long term disability plans with respect to the U.S. Employees. In
the calendar year which includes the Scheduled Closing Date, Pur-
chaser shall honor any deductible and out-of-pocket expenses in-
curred by U.S. Employees and their beneficiaries under the medical
or dental plans of the respective Packaging Company during the
portion of the calendar year preceding the Scheduled Closing Date.
(e) Other Employees. It is the intention of the
parties to this Agreement to deal with employee matters, including,
without limitation, offers and terms of employment and benefit and
compensation matters, in Other Countries, in a manner substantially
similar to the way they have dealt with Australian, U.S. and U.K.
employee matters in this Section 5.5, subject to such changes as are
98
<PAGE>
needed to comply with applicable Laws of such countries and their
political subdivisions, applicable labor agreements and established
local business custom in similar transactions.
(f) Employee Records. After the Scheduled Closing
Date, the parties to this Agreement will cooperate with each other
in the administration of all applicable Plans. To the extent
permitted by Law, the respective Selling Company will provide to
Purchaser the necessary employee data maintained by the respective
Selling Company's independent contractors, such as insurance compa-
nies and actuaries.
(g) Certain Employment Agreements. Seller agrees that
Purchaser may, prior to Closing, enter into employment agreements,
which shall become effective at Closing, with the Employees speci-
fied on Schedules 5.5(g)(i) and 5.5(g)(ii) (each, an "Identified
Employee"). Until the earlier of the Closing or the termination of
this Agreement, Seller shall (i) use its reasonable efforts to
maintain the continued employment of each Identified Employee
specified on Schedule 5.5(g)(i) with the applicable Packaging
Company until Closing, provided, however that neither Seller nor any
of its Affiliates shall be obligated to expend any funds in further-
ance of such obligation, and (ii) not terminate, other than for
cause, any Identified Employee.
(h) Defined Benefit Plan Obligations. Seller (1) shall
ensure that, as of the Closing, each funded and unfunded defined
benefit Plan's projected benefit obligation ("PBO"), as such term is
defined in the Financial Accounting Standards Board Statement 87,
determined on the basis of benefits and service credited under each
such Plan through such date and upon the methods and assumptions
specified in Schedule 5.5(a)(ix)(H), is calculated, and (2) shall
make such information available to Purchaser as is necessary for
Purchaser to validate such calculations.
(i) Rockware Liabilities. Seller shall ensure that,
prior to the Closing, Rockware's outstanding indebtedness with
respect to the balance of the L15.1m funding deficit, disclosed upon
the merger of the Rockware schemes into the "BTR Scheme" (as defined
in Schedule 5.5(c)) (effective April 6, 1996), and all other liabil-
ities Rockware has to the BTR Scheme (other than those specified in
Schedule 5.5(c)) are deemed by the BTR Scheme, Seller and all other
relevant parties to be extinguished without any further consider-
ation by Rockware, Purchaser or their respective Affiliates.
Section 5.6 Certain Dividends, Intergroup Financial and
Trading Amounts, Etc. Notwithstanding any provision herein to the
99
<PAGE>
contrary (including, without limitation, Section 5.2 hereof) other
than Section 5.9 hereof:
(i) Each Packaging Company will be permitted to divi-
dend to Seller or its Affiliates up to the amount of the sum
of its cash on hand at the Closing and any Intergroup Receiv-
able before Closing.
(ii) Prior to the Closing, Seller may, and may cause
the Packaging Companies to, enter into one or more transac-
tions having the effect of increasing or decreasing Intergroup
Payables or Intergroup Receivables, with the understanding
that at the Closing any and all outstanding Intergroup Payab-
les and Intergroup Receivables shall be finally paid and
settled in accordance with Sections 2.2 and 2.4.
(iii) The Packaging Companies may borrow funds from
third parties for the purpose of effecting the transactions,
described above in this Section 5.6.
Section 5.7 Securities; Insurance.
(a) On or before the Scheduled Closing Date Purchaser
shall (i) use its reasonable efforts (which shall not include
agreeing to any modifications of the terms of the applicable under-
lying obligations) to cause the members of the Seller Group to be
released, by whatever means appropriate, from all Securities which
have been provided by any member of the Seller Group to secure
obligations of any Packaging Company incurred in the ordinary course
of business and (ii) to the extent any such Security is not re-
leased, provide a complete indemnity or back to back guarantee in
either case reasonably acceptable to Seller with respect to all such
Securities.
(b) On or before the Scheduled Closing Date, Seller
shall (i) use its reasonable efforts (which shall not include
agreeing to any modifications of the terms of the applicable under-
lying obligations) to cause all Packaging Companies to be released,
by whatever means appropriate, from all Securities which have been
provided by any Packaging Company with respect to any members of the
Seller Group and (ii) to the extent any such Security is not re-
leased provide a complete indemnity or back to back guarantee in
either case reasonably acceptable to Purchaser with respect to all
such Securities.
(c) Seller shall keep, or cause to be kept, all Insur-
ance Policies, in full force and effect through the close of busi-
100
<PAGE>
ness on the Closing Date and at the request of Purchaser, shall use
all reasonable efforts to cause such Insurance Policies to be
transferred to Purchaser upon the payment to Seller of the amount
set forth in Section 2.2(a).
(d) Prior to or the Scheduled Closing Date, Seller
shall procure that each member of the Seller Group and the Packaging
Companies which is a party to a Deed of Cross Guarantee will enter
into a deed of revocation with respect to each Deed of Cross Guaran-
tee to which it is a party (each a "Revocation Deed") complying with
Australian Securities Commission Class Order 95/1530 providing for
the revocation, subject to and upon the terms contained in such Deed
of Cross Guarantee. Seller shall make or shall cause such members
of the Seller Group and the Packaging Companies to make all neces-
sary filings with respect to each such Revocation Deed with the
relevant Governmental Authority and to publish notice of such
Revocation Deed in accordance with the terms of each such Deed of
Cross Guarantee. Prior to the six month anniversary or any such
Revocation Deed, (i) Seller shall not wind up or commence the
winding up of any member of the Seller Group which is a party to the
Deed of Cross Guarantee related to such Revocation Deed, and (ii)
Purchaser shall not wind up or commence the winding up of any
Packaging Company which is a party to the Deed of Cross Guarantee
related to such Revocation Deed.
(e) Seller shall provide to Purchaser an invoice relat-
ing to that portion of the annual premium under insurance policies
that remain in effect on and after the Scheduled Closing Date
attributable to periods following the Scheduled Closing Date.
Purchaser shall promptly pay amounts due thereunder.
Section 5.8 Certain Provisions Relating to the Restruc-
turing.
(a) The parties hereto acknowledge that as of the date
hereof, Seller has commenced a restructuring (the "Restructuring")
of the Sold Companies and their Subsidiaries to (i) transfer from
the Sold Companies and their Subsidiaries all of the assets, compa-
nies and Employees and, to the extent assumable, Liabilities, that
do not constitute a part of the Packaging Business ("Non-Packaging
Assets") and (ii) transfer from the Seller Group to the direct or
indirect ownership of the Sold Companies all of the assets, compa-
nies and employees that constitute a part of the Packaging Business
each such asset and company (a "Transferred Business").
(b) Schedule 5.8(b)(i) sets forth the steps of the
Restructuring. Seller shall use its reasonable efforts to complete
101
<PAGE>
the Restructuring prior to the Closing. Purchaser will cooperate
with, and use its reasonable efforts to assist, Seller in carrying
out the Restructuring. On or immediately prior to the Scheduled
Closing Date, Seller shall deliver Schedule 5.8(b)(ii) which will
identify those steps of the Restructuring that may not be completed
prior to the Scheduled Closing Date. In the event that portions of
the Restructuring are not completed prior to the Closing, then, at
Seller's cost and expense, Purchaser shall cause the Packaging
Companies to take the steps identified in Schedule 5.8(b)(ii) as are
necessary to permit Seller to complete the Restructuring in the
manner selected by Seller and to transfer to Seller (or the Person
designated by Seller), any Non-Packaging Assets or cash received by
any Packaging Company in connection with the Restructuring.
(c) In the event that record or beneficial ownership of
any Non-Packaging Assets has not been transferred prior to the
Scheduled Closing Date or a Suspended Closing Date, if applicable,
Purchaser shall hold such Non-Packaging Assets pending transfer to
such Person or Persons designated by Seller and provide to Seller's
designee all of the benefits and liabilities associated with the
ownership and operation of such Non-Packaging Assets and, according-
ly, Purchaser shall cause such Non-Packaging Assets to be operated
as may reasonably be instructed by Seller or its designee and Seller
shall indemnify Purchaser for the liabilities resulting from such
operation so long as such operations are in accordance with Seller's
instructions. Furthermore, to the extent the proceeds of the sale
of the properties set forth on Schedule 1.1(b) are received by a
Packaging Company following the Scheduled Closing Date, Purchaser
shall immediately cause such proceeds to be paid to Seller or its
designee.
(d) In the event that record or beneficial ownership of
any Transferred Business or any asset thereof has not been trans-
ferred to the Packaging Companies prior to the Scheduled Closing
Date or Suspended Closing Date, if applicable, Seller shall hold
such Transferred Business pending transfer to such Person or Persons
designated by Seller, and provide to the relevant Packaging Compa-
nies all of the benefits and liabilities associated with the owner-
ship and operation of such Transferred Business and, accordingly,
Seller shall cause such Transferred Business to be operated as may
reasonably be instructed by Purchaser or its Packaging Company
designee and Purchaser shall indemnify Seller for the liabilities
resulting from such operation so long as such operations are in
accordance with Purchaser's instructions.
(e) As part of the Restructuring, Seller agreed to
undertake, or cause the undertaking of, certain actions at the
102
<PAGE>
request of Purchaser, which actions are the subject of a Letter
Agreement dated 27 February 1998. Purchaser agrees with Seller for
itself and on behalf of each member of Seller Group that it will
make no claim under this Agreement (including any claim under the
representations or warranties or for indemnification) in relation to
any loss, liability, or other consequence arising from the taking of
such actions.
Section 5.9 Retained Companies; Interim Period.
(a) With respect to each Retained Company, Purchaser
and Seller agree that from the Scheduled Closing Date until it is
conveyed to Purchaser pursuant to Section 2.4(b)(ii) hereof or
otherwise transferred by Seller pursuant to paragraph (g) hereof
(the "Interim Period"), each Selling Company that directly or
indirectly owns a Retained Company shall retain title to the Re-
tained Company, provided that it may transfer the Retained Company
to a Subsidiary that is wholly owned directly or indirectly by
Seller.
(b) During the Interim Period, all operating profits
and losses (net of Taxes) of the Retained Company shall be for the
account of such Retained Company. Seller shall not, and shall cause
its Affiliates, not to declare or pay any dividends or other distri-
butions from such Retained Company to Seller or any Affiliate of
Seller or any other Person and shall cause the Retained Company not
to redeem, repurchase or otherwise acquire any of its capital stock.
Purchaser shall provide the funding requirements of the Retained
Business not covered by cash on hand at the Retained Business and
shall repay and indemnify Seller for any funding advanced by it
after the Scheduled Closing Date to the extent not timely repaid by
the Retained Company.
(c) During the Interim Period, management of the
Retained Company shall operate such Retained Company without control
by Purchaser. Each Selling Company that directly or indirectly owns
a Retained Company (or each Subsidiary to which such Retained
Company has been transferred) shall instruct the management of such
Retained Company to operate such Retained Company in the ordinary
course of business in accordance with the 1998 profit plan and
capital expenditure budget of such Retained Company (copies of which
have been provided to Purchaser) (the "1998 Plan") and otherwise in
compliance with the covenants set forth in Sections 5.1 and 5.2,
except to the extent otherwise required by Regulatory Authorities.
(d) Seller shall engage Ernst & Young to oversee the
operation of the business of such Retained Company for the duration
103
<PAGE>
of the Interim Period for the purpose of monitoring compliance with
the provisions of this Section 5.9. All costs and expenses with
respect to such services provided by Ernst and Young shall be for
the account of Purchaser.
(e) Seller shall exercise reasonable oversight of the
management of such Retained Company during the Interim Period,
provided that Seller (or each Subsidiary to which such Retained
Company has been transferred) shall (i) not be liable in any manner
for the activities or operations of such Retained Company or the
activities of the directors and officers of such Retained Company
during the Interim Period and (ii) shall be indemnified by Purchaser
from any and all losses, costs or expenses attributable to Seller or
any Affiliate of Seller with respect to its status as holder of the
shares of such Retained Company during the Interim Period. Neither
Seller nor any Affiliate of Seller shall be liable to Purchaser or
such Retained Company for losses resulting from the activities or
operations of the Retained Company during the Interim Period.
(f) On or prior to the commencement of the Interim
Period, Seller shall take all necessary steps to cause such Retained
Company to hire as employees (at their current level of compensation
and benefits) any persons currently seconded to such Retained
Company by Seller or any Affiliate of Seller, provided that such
Retained Company is Rockware. Seller shall, during the Interim
Period, provide outsourcing services to such Retained Company to the
extent such services are currently provided to such Retained Company
by Seller or an Affiliate of Seller. Such services shall be provid-
ed at the cost thereof of Seller and charged to such Retained
Company. Such Retained Company or the Packaging Companies, as the
case may be, shall be deemed to have been granted licenses, immedi-
ately prior to or on the Scheduled Closing Date, by the Packaging
Companies transferred to Purchaser at the Closing or the Retained
Company, as the case may be, to use all Intellectual Property owned
or licensed (in the case of licensed Intellectual Property, subject
to the terms thereof) by such grantor and previously used in connec-
tion with the recipient's business and on the same terms and condi-
tions (including royalties) that such Intellectual Property was
licensed or made available to the recipient prior to the Closing.
(g) Upon the earliest to occur of: (i) a final deter-
mination by the competent Regulatory Authority with respect to the
sale or transfer of all the shares of such Retained Company and (ii)
7 September 1998, Seller shall transfer such Retained Company (or
the portion thereof that may be transferred) to Purchaser (provided
such transfer is not prohibited by the competent Regulatory Authori-
ty) or if all or part of such transfer is so prohibited, Seller
104
<PAGE>
shall, with the consent of Purchaser, transfer all of such Retained
Company (if none of such Retained Company could be transferred to
Purchaser) or the portion of such Retained Company that could not be
transferred to Purchaser to a third party (on terms acceptable to
Purchaser) or to a trustee, provided that Seller shall be entitled
to comply with and to rely upon any advice, orders or instructions
of a Regulatory Authority with respect to any such transfer or sale,
and further, provided that any such transfer or sale shall be made
without any undertakings on the part of Seller. Upon such sale or
transfer, all duties and obligations of Seller with respect to such
Retained Company shall thereupon cease except as otherwise provided
in this Agreement. The proceeds to Seller (net of any amount
referred to in the last sentence of this paragraph, the "net pro-
ceeds"), if any, of such transfer or sale shall be remitted to
Purchaser upon receipt of such net proceeds by Seller. Seller shall
not be liable to Purchaser for any shortfall between the net pro-
ceeds and any amount allocated by Purchaser to such Retained Company
(or the applicable portion thereof). Purchaser shall not be liable
to Seller for any excess of such proceeds over any amount allocated
by Purchaser to such Retained Company (or the applicable portion
thereof). Purchaser shall bear all costs, expenses and Taxes
arising from the sale or transfer of such Retained Company to the
extent such costs, expenses and Taxes exceed the costs, expenses and
Taxes which would have been incurred had Seller transferred such
Retained Subsidiary to Purchaser on the Scheduled Closing Date.
(h) On the fifteenth day of each month during the
Interim Period, Seller shall deliver to Purchaser the MR prepared
with respect to such Retained Company for the immediately preceding
month and such plant specific financial and operating information
with respect to such Retained Company as Purchaser shall reasonably
request, in each case subject to appropriate safeguards to restrict
the flow of competitively sensitive information to and within
Purchaser. Purchaser shall not furnish any information provided by
Seller pursuant to this Section 5.9(h) to officers or employees of
United Glass Limited, to the extent such information is competitive-
ly sensitive information. During the Interim Period, Seller will
provide reasonable cooperation and support for Purchaser's efforts
to obtain approval of the Regulatory Authorities for any sale or
transfer of any Retained Company.
(i) Notwithstanding the provisions of the Confidential-
ity Agreement, Purchaser may provide information relating to the
business and operations of such Retained Company to potential third-
party buyers for all or a portion of such Retained Company, provided
that (i) the provision of such information be subject to confidenti-
ality arrangements in favor of Seller substantially similar to the
105
<PAGE>
terms of the Confidentiality Agreement and (ii) appropriate safe-
guards be implemented to restrict the flow of competitively sensi-
tive information to and within such potential third-party buyers.
The provision of any such information prior to the Closing Date
shall be further subject to the consent of Seller, such consent not
to be unreasonably withheld, and Purchaser shall keep Seller and its
advisers reasonably apprised of all such communications and process-
es.
Section 5.10 Further Assurances. At any time after the
Scheduled Closing Date, Seller and Purchaser shall promptly execute,
acknowledge and deliver any other assurances or documents reasonably
requested by Seller or Purchaser, as the case may be, and necessary
for Seller, the Selling Companies or Purchaser, as the case may be,
to satisfy their respective obligations hereunder or obtain the
benefits contemplated hereby or to give effect to the Restructuring.
Section 5.11 Resignations; Meetings. On or prior to
the Scheduled Closing Date or at the Suspended Closing Date, as
applicable, and except as otherwise requested by Purchaser in
writing:
(a) Seller will ensure that a meeting of the directors
of each Sold Company is held on or before such date at which the
directors of each such Sold Company resolves:
(i) to approve the registration of the transfers
of the Sold Shares (subject only to payment of stamp duty);
and
(ii) to issue new share certificates for the Sold
Shares in the name of Purchaser (subject only to payment of
stamp duty).
(b) Seller will obtain from all the directors and
secretaries of the Packaging Companies transferred to Purchaser at
the Closing, other than those directors and secretaries identified
in writing by Purchaser at least three Business Days prior to the
applicable date, resignations, effective on or prior to Closing from
their positions as directors;
(c) Seller will ensure that a meeting of the directors
of each Packaging Company is held on or before Closing at which with
effect from Closing:
106
<PAGE>
(i) the nominees of Purchaser are appointed as
directors and secretaries and the resignation of each resign-
ing director and secretary is accepted;
(ii) the registered office of each Packaging
Company is changed to an address nominated by Purchaser; and
(iii) all existing mandates for the operation of
the bank accounts by each Packaging Company are revoked and
replaced with mandates approved by Purchaser;
(d) subject to the approval of the Australian Securi-
ties Commission, Seller shall ensure that the auditors of each
Packaging Company incorporated in Australia resign and are replaced
by a firm nominated by Purchaser with effect from Closing; and
(e) Seller will cause each Person holding any
director's qualifying shares, if any, in the relevant Packaging
Company to transfer such shares at the applicable Closing to
Purchaser (or Purchaser's designee) without payment therefor.
Section 5.12 Use of Corporate Names.
(a) "BTR" and "Nylex" Name and Logo. Within one year
after the Closing, Purchaser shall cause each of the Packaging
Companies to change its corporate name to a name that does not
include the names "BTR" or "Nylex" or the BTR or Nylex logos and to
make any necessary legal filings with the appropriate Governmental
Authority to effectuate such changes. After the Closing, the
Packaging Companies and assignees shall have no right to use the
names "BTR" or "Nylex" or any trademarks, trade names, brandmarks,
trade dress or logos relating to such name, except that for a period
ending on the one-year anniversary of the Closing, the Packaging
Companies shall have the right to use any packaging labels, cata-
logues, sales and promotional materials and printed forms that use
the names "BTR" or "Nylex" and the BTR or Nylex logos, provided,
however, that Purchaser may continue to use such name and logo on
inventory in existence as of the Scheduled Closing Date until the
sale or disposition of such inventory but only to the extent that it
is not practicable to remove or cover up the "BTR" or "Nylex" name
and logo and will indemnify Seller and its Affiliates from any
claims against them resulting from such use; provided, however, that
Purchaser shall as expeditiously as possible cancel all registra-
tions (including any Registrations for business names) with the
appropriate Governmental Authorities to effectuate such name chang-
es. Purchaser shall transfer any registrations in the name of any
of the Packaging Companies with respect to the BTR name or logo or
107
<PAGE>
the Nylex name or logo to Seller as soon as practicable after the
Closing.
(b) "ACI" Name and Logo. Within one year after the
Closing, Seller shall cause each member of the Selling Group to
change its corporate name to a name that does not include the name
"ACI" or the ACI logo and to make any necessary legal filings with
the appropriate Governmental Authority to effectuate such name and
logo changes. After the Closing, Seller and the Selling Group and
assignees shall have no right to use the name "ACI" or the ACI logo,
except that for a period ending on the one-year anniversary of the
Closing, Seller, the Selling Group and their assignees shall have
the right: (a) to use any packaging labels, catalogues, sales and
promotional materials and printed forms that use the name "ACI" and
ACI logo, but only to the extent that it is not practicable to
remove or cover up the name "ACI" and ACI logo and (b) to continue
to manufacture products (which are not part of the Packaging Busi-
ness) branded with the ACI name and logo which are currently manu-
factured and branded with such name and logo and will indemnify
Purchaser and its Affiliates from any claims against them resulting
from such use; provided, however, that Seller shall cause its
Subsidiaries as expeditiously as possible to cancel all registra-
tions with the appropriate Governmental Authorities to effectuate
such name changes. Notwithstanding the foregoing, Seller, the
Selling Group and their assignees may continue to use such name and
logo on inventory in existence as of the one-year anniversary of the
Scheduled Closing Date until the sale or disposition of such inven-
tory but only to the extent it is not practicable to remove or cover
up the name "ACI" and ACI logo and will indemnify Purchaser and its
Affiliates from any claims against them resulting from such use.
Purchaser agrees that it will on the Scheduled Closing Date enter
into a license agreement to grant an exclusive perpetual royalty-
free license (with such quality control rights as are required by
law to preserve the trademark) to use the name and logo "ACI" in
connection only with the manufacturing, marketing, sale, supply,
installation and distribution of insulation products currently known
as "Pink Batts" to Seller or one of its Affiliates, which license
will be assignable to third parties in connection with the sale of
such business.
(c) Purchaser agrees and acknowledges on behalf of
itself and each of its Affiliates that none of the Packaging Compa-
nies shall have or retain any right whatsoever (whether proprietary
or by way of Intellectual Property or otherwise) in or in respect of
Seller Manuals and Policy Documents or any of them, or any right to
use or continue to use them or any of them after the Closing except
to the extent necessary in the preparation of MRs and GARs pursuant
108
<PAGE>
to Section 5.18(c). All originals and copies of Seller Manuals and
Policy Documents shall be delivered to Sellers or to their order to
such location in England as they shall reasonably specify, at or
immediately following Closing. Immediately following Closing, the
Selling Companies and Purchaser shall seek to verify that they have
been so returned. If Purchaser or Seller become aware after Closing
that any of the same have not been so returned, Purchaser shall
procure that they are immediately returned to Seller or to their
order. Purchaser (on behalf of itself and each of its Affiliates)
agrees with Seller (on behalf of itself and each member of Seller's
Group) that Seller and their employees and agents shall be entitled
to have access following Closing, after giving reasonable prior
notice, to the premises of any Packaging Companies in order to
recover possession of any originals or copies of Seller Manuals and
Policy Documents.
(d) Purchaser undertakes to procure the transfer of any
Intellectual Property which is owned by any of the Packaging Compa-
nies and also used principally by any member of the Seller Group
("Purchaser Shared Intellectual Property") to Seller, and Seller
shall on the date of such transfer grant to Purchaser a non-exclu-
sive, worldwide, royalty-free, assignable, perpetual license to use
the Purchaser Shared Intellectual Property other than the names
"BTR" or "Nylex" or the BTR or Nylex logos, and, whether before or
after such transfer, any other Intellectual Property owned by any
member of the Seller Group and used by the Packaging Companies that
is not principally used by the Packaging Companies. Seller under-
takes to procure the transfer of any Intellectual Property which is
owned by any member of the Seller Group and also used principally by
any of the Packaging Companies ("Seller Shared Intellectual Proper-
ty") to Purchaser, and Purchaser shall on the date of such transfer
grant to Seller a non-exclusive, worldwide, royalty-free, assign-
able, perpetual license to use the Seller Shared Intellectual
Property other than the name "ACI" or the ACI logo, and, whether
before or after such transfer, any other Intellectual Property owned
by the Packaging Companies and used by the members of the Seller
Group but not principally used by members of the Seller Group.
(e) Following the Scheduled Closing Date or on such
other date that Kuala Lumpur Glass Manufacturing Co. Sdn Bhd ("KL
Glass") ceases to be a direct or indirect Subsidiary of BTR Nylex,
Purchaser shall cause any necessary Packaging Company or an appro-
priate Affiliate of Purchaser, and Seller shall cause KL Glass, to
enter into an agreement or agreements pursuant to which KL Glass
shall have substantially the same rights (including the right to
receive substantially the same technical services) and obligations
as it presently does under KL Glass' existing technical assistance
109
<PAGE>
agreement, which includes its license to use Purchaser's glass
technology, such rights to include at the request of KL Glass the
services of the existing ACI Glass employees located in Kuala Lumpur
(or equivalent replacement), for a period not to exceed two years.
(f) Prior to the Scheduled Closing Date, Seller shall
cause Kennon Carpet Mills Pty Ltd. to change its corporate name and
to make any necessary legal filings with the appropriate Governmen-
tal Authority to effectuate such name change.
Section 5.13 Shareholder Meeting. Seller shall, as
soon as reasonably practicable following the date of this Agreement,
convene a meeting of the common shareholders of Seller for the
purpose of obtaining the Shareholder Approval, (ii) the Board of
Directors of Seller shall recommend approval of this Agreement and
the transactions contemplated hereby to such shareholders in connec-
tion with such meeting and (iii) Seller shall take all lawful action
to solicit such approvals at the meeting, provided that in the case
of (ii) and (iii) such actions shall be subject to the fiduciary
duties of the Board of Directors of Seller.
Section 5.14 Confidentiality.
(a) Each of Seller and each Selling Company recognizes
that by reason of its ownership of the Packaging Companies, it has
acquired confidential information and trade secrets concerning the
operation of the Packaging Companies, the use or disclosure of which
could cause Purchaser or its Affiliates substantial loss and damages
that could not be readily calculated and for which no remedy at law
would be adequate. Accordingly, each of Seller and each Selling
Company covenants and agrees with Purchaser that it will not at any
time following the Closing Date prior to the second anniversary of
the Closing Date, except in performance of its obligations to
Purchaser or with the prior written consent of Purchaser, directly
or indirectly, disclose (other than to its directors, employees,
accountants, attorneys and other representatives for valid business
purposes and other than to defend any claim against it or for which
it may be liable) any Intellectual Property or other proprietary,
non-public secret or confidential information relating to the
Packaging Business that it may learn or has learned by reason of its
ownership of the Packaging Companies, unless (i) such information
becomes known to the public generally through no fault of Seller or
any Selling Company or (ii) disclosure is required by applicable Law
or legal process. The parties agree that the covenant contained in
this Section imposes a reasonable restraint on Seller and the
Selling Companies in light of the transactions contemplated hereby.
110
<PAGE>
(b) At the Closing, Seller and the Selling Companies
shall, to the extent permitted thereunder, assign, grant and convey
to Purchaser all their respective rights subject to the assumption
of obligations under confidentiality agreements between any of them
and any Person other than Purchaser relating to the Packaging
Business or any part thereof or any of the Packaging Companies,
including the right to enforce all terms of any such agreement, and
Seller shall deliver to Purchaser copies of all such agreements at
or prior to the Closing.
Section 5.15 Notification of Certain Matters. Prior to
Closing each of Seller and each Selling Company shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to
Seller, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure such party believes (A) would result in
the failure to satisfy any of the conditions set forth in Section
6.1 and Section 6.2 (in the case of Seller) or Section 6.1 and
Section 6.3 (in the case of Purchaser), (B) is materially adverse to
the ability of such party to perform its obligations under this
Agreement or (C) would materially interfere with or delay the
consummation of any of the transactions contemplated hereby, (ii)
any written notice or communication received from any Person alleg-
ing that the consent of such Person is or may be required in connec-
tion with the transactions contemplated by this Agreement, the
failure of which to obtain such party believes would have a Material
Adverse Effect, (iii) any notice or other communication from any
Governmental Authority in connection with the transactions contem-
plated by this Agreement, (iv) any Actions that, if pending or
threatened on the date hereof, would have been required to have been
disclosed on Schedule 3.9, and (v) any Actions that, to the Knowl-
edge of Seller, relate to that consummation of the purchase of the
Sold Shares contemplated hereby, provided, however, that the deliv-
ery of, or failure to deliver, any notice pursuant to this Section
5.15 shall not limit or otherwise affect the representations,
warranties, covenants or agreements of any party hereto (other than
the agreements contained in this Section 5.15) or any conditions to
the obligations of any party or the rights (including the rights to
indemnification) or remedies of any party hereunder.
Section 5.16 No Solicitations. Until the earlier of
the Scheduled Closing Date and the termination of this Agreement,
each of Seller and each Selling Company shall not, and shall not
authorize or encourage any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or
other representative or agent (collectively, "Representatives")
retained by it or any of its Subsidiaries to, solicit or encourage
(including by way of furnishing information) or take any other
111
<PAGE>
action to facilitate any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as defined below) or agree to or endorse any
Acquisition Proposal, or participate in any discussions or negotia-
tions, or provide third parties with any information, relating to
any such inquiry or proposal, provided, however that in furtherance
of the fiduciary duties of the directors of Seller and each Selling
Company, each of Seller and each Selling Company and such Persons
may take any such actions, including the provision of confidential
information and entering into discussions or negotiations, in
connection with any unsolicited Acquisition Proposal. Each of
Seller, and each Selling Company shall advise Purchaser orally
(within one business day) and in writing (within three business
days), in reasonable detail, of any such inquiry or proposal which
it or any of its Subsidiaries or Representatives may receive and if
such inquiry or proposal is in writing, then such party shall
deliver to Purchaser a copy of such inquiry or proposal. As used in
this Agreement, "Acquisition Proposal" shall mean any offer, propos-
al or indication of interest in the acquisition of (i) any of the
capital stock of any of the Selling Companies or any of the Packag-
ing Companies or (ii) any of the assets of the Packaging Business
(other than assets permitted to be disposed of under Section 5.2
hereof without the consent of Purchaser), other than the transac-
tions contemplated by this Agreement.
Section 5.17 Additional Financial Statements, Reconcil-
iations.
(a) As soon as reasonably practicable after the end of
each month, Seller shall furnish to Purchaser all monthly financial
statements of the Packaging Companies or the Packaging Business and
Packaging Business MRs for the Packaging Companies or the Packaging
Business for months subsequent to September 1997, which shall have
been prepared in a manner consistent with past practice.
(b) As soon as practicable after the date hereof but in
no event later than 14 April 1998, Seller shall furnish to Purchaser
audited combined financial statements of the Packaging Companies as
at and for each of the years ended December 31, 1995, 1996 and 1997
which comply in all material respects with the applicable accounting
requirements of the United States Securities Exchange Act of 1934,
as amended, as it applies to Item 17 of Form 20-F and the related
published rules and regulations.
112
<PAGE>
Section 5.18 Post-Closing Cooperation.
(a) Purchaser, Seller and the Selling Companies shall
cooperate with each other, and shall cause their officers, employ-
ees, agents, auditors and representatives to cooperate with each
other, for a period of 180 days after the Closing to ensure the
orderly transition of each Packaging Company from Seller to Purchas-
er (including the transition of any Information Technology Systems)
and to minimize any disruption to the respective businesses of
Seller, the Selling Companies, Purchaser and the Packaging Companies
that might result from the transactions contemplated hereby. After
the Closing, upon reasonable written notice, Purchaser, Seller and
the Selling Companies shall furnish or cause to be furnished to the
other party and its employees, counsel, auditors and representatives
access, during normal business hours, to such information and
assistance relating to the Packaging Companies as is reasonably
necessary for financial reporting and accounting matters, the
preparation and filing of any Tax Returns, reports or forms or the
defense of any Tax audit, claim or assessment or any other require-
ment under any applicable law or regulation (including in connection
with the valuation as at 31 March 1982 of any asset or any Packaging
Company and in connection with the underlying tax rate of distribu-
tions made by any Packaging Company); provided that the provisions
of Section 5.4 shall govern with respect to all Tax-related matters
to the extent any provision in Section 5.4 is in conflict with this
Section 5.18. Each party shall be allowed to make copies of any
requested books and records, subject to giving Purchaser such
undertaking as to confidentiality as it shall reasonably require and
each party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred in assisting the other pursuant to this
Section 5.18(a). Neither party shall be required by this Section
5.18(a) to take any action that would unreasonably interfere with
the conduct of its business or unreasonably disrupt its normal
operations (or, in the case of Purchaser, the business or operations
of any Packaging Company.)
(b) As soon as reasonably practicable after the Closing
Date and subject to Section 5.12(c), Seller and the Selling Compa-
nies shall deliver or cause to be delivered to Purchaser all agree-
ments, documents, books, records and files, including records and
files stored on computer disks or tapes or any other storage medium
(collectively "Records") in the possession of Seller or the Selling
Companies primarily relating to the business and operations of any
of the Packaging Companies.
(c) Purchaser will procure that each Packaging Company
shall prepare free of charge:
113
<PAGE>
(i) a GAR as at the Scheduled Closing Date; and
(ii) an MR pack in respect of the period from the
date of the last such pack until:
(a) the Scheduled Closing Date, if the Sch-
eduled Closing Date takes place on or
after the tenth day of the month; or
(b) the end of the month preceding the Sch-
eduled Closing Date, if Closing takes
place before the tenth day of the
month; and
(iii) Tax information returns, overseas tax re-
turns, and in the form presently prepared by Packaging Compa-
nies, US Style T Schedules and Y/E Schedules;
which shall each be delivered (both in hard copy form and on disk)
to Seller as soon as reasonably practicable and, in any event,
within sixty (60) days after the Scheduled Closing Date.
(d) With respect to insurance policies in effect for
periods ending prior to the Scheduled Closing Date that were written
on an occurrence basis (including U.S. workers' compensation, U.K.
employers' liability, U.S. and U.K. auto liability and comprehensive
general liability): (i) Seller shall use reasonable efforts to
receive coverage under the relevant policy on behalf of any Packag-
ing Company with respect to which a covered claim arises and (ii)
Purchaser will provide such information and records as are available
with respect thereto in order to enable Seller to comply with
insurers' requirements and to permit investigation and defense by
insurers.
Section 5.19 Consent to Future Transfers.
(a) In the event the obligations of Purchaser under
this Agreement do not become unconditional (other than as a result
of the failure of Seller to satisfy the conditions to the obliga-
tions of Purchaser set forth in Section 6.2 hereof or if the Share-
holder Approval shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of
shareholders or at any postponement or adjournment thereof), Pur-
chaser hereby agrees (i) irrevocably to waive such right as it may
have (if any) to terminate, rescind or otherwise withdraw from,
prior to its expiration date, the Technical Assistance and Trade
Secret Agreement, dated February 5, 1981 or any amendment or varia-
114
<PAGE>
tion thereof or similar agreement (the "TSAs"), entered into with
Australian Consolidated Industries Limited or to which Owens-Illi-
nois or any of its subsidiaries or associates is a party with any of
the companies which own or comprise the Packaging Business solely by
reason of any change of control resulting from the sale of shares to
the public in any initial public offering of all or any part of the
assets comprising the Packaging Business or the companies which own
such assets; and (ii) to give such other consents and co-operation
as may be reasonably necessary for the purposes of such initial
public offering.
(b Nothing in this Section 5.19 shall be taken (i) as
Seller's or any Selling Company's acknowledgement that Purchaser is
entitled to terminate, rescind or otherwise withdraw from the TSAs
as a consequence of any change of control arising solely as a result
of a sale of any shares to the public in an initial public offering
or that a change of control necessarily arises for the purposes of
the TSAs on such an initial public offering or (ii) to prejudice any
right any member of the Seller Group or any Packaging Company may
have under the TSAs.
Section 5.20 Corporate Books. Seller agrees to deliver
to Purchaser (or leave in the possession of the Packaging Companies)
at or as soon as practicable after Closing all minute books and
stock transfer records of each of the Packaging Companies since such
Companies have been wholly owned Subsidiaries of Seller. If a
minute book or a stock transfer record is located at a place of
business of a Sold Company, it shall be deemed to have been deliv-
ered pursuant to this Section 5.20.
Section 5.21 Permanent Establishments. Prior to
Closing, Seller shall deliver to Purchaser a list of each jurisdic-
tion in which the Packaging Companies currently take the position
that they have permanent establishments (as such term is used in any
relevant double taxation agreement) outside the country in which it
is incorporated.
Section 5.22 Treatment of Debt Other External Obliga-
tions.
(a) Schedule 5.22 sets forth the Debt of the
Packaging Companies as of January 30, 1998 other than overdrafts and
similar immaterial Debt. Not later than two weeks following execu-
tion of this Agreement, Purchaser will advise Seller of the Debt
which Seller or one of its Affiliates is to discharge on or before
the Scheduled Closing Date. Seller shall, or shall cause one of its
Affiliates to, repay such Debt prior to the Scheduled Closing Date,
115
<PAGE>
and no adjustment shall be made to the Aggregate Purchase Price with
respect to the amount of Debt so repaid; provided, however that
Seller and Purchaser agree that the medium term notes issued by BTR
Nylex not in excess of A$200,000,000 principal amount may remain
outstanding at the Scheduled Closing Date due to timing consider-
ations associated with repaying such Debt and that, if still out-
standing, such amounts, together with accrued and unpaid interest
thereon as of the Scheduled Closing Date, will be included in the
calculation of the Final Debt/Cash Balance. Seller may (i) replace
any such repaid Debt with Intergroup Payables and (ii) may discharge
any Debt, whether or not so requested by the lenders or holders
thereof.
(b) Purchaser agrees to indemnify and hold harm-
less Seller with respect to any Losses (as hereinafter defined)
arising out of or relating to any Debt which it does not advise
Seller to discharge pursuant to paragraph (a) of this Section 5.22
or which otherwise reduces the Debt/Cash Balance.
(c) Seller agrees to indemnify and hold harmless
Purchaser with respect to any costs and expenses reasonably required
to be incurred in repaying (but not including interest and principal
payments) any Debt which Purchaser advises Seller to discharge
pursuant to paragraph (a) of this Section 5.22 but which is not so
discharged on or before the Scheduled Closing Date.
Section 5.23 Share Registrations. With respect to any
entities for which registration of transfer cannot be made immedi-
ately following the Scheduled Closing Date or the Suspended Closing
Date as contemplated by Section 2.4(b)(i) or 2.4(d), respectively,
Seller and the Selling Companies shall use their reasonable best
efforts to assist in ensuring that such registration is effected as
promptly as possible.
Section 5.24 Intercompany Arrangements. Schedule
5.24 sets forth a description of the types of arrangements currently
existing between any Packaging Company, on the one hand, and any
member of the Seller Group, on the other, excluding arrangements
specifically referred to in the Financial Statements.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Purchaser
and Seller. The obligations of the parties hereto to effect the
Closing are subject to the satisfaction (or waiver (to the extent
116
<PAGE>
permitted by Law) by Purchaser and Seller) prior to the Scheduled
Closing Date of the following conditions:
(a) Australian, New Zealand Investment Approvals.
(i) The first to occur of:
(A) the Treasurer of the Commonwealth of Aus-
tralia ("Treasurer") becoming precluded under sec-
tion 25 of the Foreign Acquisitions and Takeovers
Act 1975 ("Act") from being empowered to make an
order under Part II of the Act in relation to the
purchase and sale of the Seller Nylex Shares con-
templated herein;
(B) the issue by or on behalf of the Treasurer
of a notice in writing under the Act stating uncon-
ditionally that the Government of the Commonwealth
of Australia does not object to the purchase and
sale of the Seller Nylex Shares contemplated here-
in; and
(C) the issue by or on behalf of the Treasurer
of a notice in writing under the Act to the effect
that, subject to the conditions specified therein
the Government of the Commonwealth of Australia
does not object to the purchase and sale of the
Seller Nylex Shares and Purchaser notifying Seller
within 5 days of the issue thereof, or such longer
period as the parties may agree, that such condi-
tions are acceptable to Purchaser.
(b) No Injunctions; Orders. There shall not be in
effect any Governmental Order that prohibits or enjoins the sale or
purchase of the Sold Shares in accordance with Section 2.4.
(c) HSR, Australia and New Zealand Competition Authori-
ties.
(i) All waiting periods under the HSR Act applica-
ble to the transactions contemplated by this Agreement shall
have expired, by passage of time or by valid early termination
by the Federal Trade Commission or the Department of Justice
of the United States; and
(ii) written confirmation from the Australian
Competition and Consumer Commission (the "ACCC") that the ACCC
117
<PAGE>
does not propose to oppose the sale and purchase of the Seller
Nylex Shares contemplated herein.
(d) Shareholder Approval. Seller shall have received
the Shareholder Approval.
Section 6.2 Conditions to the Obligations of Purchaser.
The obligation of Purchaser to effect the Closing is subject to the
satisfaction (or waiver (to the extent permitted by Law) by Purchas-
er) prior to the Scheduled Closing Date of the following conditions:
(a) Representations and Warranties. The representa-
tions and warranties of Seller and the Selling Companies contained
herein shall be true and correct (in each case without regard to any
"Material Adverse Effect" or other materiality qualifier contained
therein), in each case as of the date of this Agreement and as of
the Closing (except to the extent rendered untrue as a result of the
consummation of the transactions contemplated hereby, including the
Restructuring), as if made as of the Closing (except that the
representations and warranties that are made as of a specific date
need be true and correct only as of such date) except in each case
for such failures which would not, individually or in the aggregate,
result in a Material Adverse Effect. Purchaser shall have received
a certificate from Seller and the Selling Companies signed by an
executive officer thereof with respect to the matters described in
this Section 6.2(a).
(b) No Material Adverse Effect. Since December 31,
1997, there shall not have occurred any event, change or development
which, individually or in the aggregate, has had or is reasonably
expected to have a Material Adverse Effect.
(c) Covenants. The covenants and agreements of Seller
and the Selling Companies to be performed on or prior to the Closing
shall have been duly performed except for such failures or defaults
of performance which would not, individually or in the aggregate,
result in a Material Adverse Effect or materially impair the bene-
fits to be received by Purchaser under this Agreement. Purchaser
shall have received a certificate from Seller and the Selling
Companies signed by an executive officer thereof with respect to the
matters described in this Section 6.2(c).
(d) Legal Opinion. Seller shall have delivered to
Purchaser opinions of counsel substantially in the form set forth on
Exhibits A-1 through A-4 hereto addressed to Purchaser.
118
<PAGE>
Section 6.3 Conditions to the Obligations of Seller.
The obligation of Seller to effect the Closing is subject to the
satisfaction (or waiver (to the extent permitted by applicable Law)
by Seller) prior to the Scheduled Closing Date of the following
conditions:
(a) Representations and Warranties. The representa-
tions and warranties of Purchaser contained herein that are quali-
fied as to materiality shall be true and correct and the representa-
tions and warranties of Purchaser that are not so qualified shall be
true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing, as if made as of the
Closing (except that the representations and warranties that are
made as of a specific need be true and correct (or true and correct
in all material respects if such representations and warranties are
not qualified as to materiality) only as of such date). Seller
shall have received a certificate from Purchaser signed by an
executive officer thereof with respect to the matters described in
this Section 6.3(a).
(b) Covenants. The covenants and agreements of Pur-
chaser to be performed on or prior to the Closing shall have been
duly performed except for such failures or defaults of performance
which would not, individually or in the aggregate, materially impair
the benefits to be received by Seller under this Agreement. Seller
shall have received a certificate from Purchaser signed by an
executive officer thereof with respect to the matters described in
this Section 6.3(a).
(c) Legal Opinion. Purchaser shall have delivered to
Seller opinions of counsel substantially in the form set forth on
Exhibits B-1 through B-4 hereto addressed to Seller.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival. The representations and warran-
ties of Seller, Purchaser and the Selling Companies contained in
this Agreement shall survive the Closing for the period set forth in
this Section 7.1. All of the covenants and agreements of the
parties contained in this Agreement shall survive the Closing in
accordance with their terms without limitation as to time. Neither
the period of survival nor the Liability of any party hereto with
respect to the representations, warranties, covenants or agreements
contained herein shall be reduced or otherwise affected by any
119
<PAGE>
investigation made at any time by or on behalf of any other party.
All representations and warranties of Seller contained in this
Agreement and, subject to the last sentence of Section 7.1, all
claims and causes of action with respect thereto shall terminate on
the third anniversary of the Scheduled Closing Date, except that:
(i) the representations and warranties in Sections
3.1, 3.2, 3.3 and 3.26 shall have no expiration date;
(ii) the representations and warranties in Section
3.15 shall survive until twenty (20) Business Days after the
expiration of the applicable statute of limitations with
respect to the Tax or Tax Return at issue and the representa-
tions and warranties contained in Section 3.16 shall survive
until ninety (90) days after the expiration of the applicable
statute of limitations with respect to the subject matter
thereof; and
(iii) the representations and warranties set forth
in Sections 3.11 shall survive until the fifth anniversary of
the Scheduled Closing Date.
The representations and warranties of Purchaser and,
subject to the last sentence of this Section 7.1, all claims and
causes of action with respect thereto, contained in Sections 4.1,
4.2 and 4.7 shall have no expiration date, and the representations
and warranties of Purchaser and, subject to the last sentence of
this Section 7.1, all claims and causes of action with respect
thereto, contained in Sections 4.3, 4.4, 4.5, 4.6 and 4.8 this
Agreement shall terminate on the third anniversary of the Scheduled
Closing Date. In the event notice of any claim for indemnification
under Section 7.2(a)(i) or Section 7.3(a)(i) hereof shall have been
given (within the meaning of Section 9.1) in accordance with Section
7.4 in good faith within the applicable survival period, the repre-
sentations and warranties that are the subject of such indemnifica-
tion claim shall survive until such time as such claim is finally
resolved.
Section 7.2 Indemnification by Purchaser.
(a) Purchaser hereby agrees that it shall indemnify,
defend and hold harmless Seller and its Affiliates (until, in the
case of any Subsidiary of Seller, such Subsidiary is no longer an
Affiliate of Seller (except with respect to any Losses in respect of
which notice has been given in accordance with Section 7.4 prior to
such Subsidiary ceasing to be an Affiliate)), and their respective
directors, officers, shareholders, partners, attorneys, accountants,
120
<PAGE>
agents and employees and their heirs and successors (the "Seller
Indemnified Parties") from, against and in respect of any actual
damages, claims, losses, charges, actions, suits, proceedings,
deficiencies, interest, penalties, and reasonable costs and expenses
(including without limitation reasonable attorneys' and consultants'
fees) (collectively but without duplication, "Losses") imposed on,
sustained, incurred or suffered by any of the Seller Indemnified
Parties relating to or arising out of (i) any breach of any repre-
sentation or warranty made by Purchaser contained in this Agreement;
(ii) the breach of any covenant or agreement of Purchaser contained
in this Agreement; (iii) subject to the provisions of Section 5.9
with respect to Retained Companies (until they no longer have the
status of Retained Companies) all obligations and liabilities of the
Packaging Companies arising on or after the Scheduled Closing Date
or relating to the conduct of the Packaging Business on or after the
Scheduled Closing Date, except to the extent that Purchaser is
entitled to indemnification under Section 5.4 or 7.3(a) in respect
of that claim (without regard to the provisions of Section 7.3(b));
and (iv) any action brought by a security holder or creditor of
Purchaser in its capacity as such; provided that all rights in
respect of indemnification of Seller Indemnified Parties by Pur-
chaser hereunder may be asserted only by Seller (including on behalf
of other Seller Indemnified Parties).
(b) Notwithstanding the provisions of this Article VII,
Purchaser shall not be liable for any Losses with respect to the
matters contained in clause (i) of Section 7.2(a) except (i) to the
extent the Losses therefrom exceed U.S.$35,000,000, in which event
Purchaser shall be liable to Seller only for such Losses above such
amount or (ii) for any individual item or series of related items
where the Losses relating thereto or arising therefrom are less than
U.S.$50,000 (it being expressly understood that Losses in respect of
such items shall not be applied against the U.S.$35,000,000 basket
set forth in clause (i) hereof); provided that the aggregate liabil-
ity of Purchaser under Section 7.2(a) shall not exceed U.S.$3,600,0-
00,000. Seller shall not be entitled under this Agreement to
multiple recovery for the same Losses.
Section 7.3 Indemnification by Seller.
(a) Seller hereby agrees that it shall, or shall cause
the Selling Companies to, indemnify, defend and hold harmless
Purchaser and its Affiliates (until, in the case of any Subsidiary
of Purchaser, such Subsidiary is no longer an Affiliate of Purchaser
(except with respect to any Losses in respect of which notice has
been given in accordance with Section 7.4 prior to such Subsidiary
ceasing to be an Affiliate)) and their respective directors, offi-
121
<PAGE>
cers, shareholders, partners, attorneys, accountants, agents and
employees and their heirs and successors (the "Purchaser Indemnified
Parties") from, against and in respect of any actual Losses imposed
on, sustained, incurred or suffered by any of the Purchaser Indemni-
fied Parties relating to or arising out of (i) any breach of any
representation or warranty made by Seller contained in this Agree-
ment (other than Section 3.15 which shall be indemnified as provided
in Section 5.4); (ii) the breach of any covenant or agreement of
Seller made in this Agreement; (iii) the Excluded Liabilities; (iv)
any action brought by a security holder or creditor of Seller or any
Selling Company in its capacity as such; (v) any payments required
to be made to any Person with respect to stock options issued or
outstanding on or prior to the Scheduled Closing Date under the
Continental 1991 Stock Option Plan, as amended; (vi) any Liabilities
with respect to any equity-based Plan or arrangement in which any
Employee participates or participated and that is or was maintained
by Seller (or any of its Affiliates), including the Continental 1991
Stock Option Plan which Liabilities arose prior to the Closing;
(vii) the BTR Scheme (as defined in Schedule 5.5(c)) undergoing a
winding-up or closing to new members or any employers to which the
BTR Scheme relates undergoing a relevant insolvency or any trigger-
ing event under Section 75 of the UK Pensions Act 1995 after the
Scheduled Closing Date save insofar as such liabilities relate to
any default of Purchaser in its obligations as a participating
employer in the BTR Scheme during the Transitional Period (as
defined in Schedule 5.5 (c)); and (viii) arising in respect of any
employee or former employee of any of the Sold Companies (other than
the Transferring Employees as defined in Schedule 5.5(c)) under or
in connection with the BTR Scheme (as defined in Schedule 5.5(c));
provided that all rights in respect of indemnification of Purchaser
Indemnified Parties by Seller hereunder may be asserted only by
Purchaser (including on behalf of other Purchaser Indemnified
Parties).
(b) Notwithstanding the provisions of this Article VII,
neither Seller nor the Selling Companies shall be liable for any
Losses with respect to the matters contained in clause (i) of
Section 7.3(a) except (i) to the extent the Losses therefrom exceed
U.S.$35,000,000, in which event Seller and the Selling Companies
shall be liable to Purchaser only for such Losses above such amount
or (ii) for any individual item or series of related items where the
Losses relating thereto or arising therefrom are less than U.S.$50,-
000 (it being expressly understood that Losses in respect of such
items shall not be applied against the U.S.$35,000,000 basket set
forth in clause (i) hereof); provided that the aggregate liability
of Seller and the Selling Companies under Section 7.3(a) shall not
122
<PAGE>
exceed US$3,600,000,000. Purchaser shall not be entitled under this
Agreement to multiple recovery for the same Losses.
(c) Notwithstanding anything to the contrary in this
Agreement, an Indemnifying Party shall not be liable for any Losses:
(i) where the Losses suffered by any Purchaser
Indemnified Party or Seller Indemnified Party, as the case may
be, are the result of or in consequence of any failure by such
Indemnified Party to take reasonable and prudent action to
mitigate any Losses; and
(ii) where the Losses result from or in respect of
or arise from any act, matter, omission, transaction or cir-
cumstance which would not have occurred or arisen but for Law
not in force on the Scheduled Closing Date, or any change of
any Law or practice of any Governmental Authority (excluding,
for the avoidance of doubt, the proposed U.K. Contaminated
Land Regime).
(d) The term "Losses" as used in this Article VII and
in Section 5.4 is not limited to matters asserted by third parties
against any Person entitled to be indemnified under this Article
VII, but includes Losses incurred or sustained by any such Person in
the absence of third party claims. For purposes of (i) Section
5.4(b)(i)(E) and (ii) clause (i) of Section 7.3(a), in determining
whether there has been a breach of any representation or warranty
contained in Article III of this Agreement or the amount of any
Losses resulting from any such breach, (i) such representations and
warranties (other than in the first sentence of Section 3.8) shall
be read without regard to any "Material Adverse Effect" qualifier
contained therein; (ii) the word "material" shall be disregarded in
(1) the first sentence of Section 3.8 and clauses (ii), (x) and
(xiii) thereof, (2) Section 3.11(a)(i) and (ii) and Section 3.11(b),
(3) Section 3.12(b), (4) the last sentence of Section 3.16(b)(ii)
and Section 3.16(b)(v)(C) and (H), (5) Section 3.17(vii) and (x) and
(6) Section 3.20(c); (iii) the word "materially" shall be disregard-
ed in (1) clauses (iii) and (vi) of Section 3.8 and (2) clause (ii)
of Section 3.16(a); and (iv) the representations and warranties
contained in (1) the sixth sentence of Section 3.3, (2) the third
and fourth sentences of Section 3.4 (b) (other than, in the case of
the third sentence therein, with respect to the Joint Venture
Companies), (3) with respect to clause (i) thereof, Section 3.5, (4)
Section 3.6, (5) Section 3.9, (6) Section 3.10, (7) Section 3.11,
(8) Section 3.12(b) to the extent that such representation and
warranty relates to defaults or breaches under Material Contracts,
(9) Section 3.13(b), (10) Section 3.14(a), (11) Section 3.15, (12)
123
<PAGE>
clauses (v)(J), (v)(L) and (v)(M) of Section 3.16(b), (13) clauses
(iii), (v), (vi), (vii), (viii), (ix), (x) and (xi) (other than the
Australian severance agreements listed on the related Schedule) of
Section 3.17, (14) the third sentence (other than those matters
relating to Joint Ventures Companies and other than references to
Debt that Purchaser has not requested to be repaid at Closing
pursuant to Sections 5.22) of Section 3.20(a), (15) Section 3.22(a)
and (16) the reference to Schedules 3.20(a) and 3.20(b) in the
definition of Permitted Liens, shall each be read without regard to
any disclosure contained in any Schedule hereto.
Section 7.4 Indemnification Procedures. With respect
to indemnification claims under this Agreement other than those
relating to Taxes which shall be subject to Section 5.4, all claims
for indemnification by any Indemnified Party hereunder shall be
asserted and resolved as set forth in this Section 7.4. In the
event that any Indemnified Party shall incur or suffer any Loss in
respect of which indemnification may, prior to the expiration of the
survival period in Section 7.1, be sought under this Article VII,
such Indemnified Party may assert a claim for indemnification by
written notice to the party from whom indemnification is being
sought (the "Indemnifying Party") stating the nature of such claim
and the amount or estimated amount of such Loss to the extent then
feasible (which estimate shall not be conclusive on the final amount
of such claim). In the event that any written claim or demand for
which an Indemnifying Party may be liable to any Indemnified Party
under this Article VII (a "Claim") is asserted against or sought to
be collected from any Indemnified Party by a third party, such
Indemnified Party shall as promptly as practicable notify the
Indemnifying Party in writing of such Claim and the amount or the
estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such Claim) (the
"Claim Notice") and the following provisions shall be applicable.
The failure on the part of the Indemnified Party to give any such
Claim Notice in a reasonably prompt manner shall not relieve the
Indemnifying Party of any indemnification obligation hereunder
except to the extent that the Indemnifying Party is materially
prejudiced thereby. The Indemnifying Party shall have twenty (20)
days from the personal delivery or mailing of the Claim Notice (the
"Notice Period") to notify the Indemnified Party in writing (a)
whether or not the Indemnifying Party disputes or does not yet have
sufficient information to assess the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such Claim
and (b) whether or not it desires to defend the Indemnified Party
against such Claim. All costs and expenses incurred by the Indemni-
fying Party in defending such Claim shall be a liability of, and
shall be paid by, the Indemnifying Party. Except as hereinafter
124
<PAGE>
provided, in the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it desires to defend
the Indemnified Party against such Claim, the Indemnifying Party
shall, at its sole cost and expense have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole
power to direct and control such defense. If any Indemnified Party
desires to participate in any such defense it may do so at its sole
cost and expense provided, however, that if the defendants in any
Action shall include both the Indemnifying Party and an Indemnified
Party and such Indemnified Party shall have reasonably concluded
that counsel selected by the Indemnifying Party has a conflict of
interest because of the availability of different or additional
defenses to such Indemnified Party, such Indemnified Party shall
have the right to select separate counsel to participate in the
defense of such Action on its behalf, at the expense of the Indemni-
fying Party. The Indemnified Party shall not settle, admit or in
any other way materially prejudice a Claim for which it is indemni-
fied by the Indemnifying Party without the written consent of the
Indemnifying Party unless the Indemnifying Party elects not to
defend the Indemnified Party against such Claim or if the Indemnify-
ing Party shall not notify the Indemnified Party of its desire to
defend the Indemnified Party with respect to such Claim during the
Notice Period or if the Indemnifying Party shall fail to defend such
Claim in good faith and on a timely basis following the Indemnifying
Party's election to defend such claim. The Indemnifying Party shall
not settle or compromise any action or consent to the entry of any
judgment without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld) provided, that an
Indemnified Party shall not be required to consent to any settlement
or judgment which (i) does not include as a term thereof the deliv-
ery by the claimant or plaintiff to the Indemnified Party of a duly
executed written unconditional release of the Indemnified Party from
all Liability in respect of such Claim or (ii) involves the imposi-
tion of equitable remedies, the imposition of any material obliga-
tions on or the waiver or compromise of any material rights of such
Indemnified Party other than financial obligations for which such
Indemnified Party will be indemnified hereunder. Notwithstanding
the foregoing, the Indemnified Party shall have the sole right to
defend, settle or compromise any Claim with respect to which it has
agreed in writing to waive its right to indemnification pursuant to
this Agreement. Notwithstanding the foregoing, the Indemnified
Party, during the period the Indemnifying Party is determining
whether to elect to assume the defense of a matter covered by this
Section 7.4, may take such reasonable actions as it deems necessary
to preserve any and all rights with respect to the matter, without
such actions being construed as a waiver of the Indemnified Party's
rights to defense and indemnification pursuant to this Agreement.
125
<PAGE>
If the Indemnifying Party elects not to defend the Indemnified Party
against a Claim, or fails to notify Indemnified Party of its desire
to defend the Indemnified Party with respect to such Claim during
the Notice Period, then any Loss (including reasonable attorneys
fees and expenses) of the Indemnified Party relating to or arising
out of such Claim shall be the Liability of the Indemnifying Party
hereunder, subject to the limitations set forth in Section 7.2(b)
and Sections 7.3(b) and (c) hereof. To the extent any party shall
direct, control or participate in the defense or settlement of any
third party claim or demand, the other parties will give such party
and its counsel access to, during normal business hours, the rele-
vant business records and other documents, and shall permit them to
consult with the employees and counsel of the Indemnified Party.
The Indemnified Party shall act in good faith in the defense of all
such Claims. Amounts payable by the Indemnifying Party to the
Indemnified Party in respect of any Losses for which such party is
entitled to indemnification hereunder shall be payable by the
Indemnifying Party as incurred by the Indemnified Party except to
the extent contested by the Indemnifying Party.
Section 7.5 Computation of Losses Subject to Indemnifi-
cation.
(a) The amount of any Loss for which indemnification is
provided under this Article VII or otherwise in this Agreement shall
be computed to take into account:
any insurance proceeds to which the Indemni-
fied Party is entitled;
(ii) Tax Benefits and Tax costs pursuant to the
methodology set forth in Section 5.4(b)(iii) hereof; and
(iii) any prior or subsequent recovery in respect
of part or all of a Claim by any Indemnified Party, whether by
payment, discount, credit, offset or otherwise.
(b) Any payments by Seller and the Selling Companies
pursuant to Section 5.4 or this Article VII shall be deemed a
reduction of the Purchase Price for the Sold Shares.
Section 7.6 Certain Other Matters.
(a) Indemnification hereunder shall include liability
for any special, incidental, punitive or consequential damages to
126
<PAGE>
the extent the Indemnified Party pays such amount to a third party
in respect of a claim of such third party. Except as expressly
provided in the preceding sentence, there shall be no indemnifica-
tion by Seller (and the Selling Companies) or Purchaser for any
special, incidental, punitive or consequential damages.
(b) If the Closing shall occur, the indemnification
provisions of this Article VII shall be the sole and exclusive
remedy for any inaccuracy or breach of any representation or warran-
ty or any breach of any covenant or agreement made in this Agreement
other than in respect of any claim for fraudulent misrepresentation.
No party shall be entitled to seek, and to the fullest extent
permitted by applicable Law, the parties hereto waive, any rights
they might otherwise have to rescind the sale and purchase of the
Sold Shares.
(c) Upon making any payment to an Indemnified Party for
any indemnification claim pursuant to this Article VII, the Indemni-
fying Party shall be subrogated, to the extent of such payment, to
any rights which the Indemnified Party or its Affiliates may have
against any other Persons with respect to the subject matter under-
lying such indemnification claim and the Indemnified Party shall, at
the Indemnifying Party's sole cost and expense, take such actions as
the Indemnifying Party may reasonably require to perfect such
subrogation or to pursue such rights against such other Persons as
the Indemnified Party or its Affiliates may have.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be termi-
nated at any time prior to the Scheduled Closing Date:
(a) by written agreement of Purchaser and Seller;
(b) by either Purchaser or Seller, by giving written
notice of such termination to the other parties, if Closing shall
not have occurred on or prior to 7 September 1998 (unless the
failure to consummate the Closing by such date shall be due to the
failure of the party seeking to terminate this Agreement to have
fulfilled any of its obligations under this Agreement, including,
without limitation, the obligations of Purchaser and Seller under
Section 5.3 hereof);
127
<PAGE>
(c) by either Purchaser or Seller if at a duly held
meeting of shareholders or Seller or at any adjournment thereof at
which such item is voted upon, the Shareholder Approval shall have
not been obtained and thirty days shall have elapsed from the date
of such meeting (or adjournment thereof); or
(d) by either Seller or Purchaser in the event that any
Governmental Authority located in Australia, the United States or
the United Kingdom shall have issued a final, non-appealable order,
decree or ruling or taken any other final, non-appealable action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable.
Section 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement
in accordance with Section 8.1 hereof, this Agreement shall thereaf-
ter become void and have no effect, and no party hereto shall have
any liability to the other parties or their respective Affiliates,
directors, officers or employees, except for the obligations of
Seller and Purchaser contained in this Section 8.2 and in Sections
5.1(b), 5.19(a) (except as provided in Section 8.2(b)) 9.1, 9.7,
9.8, 9.9 and 9.11 hereof, and except that nothing herein will
relieve any party from liability for any breach of this Agreement
prior to such termination except as provided in Section 8.2(c).
(b) If this Agreement is terminated pursuant to Section
8.1(c) and there is not then the ability of Seller to terminate this
Agreement otherwise pursuant to Section 8.1 (b) or (d), then (i)
Seller shall promptly pay to Purchaser by wire transfer of immedi-
ately available funds to an account designated by Purchaser, U.S.$1-
5,000,000 as liquidated damages in respect of, and the sole and
exclusive remedy for, all claims, damages, expenses and losses of
any nature against Seller, its Affiliates, its respective directors,
officers, shareholders, partners, attorneys, accountants, agents and
employees thereof related to this Agreement, the termination hereof
or the transactions contemplated hereby and (ii) the waiver set
forth in Section 5.19(a) of this Agreement shall terminate.
(c) Following the failure of the Shareholder Approval
to have been obtained at a duly convened meeting of shareholders of
Seller or at any adjournment thereof at which such item is voted
upon, the covenants and agreements set forth in this Agreement shall
cease to be of any force and effect except for those sections of
this Agreement specifically enumerated in Section 8.2(a).
128
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices or other communica-
tions hereunder shall be deemed to have been duly given and made if
in writing and if served by personal delivery upon the party for
whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if
sent by telecopier, provided that the telecopy is promptly confirmed
by telephone confirmation thereof, to the person at the address set
forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
To Seller or any Selling Company
BTR plc
Carlisle Place
London, SW1P 1BX
Telephone: +44-171-821-3805
Telecopy: +44-171-821-3806
Attn: General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: 212-735-3000
Telecopy: 212-735-2000
Attn: Eileen Nugent Simon, Esq.
Stephen F. Arcano, Esq.
To Purchaser or any Purchasing Company:
Owens-Illinois, Inc.
One Seagate
Toledo, OH 43666
Telephone:419-247-1114
Telecopy: 419-247-2226
Attn: General Counsel
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
129
<PAGE>
New York, New York 10017
Telephone: 212-455-2000
Telecopy: 212-455-2502
Attn: Alan M. Klein, Esq.
Section 9.2 Amendment; Waiver; Invalidity. Any provi-
sion of this Agreement (including any Schedule or Exhibit hereto)
may be amended or waived if, and only if, such amendment or waiver
is in writing and signed, in the case of an amendment, by Purchaser
and Seller, or in the case of a waiver, by the party against whom
the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. In the event that any one or
more of the provisions contained in this Agreement or in any other
instrument referred to herein, shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
Section 9.3 Assignment. No party to this Agreement may
assign any of its rights or obligations under this Agreement without
the prior written consent of the other parties hereto except that
Purchaser may without such consent assign its rights to purchase the
Sold Shares hereunder to one or more wholly-owned Subsidiaries;
provided, that no such assignment by Purchaser shall relieve Pur-
chaser of any of its obligations hereunder and that Purchaser shall
unconditionally guarantee the obligations of such Subsidiary and
shall hold harmless and indemnify Seller for any additional Tax or
other cost resulting from such assignment.
Section 9.4 Entire Agreement.
(a) This Agreement (including all Schedules and Exhib-
its hereto) contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such
matters, except for the Confidentiality Agreement which will remain
in full force and effect for the term provided for therein and other
than any written agreement of the parties that expressly provides
that it is not superseded by this Agreement.
(b) Each of Seller and the Selling Companies agrees and
undertakes that it has no right against and shall not make any claim
against any employee, director, agent, officer or adviser of any
Purchaser or any of its Affiliates arising out of or in connection
130
<PAGE>
with (i) the negotiations antecedent to and subject matter of this
Agreement; (ii) any representation, warranty, statement, disclosure,
undertaking, promise or inducement, whether express or implied;
(iii) any conduct of Purchaser or any of its Affiliates or any
Person having actual or ostensible authority to act on behalf of
Purchaser or any of its Affiliates in relation to the purchase of
the Sold Shares, the negotiations antecedent to this Agreement or
the information made available in connection therewith.
(c) Purchaser agrees and undertakes that it has no
rights against and shall not make any claim against any employee,
director, agent, officer or adviser of any member of the Seller's
Group arising out of or in connection with (i) the negotiations
antecedent to and subject matter of this Agreement; (ii) any repre-
sentation, warranty, statement, disclosure, undertaking, promise or
inducement, whether express or implied; (iii) any conduct of any
member of the Seller Group or any Person having actual or ostensible
authority to act on behalf of any member of the Seller Group in
relation to the sale of the Sold Shares, the negotiations antecedent
to this Agreement or the information made available in connection
therewith, including, without prejudice to the generality of the
foregoing, any such persons as are named in the definition of
"Knowledge of Seller".
Section 9.5 Fulfillment of Obligations. Any obligation
of any party to any other party under this Agreement, which obliga-
tion is performed, satisfied or fulfilled by an Affiliate of such
party, shall be deemed to have been performed, satisfied or ful-
filled by such party.
Section 9.6 Parties in Interest. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person
other than Purchaser, the Purchasing Companies, Seller, the Selling
Companies or their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement, it being understood
that the foregoing shall not limit the right of Seller or Purchaser,
as the case may be, to bring claims for indemnification under
Section 7.2 or Section 7.3 as the case may be in respect of indemni-
fiable Losses of other Seller Indemnified Party or Purchaser Indem-
nified Parties, as the case may be.
Section 9.7 Public Disclosure. Notwithstanding any-
thing herein to the contrary, each of the parties to this Agreement
hereby agrees with the other party hereto that, except as may be
required to comply with the requirements of any applicable Laws, and
131
<PAGE>
the rules and regulations of each stock exchange upon which the
securities of one of the parties is listed, if any, and except in
connection with the information to be provided by Seller to its
shareholders for purposes of obtaining the Shareholder Approval
required in Section 6.1(d), no press release or similar public
announcement or communication shall, if prior to the Closing, be
made or caused to be made concerning the execution or performance of
this Agreement unless the parties shall have agreed in advance with
respect thereto.
Section 9.8 Return of Information. If for any reason
whatsoever the transactions contemplated by this Agreement are not
consummated, Purchaser shall promptly return to Seller all books and
records furnished by Seller, any Selling Company, any Packaging
Company, any of their respective Affiliates or any of their respec-
tive agents, employees, or representatives (including all copies,
summaries and abstracts, if any, thereof) and shall not use or
disclose the information contained in such books and records for any
purpose or make such information available to any other entity or
person.
Section 9.9 Expenses. Except as otherwise expressly
provided in this Agreement and as provided in the Rockware Indemnity
Agreement, dated 27 February 1998, whether or not the transactions
contemplated by this Agreement are consummated, all costs and
expenses incurred in connection with this Agreement and the transac-
tions contemplated hereby shall be borne by the party incurring such
expenses.
Section 9.10 Schedules. The disclosure of any matter
in any Schedule to this Agreement shall be deemed to be a disclosure
for any other Schedule for which such matter would reasonably be
expected to be pertinent in light of the disclosure made, but shall
expressly not be deemed to constitute an admission by any Selling
Company or Purchaser, or to otherwise imply, that any such matter is
material for the purposes of this Agreement.
SECTION 9.11 GOVERNING LAW. THE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK, INCLUDING NEW YORK GENERAL OBLIGATIONS LAW SECTIONS 5-
1401 AND 5-1402. With respect to any Action arising out of or
relating to this Agreement or the transactions contemplated hereby,
Seller, the Selling Companies, Purchaser and the Purchasing Compa-
nies hereby agree and consent to be subject to the exclusive juris-
diction of the United States District Court for the Southern Dis-
trict of New York and in the absence of such Federal jurisdiction,
the parties consent to be subject to the exclusive jurisdiction of
132
<PAGE>
the Supreme Court of the State of New York, County of New York. The
parties hereto irrevocably waive the defense of an inconvenient
forum to the maintenance of any such Action. Each of Purchaser,
Seller and each Selling Company further irrevocably consents to the
service of process out of any of the aforementioned courts in any
such Action by the mailing of copies thereof by registered airmail,
postage prepaid, to such party at its address set forth in this
Agreement, such service of process to be effective upon acknowledge-
ment of receipt of such registered mail. Nothing in this Section
shall affect the right of any party hereto to serve legal process in
any other manner permitted by law. The consents to jurisdiction set
forth in this Section shall not constitute general consents to
service of process in the State of New York and shall have no effect
for any purpose except as provided in this Section and shall not be
deemed to confer rights on any Person other than the parties hereto.
The parties hereto agree that a final judgement in any such Action
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Seller
and the Selling Companies agree that Purchaser and the Purchasing
Companies will be able to serve process on Seller or any Selling
Company at BTR Inc., 333 Ludlow Street, Stamford, Connecticut 06902.
Purchaser and the Purchasing Companies agree that Seller and Selling
Companies will be able to serve process on Purchaser or any Purchas-
ing Company at CT Corporation Systems, 1633 Broadway, New York, New
York 10019.
Section 9.12 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original, and all of which shall constitute one and the same
agreement.
Section 9.13 Headings. The heading references herein
and the table of contents hereto are for convenience purposes only,
do not constitute a part of this Agreement and shall not be deemed
to limit or affect any of the provisions hereof.
133
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused
this Agreement to be executed as of the date first written above.
Owens-Illinois, Inc.
By: /s/ David G. Van Hooser
-----------------------
Name:
Title:
United Glass, Limited.
By: /s/ David G. Van Hooser
-----------------------
Name:
Title:
Owens-Illinois International B.V.
By: /s/ David G. Van Hooser
-----------------------
Name:
Title:
Owens-Illinois (Australia) Pty Limited
By: /s/ David G. Van Hooser
-----------------------
Name:
Title:
134
<PAGE>
BTR plc
By: /s/ J.B. Saunders
-----------------
Name:
Title:
BTR Australia Limited
By: /s/ J.B. Saunders
-----------------
Name:
Title:
BTR (European Holdings) B.V.
By: /s/ J.B. Saunders
-----------------
Name:
Title:
BTR Finance B.V.
By: /s/ J.B. Saunders
-----------------
Name:
Title:
135
<PAGE>
Nylex Investments Pty Limited
By: /s/ J.B. Saunders
-----------------
Name:
Title:
HDH Holdings Ltd.
By: /s/ J.B. Saunders
-----------------
Name:
Title:
Brake and Signal Holdings (Aust.) Pty
Ltd.
By: /s/ J.B. Saunders
-----------------
Name:
Title:
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-47519) of Owens-Illinois, Inc. and in the related
Prospectus, in the Registration Statement (Form S-8 No. 33-57139) pertaining
to the Amended and Restated Owens-Illinois, Inc. Stock Purchase and Savings
Program and the Amended and Restated Owens-Illinois, Inc. Long-Term Savings
Plan, in the Registration Statement (Form S-8 No. 33-44252) pertaining to the
Amended and Restated Stock Opton Plan for Key Employees of Owens-Illinois,
Inc., in the Registration Statement (Form S-8 No. 33-57141) pertaining to the
Stock Option Plan for Directors of Owens-Illinis, Inc., and in the
Registration Statement (Form S-8 No. 333-47691) pertaining to the 1997 Equity
Participaton Plan of Owens-Illinois, Inc. of our report dated April 7, 1998,
with respect to the combined financial statements of BTR Packaging included in
this Current Report on Form 8-K of Owens-Illinois, Inc.
/s/ Ernst & Young
-----------------
Ernst & Young
Melbourne, Australia
April 16, 1998
