UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1998
Commission file number 1-7349
BALL CORPORATION
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
765/747-6100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ X
] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 26, 1998
Common Stock,
without par value 30,363,528 shares
<PAGE>
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended March 29, 1998
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statement of Income for the
three month periods ended March 29, 1998, and March 30, 1997
3
Unaudited Condensed Consolidated Balance Sheet at March 29,
1998, and December 31, 1997 4
Unaudited Condensed Consolidated Statement of Cash Flows
for the three month periods ended March 29, 1998, and March
30, 1997 5
Notes to Unaudited Condensed Consolidated Financial Statements
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II. OTHER INFORMATION 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars except per share amounts)
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------
March 29, March 30,
1998 1997
------------------- ------------------
<S> <C> <C>
Net sales $ 549.7 $ 479.8
------------------- ------------------
Costs and expenses
Cost of sales 491.2 431.6
General and administrative expenses 28.4 26.7
Selling and product development expenses 5.0 3.7
Relocation and other 6.3 (1.2)
Interest expense 12.7 9.9
------------------- ------------------
543.6 470.7
------------------- ------------------
Income before taxes on income 6.1 9.1
Provision for income tax expense (3.1) (2.8)
Minority interests 2.6 1.6
Equity in losses of affiliates (0.3) (0.9)
------------------- ------------------
Net income 5.3 7.0
Preferred dividends, net of tax benefit (0.7) (0.7)
------------------- ------------------
Earnings available to common shareholders $ 4.6 $ 6.3
=================== ==================
Earnings per share of common stock $ 0.15 $ 0.21
=================== ==================
Diluted earnings per share $ 0.14 $ 0.20
=================== ==================
Cash dividends declared per common share $ 0.15 $ 0.15
=================== ==================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
<TABLE>
<CAPTION>
March 29, December 31,
1998 1997
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets
Cash and temporary investments $ 41.3 $ 25.5
Accounts receivable, net 315.7 301.4
Inventories, net
Raw materials and supplies 140.4 184.9
Work in process and finished goods 274.3 228.4
Deferred income tax benefits and prepaid expenses 57.2 57.9
------------------ ------------------
Total current assets 828.9 798.1
------------------ ------------------
Property, plant and equipment, at cost 1,543.7 1,556.1
Accumulated depreciation (662.4) (636.6)
------------------ ------------------
881.3 919.5
------------------ ------------------
Investment in affiliates 78.5 74.5
Goodwill, net 212.1 194.8
Other assets 106.2 103.2
------------------ ------------------
$2,107.0 $2,090.1
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 462.7 $ 407.0
Accounts payable 248.3 258.6
Salaries and wages 53.6 78.3
Other current liabilities 97.0 93.9
------------------ ------------------
Total current liabilities 861.6 837.8
------------------ ------------------
Noncurrent liabilities
Long-term debt 359.5 366.1
Deferred income taxes 61.4 60.5
Employee benefit obligations and other 144.3 139.8
------------------ ------------------
Total noncurrent liabilities 565.2 566.4
------------------ ------------------
Contingencies
Minority interests 44.0 51.7
------------------ ------------------
Shareholders' equity
Series B ESOP Convertible Preferred Stock 59.9 59.9
Unearned compensation - ESOP (37.0) (37.0)
------------------ ------------------
Preferred shareholder's equity 22.9 22.9
------------------ ------------------
Common stock (issued 33,913,805 shares - 1998;
33,759,234 shares - 1997) 342.0 336.9
Retained earnings 402.4 402.3
Accumulated other comprehensive loss (23.5) (22.8)
Treasury stock, at cost (3,616,530 shares - 1998;
3,539,574 shares - 1997) (107.6) (105.1)
------------------ ------------------
Common shareholders' equity 613.3 611.3
------------------ ------------------
Total shareholders' equity 636.2 634.2
------------------ ------------------
$2,107.0 $2,090.1
================== ==================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------
March 29, March 30,
1998 1997
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 5.3 $ 7.0
Reconciliation of net income
to net cash used in operating activities:
Depreciation and amortization 29.7 24.0
Relocation and other 6.3 (1.2)
Other 3.8 0.2
Changes in working capital components,
excluding effect of acquisition (57.4) (88.0)
------------------ ------------------
Net cash used in operating activities (12.3) (58.0)
------------------ ------------------
Cash flows from investing activities
Additions to property, plant and equipment (16.9) (27.2)
Investment in and advances to affiliates (2.6) (4.8)
Acquisition of M.C. Packaging, net of cash acquired - (152.3)
Other 2.2 5.6
------------------ ------------------
Net cash used in investing activities (17.3) (178.7)
------------------ ------------------
Cash flows from financing activities
Net change in short-term debt 56.5 116.7
Net change in long-term debt (7.7) (4.3)
Proceeds from issuance of common stock under
various employee and shareholder plans 5.1 4.5
Acquisitions of treasury stock (2.5) (10.2)
Common dividends (4.5) (4.8)
Other (1.5) 0.5
------------------ ------------------
Net cash provided by financing activities 45.4 102.4
------------------ ------------------
Net increase (decrease) in cash 15.8 (134.3)
Cash and temporary investments:
Beginning of period 25.5 169.2
------------------ ------------------
End of period $ 41.3 $ 34.9
================== ==================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
Ball Corporation and Subsidiaries
March 29, 1998
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
General.
The accompanying condensed consolidated financial statements have been prepared
by the Company without audit. Certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and reported amounts of revenues and expenses during
the reporting period. Future events could affect these estimates. However, the
Company believes that the financial statements reflect all adjustments which are
of a normal recurring nature and are necessary for a fair statement of the
results for the interim period.
Results of operations for the periods shown are not necessarily indicative of
results for the year, particularly in view of some seasonality in packaging
operations. It is suggested that these unaudited condensed consolidated
financial statements and accompanying notes be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest annual report.
Reclassifications.
Certain prior year amounts have been reclassified in order to conform with the
1998 presentation.
New Accounting Standards.
Effective January 1, 1998, Ball adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." See the
note, "Shareholders' Equity" for information regarding SFAS No. 130.
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements and requires interim reporting of
selected operating segments information effective, for Ball, in 1999.
Acquisitions.
Reynolds Global Can Business
In April 1998, Ball and Reynolds Metals Company (Reynolds) signed a definitive
purchase agreement, under which Ball will acquire substantially all of Reynolds'
global aluminum beverage container manufacturing business for a total purchase
price of approximately $820 million.
Ball will use a combination of cash and, at Ball's option, up to $100 million of
Ball common stock to acquire all of Reynolds' North American beverage can
manufacturing assets, which consist largely of 16 plants in 12 states and Puerto
Rico, as well as Reynolds' approximate one-third interest in Latasa, a Brazilian
company which operates beverage can plants in Argentina, Brazil and Chile. The
acquisition of Reynolds' can business is subject to government antitrust
approval, transaction financing and refinancing of existing Ball debt and
customary closing conditions.
<PAGE>
Additionally, the acquisition by Ball of Reynolds' interest in Latasa is subject
to certain third party consents. Ball and Reynolds have agreed to discuss
further the possible later acquisition by Ball of Reynolds' minority interest in
a can manufacturing company in Saudi Arabia.
The transaction is expected to close in the second half of 1998. The $820
million total purchase price assumes certain incentives and other requirements,
which both Ball and Reynolds expect will be achieved. If the conditions to
acquire Reynolds' interest in Latasa are not met, the acquisition price for
Reynolds' North American beverage can assets will be reduced appropriately.
M.C. Packaging
As reported, in early 1997 the Company acquired approximately 75 percent of M.C.
Packaging (Hong Kong) Limited (M.C. Packaging). Since year end, asset appraisals
and other analyses have been completed which resulted in an adjustment to the
preliminary allocation of the purchase price, decreasing fixed assets by
approximately $20 million, with a corresponding increase in goodwill from the
amount reported at year end.
Relocation and Other.
On February 4, 1998, Ball announced that it would relocate its corporate
headquarters to an existing company-owned building in Broomfield, Colorado. The
total cost of the headquarters relocation is estimated to be $22.5 million
($13.8 million after tax or 46 cents per share). Generally accepted accounting
principles do not permit financial statement recognition of certain costs, such
as employee relocation, until they are incurred. Therefore the Company recorded
a pretax charge of $6.3 million ($3.8 million after tax or 13 cents per share)
for costs paid or incurred in the first quarter of 1998 and to reflect the
estimated net realizable values of certain properties and assets in Muncie,
Indiana, the current location of the corporate headquarters. It is anticipated
that the remainder of the relocation costs will be recorded and paid largely in
the second and third quarters of 1998.
Dispositions and other in the first quarter of 1997 was comprised of a pretax
gain of $1.2 million ($0.7 million after tax or two cents per share) from the
sale of an investment in Datum Inc.
Shareholders' Equity.
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. In accordance with SFAS No. 130, the Company is required to
report the changes in shareholders' equity from all sources during the period
other than those resulting from investments by shareholders (i.e., issuance or
repurchase of common shares and dividends). Although adoption of this standard
has not resulted in any change to the historic basis of the determination of
earnings or shareholders' equity, the comprehensive income components recorded
under generally accepted accounting principles and previously included under the
category, "retained earnings," are displayed as "accumulated other comprehensive
loss," within the unaudited condensed consolidated balance sheet. The
composition of accumulated other comprehensive loss at March 29, 1998 is
primarily the cumulative adjustment for foreign currency translation and
additional minimum pension liability.
Total comprehensive income for the three-month periods of 1998 and 1997 is $4.6
million and $8.2 million, respectively. The difference between net income and
comprehensive income for the quarters of 1998 and 1997 is primarily the
adjustment for foreign currency translation.
Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
were 1,635,410 shares at March 29, 1998, and December 31, 1997.
<PAGE>
Earnings per Share.
The following table provides additional information on the computation of
earnings per share amounts:
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------
March 29, March 30,
(dollars in millions except per share amounts) 1998 1997
------------------- ------------------
<S> <C> <C>
Earnings per Common Share
Net income $ 5.3 $ 7.0
Preferred dividends, net of tax benefit (0.7) (0.7)
------------------- ------------------
Net earnings available to common shareholder $ 4.6 $ 6.3
------------------- ------------------
Weighted average common shares (000s) 30,203 30,447
------------------- ------------------
Earnings per common share $ 0.15 $ 0.21
=================== ==================
Diluted Earnings per Share
Net income $ 5.3 $ 7.0
Adjustment for deemed ESOP cash contribution
in lieu of the ESOP Preferred dividend (0.6) (0.5)
------------------- ------------------
Adjusted net earnings available to common shareholders $ 4.7 $ 6.5
------------------- ------------------
Weighted average common shares (000s) 30,203 30,447
Effect of dilutive stock options 174 33
Common shares issuable
upon conversion of the ESOP Preferred stock 1,889 1,938
------------------- ------------------
Weighted average shares applicable
to diluted earnings per share 32,266 32,418
------------------- ------------------
Diluted earnings per share $ 0.14 $ 0.20
=================== ==================
</TABLE>
Contingencies.
In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the competitive nature of the industries in which
Ball participates, its operations in developing markets outside the U.S.,
changing commodity prices for the materials used in the manufacture of its
products, and changing capital markets. Where practicable, the Company attempts
to reduce these risks and uncertainties, through the establishment of risk
management policies and procedures, including, at times, the use of certain
derivative financial instruments.
The Company was not in default of any loan agreement at March 29, 1998, and has
met all payment obligations. M.C. Packaging was, however, in noncompliance with
certain financial ratio provisions under a fixed term loan agreement, of which
$37.5 million was outstanding at quarter end. The lender has granted M.C.
Packaging an unspecified period to present a revised, comprehensive financing
structure for its business. Management believes that M.C. Packaging has made
significant progress towards concluding an alternative, longer term financing
arrangement satisfactory to all parties and that although such an arrangement
has substantially been concluded, a definitive agreement has not yet been
executed. Management also believes that existing credit resources will be
adequate to meet foreseeable financing requirements. Ball Corporation does not
guarantee any debt obligations of M.C. Packaging.
<PAGE>
The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
annual report.
From time to time, the Company is subject to routine litigation incident to its
business. Additionally, the U.S. Environmental Protection Agency has designated
Ball as a potentially responsible party, along with numerous other companies,
for the cleanup of several hazardous waste sites. However, the Company's
information at this time does not indicate that these matters will have a
material, adverse effect upon financial condition, results of operations,
capital expenditures or competitive position of the Company.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and the accompanying
notes. Ball Corporation and subsidiaries are referred to collectively as "Ball"
or the "Company" in the following discussion and analysis.
ACQUISITION
In April 1998, Ball and Reynolds Metals Company (Reynolds) signed a definitive
purchase agreement, under which Ball will acquire substantially all of Reynolds'
global aluminum beverage container manufacturing business for a total purchase
price of approximately $820 million.
Ball will use a combination of cash and, at Ball's option, up to $100 million of
Ball common stock to acquire all of Reynolds' North American beverage can
manufacturing assets, which consist largely of 16 plants in 12 states and Puerto
Rico, as well as Reynolds' approximate one-third interest in Latasa, a Brazilian
company which operates beverage can plants in Argentina, Brazil and Chile. The
acquisition of Reynolds' can business is subject to government antitrust
approval, transaction financing and refinancing of existing Ball debt and
customary closing conditions.
Additionally, the acquisition by Ball of Reynolds' interest in Latasa is subject
to certain third party consents. Ball and Reynolds have agreed to discuss
further the possible later acquisition by Ball of Reynolds' minority interest in
a can manufacturing company in Saudi Arabia.
The transaction is expected to close in the second half of 1998. The $820
million total purchase price assumes certain incentives and other requirements,
which both Ball and Reynolds expect will be achieved. If the conditions to
acquire Reynolds' interest in Latasa are not met, the acquisition price for
Reynolds' North American beverage can assets will be reduced appropriately.
RESULTS OF OPERATIONS
Consolidated Results
Consolidated net sales of $549.7 million for the first quarter of 1998 increased
14.6 percent compared to the first quarter of 1997. Net earnings available to
common shareholders of $4.6 million, or 15 cents per share, for the first
quarter of 1998 included the a pretax charge of $6.3 million ($3.8 million after
tax or 13 cents per share) for the relocation of the Company's corporate office.
Excluding this charge, the first quarter 1998 net earnings available to common
shareholders would have been $8.4 million, or 28 cents per share, compared to
$6.3 million, or 21 cents per share, in the first quarter of 1997.
In February 1998, Ball announced that it would relocate its corporate
headquarters to an existing company-owned building in Broomfield, Colorado. The
total cost of the headquarters relocation is estimated to be $22.5 million
($13.8 million after tax or 46 cents per share). Generally accepted accounting
principles do not permit financial statement recognition of certain costs, such
as employee relocation, until they are incurred. Therefore the Company recorded
a pretax charge of $6.3 million for costs paid or incurred in the first quarter
of 1998 and to reflect the estimated net realizable values of certain properties
and assets in Muncie, Indiana, the current location of the corporate
headquarters. It is anticipated that the remainder of the relocation costs will
be recorded and paid largely in the second and third quarters of 1998.
The first quarter of 1997 included a $1.2 million pretax gain ($0.7 million
after tax or two cents per share) related to the sale of Datum Inc. common
shares owned by the Company.
Interest and Taxes
Consolidated interest expense for the first quarter of 1998 was $12.7 million
compared to $9.9 million for the first quarter of 1997. The increase was
attributable primarily to the acquisition of M.C. Packaging and lower
capitalization of interest due to lower capital spending in 1998.
Ball's consolidated effective income tax rate was 50.8 percent for the first
quarter of 1998 compared to 30.8 percent for the 1997 first quarter, which
included a reduction in taxes for creditable costs of U.S. research and
development of $1.7 million or five cents per share. Excluding these credits,
the consolidated effective income tax rate for 1997 would have been
approximately 49.5 percent.
Results of Equity Affiliates
Equity in losses of affiliates for the first quarter of 1998 were $0.3 million
versus $0.9 million for the first quarter of 1997. Results in 1998 included
Ball's share of currency exchange losses of $0.6 million after tax, or two cents
per share, primarily related to U.S. dollar denominated debt held by the
Company's 40 percent owned Thailand venture. Since a change in Thailand's
monetary policy in early July 1997, the Thai baht has depreciated significantly
versus the U.S. dollar. Since the end of the first quarter, the Thai baht has
strengthened against the U.S. dollar, such that the first quarter loss has been
more than offset. However, the Thai baht remains volatile, and there can be no
assurance that the current trend will continue. Results for 1997 included the
effects of costs for start-up operations in Brazil, Thailand and China, as well
as lower earnings from certain equity affiliates reflecting the market softness
in China.
Business Segments
Packaging
Packaging segment net sales were $461.0 million for the first quarter of 1998
compared to $382.0 million in the first quarter of 1997. Segment operating
earnings increased approximately 85 percent in the first quarter of 1998
compared to 1997, primarily as a result of improved earnings within the North
American metal container businesses. These improvements were partially offset by
lower results within FTB Packaging operations in China.
Within the packaging segment, sales in the North American metal container
businesses increased approximately 10 percent for the three-month period of 1998
compared to 1997, primarily due to increased sales volumes. Metal beverage can
and end shipments increased 10 percent and 15 percent, respectively, in the
first quarter of 1998 compared to 1997, though industry can shipments only
increased an estimated two percent. Shipments of metal food containers increased
more than eight percent in the first quarter of 1998 versus 1997, with the
additional volumes from can lines operational in 1998, which were being
relocated from a closed facility in 1997. The increase in operating earnings was
a result of the increased sales volumes, coupled with higher fixed cost
absorption and improved manufacturing performance.
Sales of PET containers in the first quarter of 1998 more than doubled compared
to the first quarter of 1997 with the additional sales volumes from long-term
supply agreements obtained in the third quarter of 1997 in connection with the
acquisition of certain PET container manufacturing assets. Gross margins also
improved in 1998, but were essentially offset by an increase in research and
development costs. The business operated at a loss in both years, though the
1998 loss was at a reduced level from 1997.
Sales within Ball's FTB Packaging operations in 1998 increased substantially
compared to the first quarter of 1997 with the inclusion of a full quarter of
sales from M.C. Packaging in 1998. FTB Packaging recorded an operating loss in
both the 1998 and 1997 first quarters. The 1998 operating loss was primarily due
to a soft metal beverage container market in China, as well as lower pricing
resulting from the current supply/demand imbalance in that area.
<PAGE>
Aerospace and Technologies
Sales in the aerospace and technologies segment decreased to $88.7 million in
the first quarter of 1998, compared to $97.8 million in 1997. The sales
reduction from 1997 to 1998 reflects, in large part, reduced activity in
connection with a classified program. Operating earnings also decreased in 1998
compared to 1997, reflecting both the effects of lower 1998 sales and a strong
demand for certain higher margin telecommunications equipment in 1997, including
one-time early delivery incentives earned. Backlog at the 1998 first quarter end
was approximately $271 million compared to $267 million at December 31, 1997,
and $322 million at the end of the first quarter of 1997. Year-to-year
comparisons of backlog are not necessarily indicative of the trend of future
operations.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations in 1998 of $12.3 million decreased from $58.0 million in
1997 due in part to lower working capital requirements and improved operating
results. Capital spending of $16.9 million in the first quarter of 1998 is below
depreciation of $27.1 million. Total 1998 capital spending is expected to be
approximately $95 million.
Total debt was $822.2 million at March 29, 1998, compared to $773.1 million at
December 31, 1997. The debt-to-total capitalization ratio was 54.7 percent at
March 29, 1998, compared to 53.0 percent as of December 31, 1997. The increase
in debt, which resulted in an increase in the debt-to-total capitalization
ratio, is attributable primarily to normal working capital requirements.
In the U.S., Ball has committed revolving credit agreements totaling $280
million consisting of a five-year facility for $150 million and 364-day
facilities for $130 million. A Canadian dollar commercial paper facility
provides for committed short-term funds of approximately $85 million. At quarter
end, approximately $78.4 million was outstanding related to this program. The
Company also has short-term uncommitted credit facilities in the U.S. of
approximately $326 million, and, in Asia, FTB Packaging, including M.C.
Packaging, had short-term uncommitted credit facilities of approximately $280
million at the end of the 1998 first quarter. At March 29, 1998, the Company had
$114.5 million and $172.2 million outstanding under these facilities,
respectively.
The Company was not in default of any loan agreement at March 29, 1998, and has
met all payment obligations. M.C. Packaging was, however, in noncompliance with
certain financial ratio provisions under a fixed term loan agreement of which
$37.5 million was outstanding at February 28, 1998. The lender has granted M.C.
Packaging an unspecified period to present a revised, comprehensive financing
structure for its business. Management believes that M.C. Packaging has made
significant progress towards concluding an alternative, longer term financing
arrangement satisfactory to all parties and that although such an arrangement
has substantially been concluded, a definitive agreement has not yet been
executed. Management also believes that existing credit resources will be
adequate to meet foreseeable financing requirements. Ball Corporation does not
guarantee any debt obligations of M.C. Packaging.
OTHER
Ball is subject to various risks and uncertainties in the ordinary course of
business due, in part, to the competitive nature of the industries in which the
Company participates, its operations in developing markets outside the U.S.,
changing commodity prices of the materials used in the manufacture of its
products, and changing capital markets. Where practicable, Ball attempts to
reduce these risks and uncertainties.
<PAGE>
As discussed earlier, the Company has recognized its share of exchange gains and
losses primarily related to U.S. dollar denominated debt held by its 40 percent
equity affiliate in Thailand. The Company also has U.S. dollar denominated debt
in China, and in Brazil through its 50 percent owned affiliate. In addition,
Ball has other U.S. dollar denominated assets and liabilities outside the U.S.
which are subject to exchange rate fluctuations.
The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
annual report.
From time to time, the Company is subject to routine litigation incident to its
business. Additionally, the U.S. Environmental Protection Agency has designated
Ball as a potentially responsible party, along with numerous other companies,
for the cleanup of several hazardous waste sites. However, the Company's
information at this time does not indicate that these matters will have a
material, adverse effect upon financial condition, results of operations,
capital expenditures or competitive position of the Company.
As is commonly known, there is a potential issue facing companies regarding the
ability of information systems to accommodate the year 2000. Ball is evaluating
its information systems and believes that all critical systems can, or will be
able to, accommodate the coming century, without material adverse effect on the
Company's financial condition, results of operations, capital spending or
competitive position.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.
FORWARD-LOOKING STATEMENTS
The Company has made or implied certain forward-looking statements in this
report. These forward-looking statements represent the Company's goals and are
based on certain assumptions and estimates regarding the worldwide economy,
specific industry technological innovations, industry competitive activity,
interest rates, capital expenditures, pricing, currency movements, product
introductions, and the development of certain domestic and international
markets. Some factors that could cause the Company's actual results or outcomes
to differ materially from those discussed in the forward-looking statements
include, but are not limited to, fluctuation in customer growth and demand; the
weather; fuel costs and availability; regulatory action; federal and state
legislation; interest rates; labor strikes; maintenance and capital
expenditures; local economic conditions; the authorization and control over the
availability of government contracts and the nature and continuation of those
contracts and related services provided thereunder; the success or lack of
success of the satellite launches and business of EarthWatch; the devaluation of
international currencies; the ability to refinance M.C. Packaging and to obtain
adequate credit resources for foreseeable financing requirements of the
Company's businesses; the inability of the Company to achieve year 2000
compliance; the ability of the Company to acquire other businesses; and the
inability of the Company to close the proposed transaction with Reynolds. If the
Company's assumptions and estimates are incorrect, or if it is unable to achieve
its goals, then the Company's actual performance could vary materially from
those goals expressed or implied in the forward-looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The Company previously reported that a lawsuit was filed by an individual named
Tangee E. Daniels on behalf of herself and two minor children and four other
plaintiffs alleging that the Company's Metal Beverage Container Operations a/k/a
Ball Corporation and over 50 other defendants disposed of certain hazardous
wastes at the hazardous waste disposal site operated by Gibraltar Chemical
Resources, Inc., located in Winona, Smith County, Texas. The lawsuit alleges
that the plaintiffs incurred certain damages for past, present, and future
medical treatment; mental and emotional anguish and trauma; loss of wages and
earning capacity; physical impairment, as well as punitive damages and
prejudgment interest, in unspecified amounts. Similar lawsuits were filed in
Williams v. AKZO Nobel Chemicals, Inc. (dismissed but appealed), Steich v. AKZO
et al. (voluntarily dismissed) and Adams v. AKZO et al. The Company has been
notified that the plaintiffs in the Daniels case have now non-suited the
generator defendants of all of their causes of action, without prejudice,
effective upon filing of the notice of partial nonsuit on May 4, 1998. Based
upon the information available to the Company at the present time, the Company
is unable to express an opinion as to the exposure of the Company for the
remaining matters.
Item 2. Changes in securities
There were no events required to be reported under Item 2 for the quarter ending
March 29, 1998.
Item 3. Defaults upon senior securities
There were no events required to be reported under Item 3 for the quarter ending
March 29, 1998.
Item 4. Submission of matters to a vote of security holders
There were no events required to be reported under Item 4 for the quarter ending
March 29, 1998.
Item 5. Other information
There were no events required to be reported under Item 5 for the quarter ending
March 29, 1998.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement by and among Ball Corporation, Ball
Metal Beverage Container Corp. and Reynolds Metals Company
27.1 Financial Data Schedule
99.1 Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995, as amended.
<PAGE>
(b) Reports on Form 8-K
A Current Report on Form 8-K filed February 12, 1998, reporting under
Item 5 an announcement that Ball will move its corporate headquarters
from Muncie, Indiana to the Denver/Boulder area in Colorado.
A Current Report on Form 8-K filed April 22, 1998, reporting under Item
5 an announcement that Ball Corporation and Reynolds Metals Company
have signed a definitive agreement under which Ball will acquire
substantially all of Reynolds' global aluminum beverage container
operations.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ball Corporation
(Registrant)
By: /s/ R. David Hoover
R. David Hoover
Vice Chairman
and Chief Financial Officer
Date: May 13, 1998
<PAGE>
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
March 29, 1998
EXHIBIT INDEX
Description
<TABLE>
<CAPTION>
Exhibit
----------------
<S> <C>
Asset Purchase Agreement by and among Ball Corporation, Ball Metal Beverage
Container Corp. and Reynolds Metals Company (Filed herewith.) EX-10.1
Financial Data Schedule (Filed herewith.) EX-27.1
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995,
as amended. (Filed herewith.) EX-99.1
</TABLE>
<PAGE>
EXHIBIT 10.1
- ------------
ASSET PURCHASE AGREEMENT
by and among
Ball Corporation,
Ball Metal Beverage Container Corp.
and
Reynolds Metals Company
dated as of April 22, 1998
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets............................2
Section 1.2 Excluded Assets........................................6
Section 1.3 Assumption of Liabilities..............................9
Section 1.4 Purchase Price........................................11
Section 1.5 Cash Purchase Price Adjustment........................12
Section 1.6 Adjustment for Periodic Items.........................14
Section 1.7 Closing...............................................15
Section 1.8 Further Assurances....................................18
Section 1.9 Allocation of Purchase Price..........................18
Section 1.10 Torrance, California Site............................19
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 2.1 Disclosure Schedule...................................23
Section 2.2 Corporate Organization................................24
Section 2.3 Operation of the Business.............................24
Section 2.4 Authorization.........................................24
Section 2.5 No Violation..........................................25
Section 2.6 Consents and Approvals................................25
Section 2.7 Financial Statements..................................26
Section 2.8 Accounts Receivable...................................27
Section 2.9 Inventory and Working Capital.........................27
Section 2.10 Absence of Certain Changes...........................27
Section 2.11 Title to Properties; Encumbrances....................29
Section 2.12 Equipment............................................30
Section 2.13 Intellectual Property Rights.........................31
Section 2.14 Certain Contracts....................................32
Section 2.15 Orders and Commitments...............................33
Section 2.16 Taxes................................................34
Section 2.17 Litigation...........................................35
Section 2.18 Compliance with Law..................................35
Section 2.19 Environmental Protection.............................36
Section 2.20 Labor Relations......................................37
Section 2.21 Employee Benefit Matters.............................39
Section 2.22 Customers and Suppliers..............................41
Section 2.23 Brokers and Finders..................................41
Section 2.24 Investment...........................................41
Section 2.25 Capitalization of Subsidiaries.......................42
Section 2.26 Latasa Agreements....................................44
Section 2.27 Latasa Offering Statement............................44
Section 2.28 Latasa Financial Statements..........................45
Section 2.29 SVE Agreement........................................45
Section 2.30 Seller's Exposure Estimates..........................45
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BALL AND BUYER
Section 3.1 Corporate Organization, etc...........................45
Section 3.2 Authorization, etc....................................46
Section 3.3 No Violation..........................................46
Section 3.4 Litigation............................................47
Section 3.5 SEC Reports...........................................47
Section 3.6 Brokers and Finders...................................47
Section 3.7 Authorization of Shares...............................47
Section 3.8 Consents and Approvals................................48
Section 3.9 Financing.............................................48
ARTICLE IV
COVENANTS OF SELLER
Section 4.1 Conduct of the Business...............................49
Section 4.2 Access................................................51
Section 4.3 Consents..............................................51
Section 4.4 Title to Real Property................................52
Section 4.5 No Solicitation.......................................54
Section 4.6 Supplements to Disclosure Schedule....................55
Section 4.7 Bulk Sales Laws.......................................55
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.1 Reasonable Efforts....................................55
Section 5.2 WARN Act..............................................56
Section 5.3 Regulatory and Other Authorizations; Consents.........56
Section 5.4 Employee Matters for Represented Employees............57
Section 5.5 General Employee Matters, Employee Matters for
Nonrepresented Employees and Welfare Benefit
Provisions for All Employees..........................70
Section 5.6 Special Employment and Transition Rules for
Salaried Employees....................................83
Section 5.7 Tax Matters...........................................87
Section 5.8 Non-Competition.......................................92
Section 5.9 Confidentiality.......................................94
Section 5.10 Materials Received After Closing.....................95
Section 5.11 Access to Books and Records..........................95
Section 5.12 Actions by Ball......................................97
Section 5.13 Delivery of Financial Statements.....................97
Section 5.14 Litigation Support...................................97
Section 5.15 Returns..............................................98
Section 5.16 Accounts Receivable..................................98
Section 5.17 Inadvertently Retained Information...................98
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
Section 6.1 Survival of Representations, Warranties
and Covenants.......................................99
Section 6.2 Indemnification by Ball and Buyer.....................99
Section 6.3 Indemnification by Seller............................100
Section 6.4 Claims for Indemnification...........................100
Section 6.5 Environmental Indemnification........................103
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATION
Section 7.1 Representations and Warranties True..................105
Section 7.2 Performance..........................................105
Section 7.3 No Injunction, Litigation, etc.......................105
Section 7.4 Stockholder's Agreement..............................105
Section 7.5 Legal Opinion........................................106
Section 7.6 HSR Act Waiting Periods..............................106
Section 7.7 Certificates.........................................106
Section 7.8 Consents.............................................106
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATION
Section 8.1 Representations and Warranties True..................106
Section 8.2 Performance..........................................107
Section 8.3 No Injunction, Litigation, etc.......................107
Section 8.4 Governmental Filings and Consents; Third
Party Consents.....................................107
Section 8.5 Stockholder's Agreement..............................107
Section 8.6 HSR Act Waiting Periods..............................107
Section 8.7 No Material Adverse Change...........................107
Section 8.8 Certificates.........................................108
Section 8.9 Financing Conditions.................................108
Section 8.10 Actions by Seller....................................108
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.1 Methods of Termination...............................108
Section 9.2 Procedure upon Termination...........................109
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Amendment and Modification..........................110
Section 10.2 Waiver of Compliance................................110
Section 10.3 Expenses, etc.......................................110
Section 10.4 Notices.............................................110
Section 10.5 Assignment..........................................112
Section 10.6 Publicity...........................................112
Section 10.7 Governing Law.......................................112
Section 10.8 Counterparts........................................112
Section 10.9 Headings............................................112
Section 10.10 Entire Agreement...................................112
Section 10.11 Third Parties......................................113
Section 10.12 Dispute Resolution.................................113
ANNEXES
A Defined Terms
1.1(a) Real Property
1.1(c) Intellectual Property Rights
1.1(e) Permits and Environmental Permits
1.1(q) Other Assets
1.1(aa) Seller's Equity Interests
1.2(f) Retained Contracts
1.2(g) Excluded Claims Against Third Parties
1.2(j) Headquarters Assets
1.2(m) Excluded Assets
1.2(s) Torrance Extrusion Plant
1.3(a)(vii) Other Assumed Liabilities
1.3(b)(iv) Other Excluded Liabilities
8.10 Actions by Seller
EXHIBITS
A Stockholder's Agreement
1.2(t) Data Processing Services Agreement
1.7(b)(ii) Bill of Sale
1.7(b)(ix) Assignment and Assumption of Leases
1.7(c)(ii) Assignment and Assumption Agreement
1.7(c)(viii) Agreement Regarding Performance of Technical
Services
1.7(d)(ii) Transitional Trademark License Agreement
1.7(d)(iii) Supply Program Agreement
1.7(d)(iv) Incentive Loan Agreement
1.7(d)(v) Transition Services Agreement
1.7(d)(vi) Payroll Services Agreement
1.7(d)(vii) [intentionally omitted]
1.7(d)(viii) Trademark License Agreement
1.7(d)(ix) Cross-License Agreement
1.7(d)(x) Transportation Services Agreement
1.7(d)(xi) Human Resources Services Agreement
1.9 Allocation of Purchase Price
1.10(a) Subdivision
1.10(b) Lease of Torrance Can Plant
4.4(b) Forms (Model Deed Certificate; Moultrie and Hayward
Easements)
5.4(f) Offset Procedure Examples
6.5 Environmental Indemnification Procedures
7.5 Opinion of Ball General Counsel
DISCLOSURE SCHEDULE
2.3 Operation of Business
2.4 Authorization
2.5 Non-Contravention
2.6 Consents and Approvals
2.7 Financial Statements
2.8 Accounts Receivable
2.9 Inventory
2.10 Absence of Certain Changes
2.11 Title to Properties; Encumbrances
2.12 Equipment
2.13 Intellectual Property
2.13(e) Year 2000 Program
2.13(f) Excluded Trademarks
2.13(g) Non-Transferred Patents, Trademarks and Copyrights
2.14(a) Material Contracts
2.14(b) Other Material Contract Matters
2.15 Orders and Commitments
2.16 Taxes
2.17 Litigation
2.18 Non-Compliance with Laws
2.19 Environmental Matters
2.19(a) Environmental Permits
2.19(c) Final Environmental Studies
2.20 Labor Relations
2.20(a) Written Policies, Rules and Procedures
2.21(a) Employee Benefit Matters and Plans
2.22 Customers and Suppliers
2.25(a) Capitalization of Domestic Subsidiaries
2.25(b) Capitalization of RIB
2.25(c) Capitalization of Latasa and Latasa Subsidiaries
2.25(d) Other Subsidiary Issues
2.26(d) Latasa Agreements and Non-Contravention
2.27 Latasa Offering Statement
2.28 Latasa Financial Statements
2.30 Seller's Exposure Estimates
3.7 Ball Shares
3.8 Buyer and Ball Consents and Approvals
4.4(b) Title Commitments and Permitted Exceptions
5.5(a) Employee Benefits Data
5.5(c)(2) List of Headquarter Employees
5.6(a)(1) Reimbursement for Seconded Employee Expenses
5.6(c) Retained Seller Employees
7.8 Consents and Approvals that are a Condition
to Seller's Obligation to Close
8.4 Consents and Approvals that are a Condition
to Buyer's and Ball's Obligation to Close
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of April 22, 1998 (the
"Agreement"), is by and among Ball Corporation, an Indiana corporation ("Ball"),
Ball Metal Beverage Container Corp., a Colorado corporation and an indirect
wholly-owned subsidiary of Ball ("Buyer") and Reynolds Metals Company, a
Delaware corporation ("Seller"). Capitalized terms not otherwise defined in the
text of this Agreement are used as defined in Annex A hereto.
W I T N E S S E T H:
WHEREAS, Seller and its majority-owned subsidiaries are engaged on a
global basis in the design, manufacture, distribution and sale of aluminum
beverage can bodies and ends (such business, as conducted throughout the world
directly by Seller and its majority-owned subsidiaries (including licensing,
directly or indirectly, of intellectual property and know-how used in the
manufacture and sale of aluminum can bodies and ends but excluding (i) Seller's
operations engaged in the manufacture and sale of aluminum can, end and tab
sheet, the recycling and reclamation of aluminum cans and the design,
manufacture and sale of printing cylinders, printing plates and color
separations that act as suppliers to, or customers of, Seller's global can
business, (ii) Seller's operations engaged in the design, manufacture,
distribution and sale of machinery, equipment and components and parts therefor
used in the manufacture of metal beverage can bodies and ends and certain can
filling operations (the "Machinery Operations") and (iii) "parent company"
finance and administration activities conducted at Seller's corporate
headquarters at 6601 West Broad Street, Richmond, Virginia) is hereinafter
referred to as the "Business"); and, in connection with the development of the
Business on a global basis, Seller and its majority-owned subsidiaries have
acquired, directly or indirectly, minority interests in, and entered into
technical services and/or management agreements with, Latas de Aluminio,
S.A.-LATASA ("Latasa") and its subsidiaries, Superenvases Envalic C.A. ("SVE")
and United Arab Can Manufacturing Company, Limited ("UAC");
WHEREAS, Seller's interest in Latasa is held by two indirect
subsidiaries, Reynolds International do Brasil Participacoes, Ltda, a Brazilian
corporation ("RIB"), and Reynolds International Latin America
S.A., a Panamanian corporation ("RILA");
WHEREAS, Seller has reached agreement with Ball and Buyer to sell to
them or their Designees the Business (including Seller's interest in Seller's
wholly-owned subsidiaries, Latas de Aluminio Reynolds, Inc., a Delaware
corporation ("LAR") and RCAL Cans, Inc., a Delaware corporation ("RCAL"),
together with RCAL's wholly-owned subsidiary, RIND Cans, Inc., a Delaware
corporation ("RIND")) and Seller's interests in RIB and SVE and the equity
securities of Latasa held by RILA, all on the terms and conditions set forth in
this Agreement; and
WHEREAS, concurrently with the closing of the transactions
contemplated hereby, if Ball elects to issue Ball Shares to Seller pursuant to
the terms of this Agreement, Ball and Seller will enter into a stockholder's
agreement, substantially in the form of Exhibit A (the "Stockholder's
Agreement").
NOW, THEREFORE, in consideration of the mutual agreements and the
representations and warranties contained herein and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement, at the closing of the transactions contemplated by
this Agreement (the "Closing"), Seller shall sell, transfer, convey, assign and
deliver, or cause to be sold, transferred, conveyed, assigned and delivered, to
Buyer, Ball or their Designees, as provided below, and Buyer, Ball or their
Designees shall purchase, acquire and accept from Seller and its majority-owned
subsidiaries, either directly or indirectly through the acquisition of all of
Seller's interests in LAR and RCAL, all assets, rights and interests in assets,
other than the Excluded Assets, which are held or owned by Seller or its
majority-owned subsidiaries as of the Closing and which are used or held for use
exclusively or primarily in the conduct of the Business, including, without
limitation, the following (collectively, the "Business Assets"):
(a) Real Property: The owned real properties described in
Annex 1.1(a), together with the plants, buildings, fixtures and improvements
thereon and all tenements, hereditaments and appurtenances thereto (the "Owned
Real Property"), as well as Seller's leasehold interests (or those of any
Affiliate of Seller) as lessee under the real property leases described in Annex
1.1(a) (the "Real Property Leases" and the property covered thereby, together
with Seller's (or such Affiliate's) interests in all plants, buildings, fixtures
and improvements thereon, the "Leased Premises"). The Owned Real Property and
the Leased Premises together are sometimes referred to herein as the "Business
Locations."
(b) Personal Property Other Than Inventory: The furniture,
fixtures, machinery, equipment, equipment subassemblies, furnishings, vehicles,
tools, dies, jigs, printing plates, physical embodiments of label films and
color standards, service, spare and replacement parts, stores, packaging
materials, pallets, slip sheets and top frames, office and other supplies and
other tangible personal property (other than Inventory) that is either (i)
located at the Business Locations, (ii) reflected on the most recent balance
sheet included in the Audited Financial Statements (other than Excluded Assets
and any assets sold or disposed of in the ordinary course of business and
consistent with the terms of this Agreement since the date of such balance
sheet) or (iii) otherwise used or held for use exclusively or primarily in the
Business, whether or not such property is reflected as an asset on the books and
records of Seller (the "Equipment").
(c) Intellectual Property Rights: Except as otherwise
specifically identified as excluded in Annex 1.1(c), (i) the Patents,
Trademarks, and Copyrights listed or described in Annex 1.1(c), (ii) Technology,
and (iii) all agreements (whether or not with related parties) under which
Seller or its majority-owned subsidiaries have granted, or have been granted,
the right to use Technology or the Patents, Trademarks and Copyrights listed or
described in Annex 1.1(c) (the Business Assets described in this Section 1.1(c),
collectively, the "Intellectual Property Rights").
(d) Business Information: All books and records (i)
customarily located at the Business Locations (other than those exclusively
related to Excluded Assets or Excluded Liabilities) or (ii) customarily located
at locations other than the Business Locations which are used exclusively or
primarily in the Business, including, without limitation, files, computer disks
and tapes, telephone directories, invoices, credit and sales records, personnel
records (subject to applicable law), customer lists (including addresses and
phone numbers), supplier lists, manuals (including policy manuals), drawings,
accounting books and records, detailed fixed- asset ledgers and records, sales
literature, current price lists and discounts, promotional signs and literature,
marketing and sales programs, manufacturing and quality control records and
procedures and compliance policies and procedures; and access to and, if
requested by Ball or Buyer, copies of such other books and records to the extent
relating to the Business or Business Assets or Assumed Liabilities which are
customarily located at locations other than the Business Locations; provided
that Seller may retain and provide Buyer with copies of any records necessary
for Seller's ongoing business or tax purposes or for performance of obligations
retained by Seller hereunder (collectively, "Business Information").
(e) Governmental Permits: To the extent assignable, (i) the
Permits and the Environmental Permits that relate exclusively to the Business,
as more particularly described in Annex 1.1(e) and (ii) any Business-related
portions of any Permits and Environmental Permits that are used in the Business
but do not relate exclusively to the Business (the Permits described in this
clause (ii), the "NonExclusive Permits").
(f) Leases and Contracts: The rights of Seller and its
Affiliates in, to and under (i) all contracts, leases of personal property,
agreements, licenses, commitments and warranties related exclusively or
primarily to the Business, (ii) sales orders, purchase orders and quotations and
bids generated by the Business, and (iii) all material agreements to which
Seller or any of its Affiliates is a party, and which relate to the ownership,
management, governance and financing of, as well as technical assistance to,
Latasa and its subsidiaries (the "Latasa Agreements") and the contracts and
agreements relating to ownership, management and governance of, and provision of
know-how and technical assistance to SVE.
(g) Inventory: The inventories of raw materials,
work-in-process and finished products carried on the books of the Business
(including any such inventories that have been written off or written down on
the books of the Business), located at the Business Locations or related
exclusively or primarily to the Business (excluding the inventories described in
Section 1.1(m), the "Inventory").
(h) Accounts Receivable and Prepaid Expenses: All notes and
accounts receivable on the books of or generated by the Business as of the
Closing (the "Accounts Receivable"), including, without limitation, all trade
notes and trade accounts receivable and receivables from employees of Seller who
are Transferred Employees, and all deposits and prepaid rents, license fees and
other expenses to the extent related to the Business or the Business Assets.
(i) Computer Software: All computer software related
exclusively to the Business, including all documentation and source codes with
respect to such software (to the extent Seller or any Affiliate of Seller
possesses such documents or source codes) and, to the extent they relate
exclusively to the Business and they are legally assignable or transferable by
Seller, licenses and leases of software.
(j) Non-Exclusive Contracts: Any Business-related portions of
any contract, claim, lease, sales/purchase order, quotation, bid, agreement,
license or contractual right to which Seller or any Affiliate of Seller is a
party with respect to operations or activities beyond those exclusively or
primarily related to the Business (each, a "Non-Exclusive Contract"), to the
extent that such portions are legally assignable or transferable to Buyer.
(k) Single Location Plans: All assets of any Single
Location Plans that are transferred to, or assumed by, Buyer under Section
5.4.
(l) Petty Cash: All petty cash on hand at the Business
Locations.
(m) Consigned Inventories: Seller's rights to inventories of
supplies and raw materials at the Business Locations consigned as of the Closing
by (x) third parties or (y) other businesses of Seller or any Affiliate of
Seller that act as suppliers to the Business (to the extent such inventories
have not been included on the Closing Statement); provided that (i) Seller is
not hereby conveying to Buyer an ownership interest in such inventories, (ii)
such inventories shall not be deemed a part of the Inventory for purposes of
Section 1.5 or otherwise and (iii) the rights conveyed under clause (y) are only
Seller's rights as owner of the Business and not as owner of such business
acting as supplier.
(n) Restrictions on Competition and Confidentiality: To the
extent assignable, all rights of Seller or any Affiliate of Seller to enforce
restrictions on competition and obligations regarding confidentiality or limited
use of information imposed on third parties and present and former officers,
executives and employees of Seller and its Affiliates to the extent such
restrictions and obligations relate to the Business; provided, however, that
Seller shall retain the right to seek relief on behalf of itself and its
majority-owned subsidiaries for any damages suffered by any of them as a result
of any breach of any such restriction or obligation.
(o) Claims: All claims, causes of action, choses in action,
rights of recovery and rights of setoff of any kind (including, without
limitation, warranty rights against suppliers to the Business), known or
unknown, liquidated or unliquidated, to the extent they relate to or arise out
of the Business Assets, or the condition of the Business Assets, existing at the
Closing Date or the conduct of the Business prior to the Closing; provided that
any of the foregoing that arise from acts, omissions or conditions that gave
rise, or shall give rise, to an Excluded Liability shall, to the extent arising
from the Excluded Liability and Seller discharges such Excluded Liability,
accrue to the benefit of Seller.
(p) Goodwill and Associated Assets: Any and all goodwill,
customer lists, going concern value and similar assets related exclusively
or primarily to, or used exclusively or primarily in, the Business.
(q) Other Assets: Such other assets as are specifically
identified in Annex 1.1(q).
In addition to the Business Assets, subject to the terms and
conditions of this Agreement, at Closing, Seller and its Affiliates shall sell,
transfer, convey, assign and deliver, or cause to be sold, transferred,
conveyed, assigned and delivered, to Buyer, Ball or its Designees, and Buyer,
Ball or its Designees shall purchase, acquire and accept from Seller and its
Affiliates, Seller's and its Affiliates' rights, title and interest in (x) any
equity securities of or other equity interests in SVE and RIB and (y) the equity
securities of Latasa held by RILA, all as listed in Annex 1.1(aa). Such equity
securities, together with the equity securities of LAR and RCAL being
transferred to Ball, Buyer or their Designees pursuant hereto, are sometimes
referred to herein as the "Shares."
The parties agree that the Business Assets and Shares shall be
purchased by Ball, Buyer or their Designees as directed by Buyer in writing at
least five days prior to the Closing.
Section 1.2 Excluded Assets. Notwithstanding the provisions of
Section 1.1, the following properties, assets and rights used in, or related to,
Seller's operation of the Business are excluded from the Business Assets (the
"Excluded Assets"):
(a) The name "Reynolds" and all variations
thereof;
(b) Except as provided in Section 1.1(h) and (l), cash,
financial instruments and marketable securities on hand and in banks, cash
deposits with respect to workers' compensation and insurance, cash equivalents,
and investments;
(c) Accounts Receivable owed to Seller from any of its
employees who are not Transferred Employees;
(d) Aluminum can sheet inventory that is, consistent with past
practice and the terms of existing supply agreements, carried on the books of
Seller's Mill Products Division and not included on the Closing Statement,
whether or not located at a Business Location; provided that Buyer will receive
Seller's rights as a consignee of any such inventory that is located at a
Business Location as if Seller's Mill Products Division were a third party
supplier to the Business;
(e) Seller's checkbooks and canceled checks;
(f) Subject to Sections 1.1(j) and 1.7(e), all
Non-Exclusive Contracts and any agreements specifically identified in Annex
1.2(f) (the "Retained
Contracts");
(g) All claims and litigation against third parties (and
benefits to the extent they arise therefrom) to the extent that such claims and
litigation relate in whole or in part to Excluded Liabilities or Excluded Assets
or are set forth in Annex 1.2(g);
(h) Seller's insurance policies and rights in connection
therewith;
(i) Rights arising from any refunds due with respect to
insurance premium payments and deposits;
(j) Except for any assets specifically enumerated in Annex
1.2(j), any and all tangible assets located at Seller's corporate headquarters
at 6601 West Broad Street in Henrico County, Virginia;
(k) All of Seller's right, title and interest in, to and under
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, copyright rights, trade dress, business and product names, logos,
slogans, and all pending applications for and registrations of trademarks and
service marks, which (i) are neither used exclusively in the Business nor
applicable exclusively to the Business or (ii) include one or more of the
following marks: the trademarks REYNOLDS; Knight, Horse and Dragon Design or the
names "Reynolds," "Reynolds Metals Company," "Reynolds Aluminum" or any
variation thereof or any trademark containing REYNOLDS, REY, REYNO, or a Knight
Horse and Dragon design (the trademarks described in this clause (ii) are
referred to herein as the "Reynolds Marks");
(l) Except for assets in Single Location Plans assumed by
Buyer under Section 5.4, all assets held in or for the Plans;
(m) Any assets identified in Annex 1.2(m);
(n) Books and records exclusively relating to Excluded
Assets and Excluded Liabilities;
(o) Any Tax refunds, credits or rights arising therefrom, for
all periods or portions of periods ending before the Closing Date; provided that
none of Ball, Buyer or their Affiliates has incurred or will incur an increased
Tax burden as a result of such refund;
(p) Except for those assets identified in Annex 1.1(q),
Seller's former Houston, Texas, and Fulton, New York, can plants;
(q) Seller's or its Affiliates' interests in, and
contracts relating to, UAC;
(r) Seller's rights under this Agreement and under any
agreement, instrument or document delivered in connection herewith;
(s) The portion of the Owned Real Property located in
Torrance, California which constitutes Seller's extrusion plant as more
specifically described in Annex 1.2(s) subject to minor adjustment of the
boundary lines thereof in accordance with Section 1.10; and
(t) Except as specifically provided in Section 1.1 (a), (e),
(i), and (o), and subject to Section 1.7(e) and the data processing services
agreement substantially in the form of Exhibit 1.2(t) (the "Data Processing
Services Agreement"), any owned or leased premises, Permits, Environmental
Permits, computer software, claims, causes of action, choses in action, rights
of recovery and rights of setoff.
Section 1.3 Assumption of Liabilities.
(a) On the Closing Date, except as otherwise specifically
provided in this Agreement or in any agreement, instrument or document delivered
in connection herewith, subject to the terms and conditions of this Agreement,
Buyer shall assume the following liabilities (the "Assumed Liabilities") and no
others:
(i) Liabilities relating to Transferred Employees and
employee benefits to the extent set forth in Sections 5.4, 5.5 and 5.6,
including, without limitation, all liabilities and obligations related to
the Single Location Plans assumed by Buyer under Section 5.4 and under
Collective Bargaining Agreements in accordance with Sections 5.4 and 5.5;
(ii) All trade accounts payable of the Business
(including trade payables to other divisions of Seller for aluminum can
sheet) to the extent set forth on the Closing Statement and other current
liabilities of the Business to the extent set forth on the Closing
Statement;
(iii) All liabilities and obligations of Seller and its
majority-owned subsidiaries to deliver goods or services to customers of
the Business arising from orders placed in the normal course of business
of the Business which are assigned to Buyer pursuant hereto;
(iv) All obligations of Seller or any of its
majority-owned subsidiaries to be performed from and after the
Closing Date under any contract, lease, commitment, license, permit,
approval, authorization or other agreement or arrangement constituting
part of the Business Assets to the extent assigned to Buyer pursuant
hereto;
(v) Subject to Ball's and Buyer's right to
indemnification from Seller set forth in Article VI, liabilities and
obligations under Environmental Laws with respect to Environmental
Conditions;
(vi) All liabilities that constitute matters of record
relating to Seller's ownership of the Owned Real Property to the extent
specifically disclosed in Section 4.4(b) of the Disclosure Schedule and
subject to the limitations set forth therein or accepted by Ball or Buyer
under Section 4.4; and
(vii) All other liabilities to the extent set forth in or
specifically reserved against on the Closing Statement or to the extent
specifically described in Annex 1.3(a)(vii).
(b) Except as expressly provided in Section 1.3(a), Buyer will
not assume or be liable for the following liabilities and obligations (the
"Excluded Liabilities"):
(i) Except as otherwise provided in this Agreement
(including, without limitation, in Section 1.6, which shall control to the
extent of any conflict with this Section 1.3(b)), (x) any federal, state,
local or foreign taxes including, without limitation, any net income,
alternative or add-on minimum tax, gross income, gross receipts, excise,
sales, use, ad valorem, franchise, capital, paid-up capital, profits,
greenmail, license, withholding, payroll, environmental, windfall profits
tax or other tax or any custom or duty, or any other charges, fees,
levies, penalties or other assessments imposed by any Taxing Authority,
including, in each case, any interest, penalties or additions thereto
("Taxes"), that are attributable to any period or portion thereof ending
on or before the Closing Date imposed on Seller or its Affiliates or
related to the Business or the Shares and (y) any liability for Taxes of
any other person under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise;
(ii) All liabilities and obligations relating to any
employee or any employee benefits which are not to be assumed by Buyer
under Section 1.3(a)(i) or Sections 5.4, 5.5 and 5.6;
(iii) All liabilities or obligations to the extent
relating to the acquisition, ownership or use of any of the Excluded
Assets (including the Retained Contracts);
(iv) Any liabilities listed in Annex 1.3(b)(iv);
(v) All liabilities or obligations arising under
Environmental Laws other than those expressly assumed by Buyer pursuant to
Section 1.3(a)(v), including, without limitation, all liabilities or
obligations arising under Environmental Laws in connection with facts,
events, conditions, actions or omissions existing or occurring before
Closing at any location other than the Business Locations ("Offsite
Obligations");
(vi) Except as otherwise provided in Section 1.3(a)(vii),
any liability or claim for injury to person or property or warranty claim
which arises out of the operation of the Business or the sale of any
product before the Closing Date; and
(vii) Any other liabilities, debts, commitments or
obligations, known or unknown, contingent or otherwise, of Seller or its
Affiliates other than those specified in Section 1.3(a).
Section 1.4 Purchase Price. Subject to the terms and conditions of
this Agreement, in reliance on the representations, warranties and agreements
contained herein, and in consideration of the sale, assignment, transfer and
delivery of the Business Assets and the Shares referred to in Section 1.1 and
Seller's other obligations set forth herein (including in Section 5.8), Ball and
Buyer agree to pay or cause to be paid to Seller at the Closing, and Seller
agrees to accept the sum of $820 million (the "Purchase Price") payable as
follows: (i) shares of common stock, no par value, of Ball having an aggregate
Designated Value, determined as set forth below, of up to $100 million (the
"Ball Shares") plus (ii) an amount in cash equal to the Purchase Price minus the
aggregate Designated Value of the Ball Shares (the "Cash Price"), plus or minus
the adjustment set forth in Section 1.5. Not later than the close of business on
the fourth day prior to the Closing Date, Ball shall notify Seller whether it
intends to pay a portion of the Purchase Price in Ball Shares and the number of
Ball Shares and the per Share and aggregate Designated Value of the Ball Shares
to be so issued. If Ball elects to pay a portion of the Purchase Price in Ball
Shares, the shares so issued shall have an aggregate Designated Value of no less
than $25 million and no more than $100 million. The per Share "Designated Value"
of Ball Shares shall mean the average of the daily volume weighted average
trading price of Ball Shares as reported in the Bloomberg Financial Markets for
the 20 consecutive trading days ending five days prior to the Closing Date;
provided that in no event shall the per Share Designated Value of Ball Shares
used to determine the number of Ball Shares to be issued in payment of a portion
of the Purchase Price exceed $42 or be less than $25.25.
Section 1.5 Cash Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than 60 days
following the Closing Date, Seller shall prepare and deliver to Buyer a working
capital statement of the Business as of 12:01 a.m. on the Closing Date (the
"Closing Statement"), setting forth the current assets included in the Business
Assets less the current liabilities included in the Assumed Liabilities (such
difference being referred to herein as the "Working Capital") in conformity with
United States Generally Accepted Accounting Principles ("GAAP") determined on a
basis consistent with the balance sheet included in the Audited Financial
Statements (the "Audited Balance Sheet") except that a current liability of (i)
$250,000 shall be recorded as a reserve on the Closing Statement for title
insurance payments and (ii) $250,000 shall be recorded as a reserve for SUB
liability in accordance with Section 5.4(c). For greater certainty, the parties
acknowledge and agree that both the Closing Statement and the Audited Balance
Sheet exclude spare or replacement parts from current assets.
(b) After receipt of the Closing Statement, Buyer shall have
30 days to review it. Buyer and its authorized representatives shall have
reasonable access to all relevant books and records and employees of Seller and
Seller's accountants to the extent required to complete their review of the
Closing Statement, including, without limitation, the accountants' work papers
used in preparation thereof. Unless Buyer delivers written notice to Seller on
or prior to the 30th day after receipt of the Closing Statement specifying in
reasonable detail its objections to the Closing Statement on the grounds that
the Closing Statement was not prepared in accordance with GAAP, consistently
applied with the Audited Balance Sheet or with respect to any arithmetic errors,
the parties shall be deemed to have accepted and agreed to the Closing
Statement. If Buyer so notifies Seller of such an objection to the Closing
Statement, the parties shall within 30 days following the date of such notice
(the "Resolution Period") attempt to resolve their differences. Any resolution
by them as to any disputed amount shall be final, binding, conclusive and
nonappealable, provided, however, that agreement by Seller and Buyer as to the
Final Closing Statement or a determination pursuant to Section 1.5(c) shall not
prevent either party from making any claims under Article VI hereof. The term
"Final Closing Statement" shall mean the definitive Closing Statement agreed to
by Seller and Buyer in accordance with this Section 1.5(b) or the definitive
Closing Statement resulting from the determination made by the Neutral Auditor
in accordance with Section 1.5(c) (in addition to those items theretofore agreed
to by Seller and Buyer).
(c) If at the conclusion of the Resolution Period, the parties
have not resolved the disputes, then all amounts remaining in dispute shall, at
the election of either party, be submitted to an auditor who shall be selected
by Ball and Seller (the "Neutral Auditor"). The Neutral Auditor shall be engaged
no later than three business days after an election by either party to submit
its objections to the Neutral Auditor, and each party agrees to execute, if
requested by the Neutral Auditor, a reasonable engagement letter. The Neutral
Auditor shall be a nationally recognized certified public accounting firm that
is not rendering (and during the preceding two-year period has not rendered)
audit services to either Seller or Ball in North America. If the parties are
unable to agree on such Neutral Auditor, then the respective accounting firms of
each of Ball and Seller shall choose the Neutral Auditor. All fees and expenses
of the Neutral Auditor shall be borne equally by Seller and Buyer. The Neutral
Auditor shall act as an arbitrator to determine, based solely on the
presentations by Seller and Buyer, and not by independent review, only those
issues still in dispute. The Neutral Auditor's determination shall be made
within 30 days of its engagement or as soon thereafter as possible, shall be set
forth in a written statement delivered to Seller and Buyer and shall be final,
binding, conclusive and nonappealable.
(d) All Inventory reflected on the Closing Statement shall be
based upon a physical count of the Inventory taken by Seller (with Buyer and its
independent auditors being permitted to observe such count and take additional
test counts as Buyer reasonably deems appropriate) as of 12:01 a.m. on the
Closing Date. Such physical inventory shall be conducted in accordance with
procedures to be mutually agreed and shall be taken immediately prior to the
Closing Date. The physical inventory shall include all products of Seller and
list the type and quantity of the inventory as of the date the physical count
was taken. For purposes of the Closing Statement, the Inventory shall include
only finished goods, work-in-process and raw materials (which are either
currently used in production of products or are products currently offered for
sale by Seller). In connection with the physical inventory, no later than 90
days after the Closing Date, Buyer shall prepare, with assistance from Seller, a
listing of Inventory deemed to be potentially obsolete and the book value
thereof as reflected on the Closing Statement (the "Inventory Carrying Value").
If any Inventory so identified is not sold by Buyer within twelve months after
the Closing Date, then Seller shall promptly pay to Buyer an amount equal to the
Inventory Carrying Value of such Inventory less the scrap value thereof,
provided that such payment, in the aggregate, shall not exceed $1,000,000.
Notwithstanding any other provision hereof to the contrary, no other reserve for
obsolete and slow-moving inventory shall be included in the Closing Statement.
(e) The Purchase Price shall be (i) increased
dollar-for-dollar to the extent the Working Capital as reflected on the Final
Closing Statement is greater than $78 million and (ii) decreased
dollar-for-dollar to the extent the Working Capital as reflected on the Final
Closing Statement is less than $78 million. The amount of any such change in the
Purchase Price pursuant to this Section 1.5(e) shall be paid by Buyer to Seller,
in the case of an increase, or by Seller to Buyer, in the case of a decrease, in
each case in cash plus interest on such amount from the Closing Date through the
date of payment at the Prime Rate within five business days after the Final
Closing Statement is agreed to by Seller and Buyer or is determined by the
Neutral Auditor. The "Prime Rate" means the prime lending rate as announced by
First Chicago-NBD, or its successor, as in effect on the Closing Date.
Section 1.6 Adjustment for Periodic Items.
(a) Any sales, transfer, stamp or use Tax or fee applicable to
the sale of the Business Assets or Shares to Buyer, Ball or their Designees
pursuant to this Agreement shall be borne as follows. Buyer shall bear the first
$150,000 of the aggregate of such Taxes and fees and the remainder of such Taxes
and fees shall be borne equally by Buyer and Seller. Any such Taxes or fees
applicable to the sale of the Business Assets pursuant to this Agreement shall
initially be paid by the party legally liable under the laws applicable to each
taxing jurisdiction, and the parties shall from time to time remit payments to
one another to effect the sharing arrangements provided in the first sentence of
this Section 1.6(a). Under no circumstances shall this article be construed to
include, nor shall Ball, Buyer or their Affiliates be liable for, any income,
franchise, gross income, gross receipts or excise Tax or any other similar
liability of Seller related to the sale of the Business Assets. Buyer shall
provide Seller with resale exemption certificates or similar documents, as
appropriate. Buyer and Seller shall cooperate in using reasonable efforts of
legal means to minimize, to the extent permitted by law, the aggregate amount of
Taxes, fees and other charges imposed on the transactions contemplated in this
Agreement.
(b) On the Closing Date or as promptly thereafter as
practicable, the parties shall adjust the other annualized or periodic items
related to the Business (to the extent not reserved or accrued for in the Final
Closing Statement) as of the Closing Date, with Seller responsible for matters
up to and including the Closing Date and Buyer responsible for matters from and
after the Closing Date. Such adjustable items shall include, without limitation,
electric, gas, telephone and utility charges of the operations of Seller related
to the Business Locations, either paid or accrued, and amounts paid under leases
and loans; provided, however, that nothing in this Section 1.6 shall increase
the liabilities and obligations of Seller assumed by Buyer pursuant to this
Agreement. Such adjustable items shall also include customer volume rebates and
vendor volume rebates and incentives, which will be attributed to Seller to the
extent such rebates and incentives relate to items purchased prior to the
Closing and to Buyer to the extent such rebates and incentives relate to items
purchased on or after the Closing.
Section 1.7 Closing.
(a) The Closing will take place at the offices of Skadden,
Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker Drive, Chicago, Illinois
60606, within seven days after all conditions set forth in Articles VII and VIII
(other than those requiring only performance by the parties at Closing) have
been satisfied or waived or such other time and place as the parties may agree
upon but in no event earlier than 7 days after the expiration or termination of
the waiting period under the HSR Act (the "Closing Date") and shall be effective
as of 12:01 a.m. on the Closing Date.
(b) At the Closing, Seller will deliver to Ball, Buyer or
their Designees (i) if any Ball Shares are issued pursuant hereto, an executed
copy of the Stockholder's Agreement, (ii) all documents of title necessary to
transfer ownership to Buyer of the Business Assets other than the Real Property,
including a duly executed bill of sale substantially in the form of Exhibit
1.7(b)(ii) (the "Bill of Sale"), (iii) executed copies of the consents referred
to in Section 2.6 hereof, (iv) certificates representing the Shares, accompanied
by appropriate stock powers or other transfer instruments duly executed in blank
or such other evidence of ownership and instruments of transfer as are
appropriate in the applicable jurisdiction, (v) with respect to Patents,
Trademarks and Copyrights included in the Business Assets (the "Filed
Intellectual Property"), (A) one "global assignment" of the Filed Intellectual
Property containing a schedule of all applications therefor and registrations
thereof and (B) individual assignments of Filed Intellectual Property,
applications therefor and registrations thereof, in recordable form for each
jurisdiction in which such Filed Intellectual Property is subsisting, (vi) all
assignments of Permits and Environmental Permits to be acquired by Buyer
pursuant hereto, (vii) duly executed and acknowledged special warranty deeds
conveying title to the Owned Real Property, subject only to the Permitted
Exceptions, (viii) any documents required of Seller by the title company to
issue the title insurance policies and endorsements in accordance with the
provisions of Section 4.4(b) of this Agreement, (ix) duly executed assignment
and assumption agreements with respect to the Real Property Leases substantially
in the form of Exhibit 1.7(b)(ix) (the "Assignment and Assumption of Leases"),
(x) if subdivision of the Torrance, California, parcel of Owned Real Property
has not been completed prior to the Closing, a lease and license of the can
plant portion of such parcel as provided in Section 1.10, (xi) all such other
deeds, consents, endorsements, assignments and other instruments as are
necessary to vest in Buyer, Ball or their Designees title to the Business Assets
and the Shares to be transferred to Buyer, Ball or their Designees and (xii) all
other previously undelivered documents required to be delivered by Seller to
Ball, Buyer or their Designees at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
(c) At the Closing, Ball and Buyer will deliver to Seller (i)
cash in the amount specified in Section 1.4 by wire transfer of immediately
available funds to an account designated in writing by Seller, (ii) a duly
executed assignment and assumption agreement substantially in the form of
Exhibit 1.7(c)(ii) (the "Assignment and Assumption Agreement") for all Assumed
Liabilities, (iii) a duly executed Assignment and Assumption of Leases for the
Real Property Leases, (iv) if any Ball Shares are issued pursuant hereto, a duly
executed Stockholder's Agreement; (v) if any Ball Shares are issued pursuant
hereto, certificates representing the Ball Shares in accordance with Section
1.4, such certificates bearing a legend to the effect set forth in the
Stockholder's Agreement, (vi) if requested by Seller, the agreement regarding
performance of technical services with respect to UAC in substantially the form
of Exhibit 1.7(c)(iii) (the "Agreement Regarding Performance of Technical
Services") and (vi) all previously undelivered documents required to be
delivered by Ball or Buyer to Seller at or prior to the Closing.
(d) At the Closing, Seller, Ball and Buyer shall, or shall
cause their respective Affiliates to, execute and deliver (i) the Data
Processing Services Agreement, (ii) the transitional trademark license agreement
in substantially the form of Exhibit 1.7(d)(ii) (the "Transitional Trademark
License Agreement"), (iii) the supply program agreement in substantially the
form of Exhibit 1.7(d)(iii) (the "Supply Program Agreement"), (iv) an incentive
loan agreement in substantially the form of Exhibit 1.7(d)(iv) (the "Incentive
Loan Agreement"), (v) the transition service agreement in substantially the form
of Exhibit 1.7(d)(v) (the "Transition Services Agreement"), (vi) the payroll
services agreement in substantially the form of Exhibit 1.7(d)(vi) (the "Payroll
Services Agreement"), (vii) [intentionally omitted], (viii) the trademark
license agreement in substantially the form of Exhibit 1.7(d)(viii) (the
"Trademark License Agreement"), (ix) the cross-license agreement in
substantially the form of Exhibit 1.7(d)(ix)(the "Cross-License Agreement"), (x)
the transportation services agreement in substantially the form of Exhibit
1.7(d)(x)(the "Transportation Services Agreement") and (xi) the human resources
services agreement in substantially the form of Exhibit 1.7(d)(xi)(the "Human
Resources Services Agreement") and, together with the Stockholder's Agreement
(if executed), the Data Processing Services Agreement, the Transitional
Trademark License Agreement, the Transition Services Agreement, the Payroll
Services Agreement, the Agreement Regarding Performance of Technical Services
(if executed), the Trademark License Agreement, the Cross-License Agreement, and
the Supply Program Agreement, the "Ancillary Agreements").
(e) To the extent that the sale, conveyance, transfer or
assignment of any agreement, lease, contract or other document or instrument
(including, but not limited to, the Business related portion of any
Non-Exclusive Contract or Non-Exclusive Permit) requires the consent of any
person other than Buyer, Ball or Seller, this Agreement shall not constitute an
agreement to effect such sale, conveyance, transfer or assignment if such action
would constitute a breach thereof unless and until such consent or waiver of
such person has been obtained; provided that the foregoing shall not limit or
affect Seller's representations and warranties in this Agreement or the
condition set forth in Section 8.4 hereof. To the extent that any such consent
or waiver is not obtained by Seller, Seller shall (i) use all reasonable efforts
to provide or cause to be provided to Buyer (or Ball, as the case may be) the
benefits of any such agreement, lease, contract or other document or instrument
for which consent or waiver has not been obtained, (ii) cooperate in any
arrangement, reasonable and lawful as to both Seller and Ball, Buyer or their
Designees designed to provide such benefits to Buyer, Ball or their Designees
(in the case of Business Assets and Shares transferred to such party pursuant to
Section 1.1) after the Closing and (iii) enforce for the account of Buyer, Ball
or their Designees (in the case of Business Assets and Shares transferred to
such party pursuant to Section 1.1 (at Ball's or Buyer's expense, as the case
may be)), any rights of Seller arising from such agreement, lease, contract or
other document or instrument for which consent or waiver has not been obtained
against the other party, including, without limitation, the right to elect to
terminate in accordance with the terms thereof on the advice of Buyer. Subject
to Section 6.4(b), Seller shall hold Ball and Buyer harmless from any Loss
suffered by Ball or Buyer as a result of any failure of Seller to obtain such
consent or waiver. Buyer, Ball or their Designees (in the case of Business
Assets and Shares transferred to such party pursuant to Section 1.1) shall use
all reasonable efforts to perform the obligations of Seller arising under such
agreement, lease, contract or other document or instrument for which consent or
waiver has not been obtained, to the extent that by reason of the transactions
consummated pursuant to this Agreement, Buyer, Ball or their Designees (in the
case of Business Assets and Shares transferred to such party pursuant to Section
1.1) has control over the resources necessary to perform such obligations.
Section 1.8 Further Assurances. After the Closing, each party shall,
from time to time, at the request of the other party and without further cost or
expense to the other party, execute and deliver such other instruments of
conveyance, assignment, transfer and assumption and take such other actions as
the other party may reasonably request, to consummate more effectively the
transactions contemplated hereby and to vest in Ball, Buyer and their Designees
title to the Business Assets and the Shares as contemplated by this Agreement,
or to cause Buyer to assume the Assumed Liabilities, as the case may be. As to
any of such licenses, registrations and permits which are transferable to Ball,
Buyer or their Designees, Seller shall cooperate with Ball, Buyer or their
Designees, to effect the transfer of such licenses, registrations and permits.
Notwithstanding the foregoing, no party shall be required under this Section 1.8
to make any payment or to incur any economic burden other than customary costs
and expenses arising from the performance of such party's obligations under this
Section 1.8.
Section 1.9 Allocation of Purchase Price. The Purchase Price (plus
Assumed Liabilities to the extent properly taken into account under section 1060
of the Code) shall be allocated among the Business Assets, the Shares and the
covenant not to compete in Section 5.8 hereof in accordance with Exhibit 1.9.
Buyer, Ball and Seller shall use their best efforts to agree, as soon as
practical after the Closing, but in no event later than 30 days after the
determination of the Cash Purchase Price Adjustment in Section 1.5, on the
allocation of the Purchase Price, including any adjustment pursuant to Section
1.5 (or such time as is mutually agreed by Seller and Buyer), among the Business
Assets, the Shares, and the covenant not to compete, and prepare and attach a
completed Exhibit 1.9 accordingly. Each of Buyer and Seller shall prepare and
timely file Internal Revenue Service Form 8594, reasonably cooperate with the
other party in the preparation of such forms and furnish the other party with
copies of such forms prepared in draft form within a reasonable period before
the filing due date. Any disputes resulting from disagreement upon the
allocation of the Purchase Price shall be resolved by the Neutral Auditor in
accordance with procedures outlined in Section 1.5(c). Buyer, Ball and Seller
agree to (i) be bound by the allocation in Exhibit 1.9, (ii) act in accordance
with such allocation in filing of all Tax Returns (including, without
limitation, filing Form 8594 with its federal income Tax Return for the year
that includes the Closing Date) and in the course of any Tax audit, Tax review,
or Tax litigation relating thereto and (iii) take no position, and cause all
Affiliates not to take a position, that is inconsistent with such allocation for
federal or state income Tax purposes.
Section 1.10 Torrance, California Site.
(a) Seller's can plant in the City of Torrance, California is
currently a part of an unsubdivided parcel of real estate (the "Parcel") on
which Seller's extrusion plant (which is not part of the Business Assets) (the
"Extrusion Land") is also located. Seller, at its sole cost and expense, shall
use its best efforts to subdivide the Parcel such that the can plant portion of
the site, together with the improvements located thereon depicted as such on
Exhibit 1.10(a) (the "Plant Land"), is a separate legally subdivided lot (the
"Subdivision"). Seller anticipates that such Subdivision may not be completed
until after the Closing Date. Accordingly, if the Subdivision has not been
completed by the Closing Date, Seller and Buyer shall, at the Closing Date,
enter into a lease and license substantially in the form of Exhibit 1.10(b) (the
"Torrance Lease"). Upon completion of the Subdivision process, Seller shall
deliver to Buyer, and Buyer shall accept, a special warranty deed to the Plant
Land in compliance with the title and survey requirements set forth in Section
4.4. Seller will pay any and all costs associated with the Subdivision,
including, without limitation, costs associated with satisfying the conditions
of the Subdivision, the separation of utilities and new utility hook-ups, and
required site modifications such as drainage, fire protection and access. Buyer
shall cooperate with Seller at no out-of-pocket cost to Buyer or Ball (other
than such internal and administrative costs as appearing at hearings, providing
information and executing documents, such as any declaration of easements,
covenants and restrictions required in connection with such Subdivision and
Buyer's and Ball's attorneys' fees). Seller shall provide to Buyer copies of all
notices and material correspondence between the applicable Authority and Seller
regarding the Subdivision, as well as copies of any parcel maps or other
documents submitted to such Authority. Buyer and Ball may participate in any and
all meetings and hearings with or at the applicable Authority regarding the
Subdivision. Seller shall consult with Buyer prior to making official
submissions to any Authority in connection with the Subdivision. In no event
shall Seller execute any documents which create, or agree with any Authority to
impose, any conditions, restrictions or easements which affect the Plant Land
without first obtaining Buyer's written approval, which approval shall not be
unreasonably withheld or delayed. If during the Subdivision process, the
applicable Authority requests changes to the description of the Plant Land from
that described on Exhibit 1.10(a) as a condition to approval of the Subdivision,
the parties shall work cooperatively and in good faith to respond to such
changes so as to maintain, to the greatest degree possible, the business deal
embodied in this Agreement and the related documents and to provide each party
the benefits contemplated herein; provided, that in no event shall Seller modify
the legal description of the Plant Land without first obtaining the written
approval of Buyer, which approval shall not be unreasonably withheld or delayed.
(b) If the Subdivision is not completed and title to the Plant
Land in fee simple has not been transferred to Buyer on or before the second
anniversary of the Closing Date, then except to the extent that Seller's failure
to complete the Subdivision is directly attributable to Buyer's act or failure
to act as required under the Torrance Lease, Seller will indemnify and hold
harmless Buyer from all Losses arising: (i) from Buyer's inability to operate
the Plant Land in a manner reasonably consistent with Seller's prior operation,
where such inability is directly attributable to Buyer's not holding title to
the Plant Land in fee simple, including all such Losses incurred after the
Closing or (ii) from any bona fide sale or mortgage, or attempt to sell or
mortgage, the Leased Premises (as defined in section 1.1 of the Torrance Lease)
to an independent third party, attributable to the "Differential." The
"Differential" equals the excess of the fair market value of a fee simple
interest in the Plant Land as if the Subdivision had occurred over the fair
market value of the Leased Premises as if the Subdivision had not occurred.
Buyer will promptly notify Seller of any inability to operate as described in
clause (b)(i) above.
(c) Until the first to occur of (i) the fourth anniversary of
the Closing Date or (ii) the conveyance of the Plant Land to Buyer, Seller will
not sell, transfer or otherwise convey the Parcel to any third party other than
(w) to Buyer, (x) to an Affiliate of Seller, (y) in connection with a taking by
eminent domain or deed in lieu thereof or (z) as reasonably required to effect
the Subdivision and thereafter, Seller may only sell such property subject to
the Torrance Lease and the right of first refusal set forth below. If at any
time after the fourth anniversary of the Closing Date but before the conveyance
of the Plant Land to Buyer, Seller receives a bona fide offer from any Person to
purchase the Parcel subject to the Torrance Lease or any interest therein, which
offer Seller intends to accept, or Seller intends to execute a contract with
respect to such sale, Seller shall notify Buyer of the terms and provisions of
such offer or contract in reasonable detail and of the intention of Seller to
accept such offer or execute such contract. Buyer shall have the right within
thirty (30) days after such notice to accept the offer to purchase the Parcel on
the same terms and conditions (with appropriate reduction of the purchase price
for any part thereof allocated to the Plant Land, if indeed any reduction is
appropriate given the observation in Section 1.10(g)) and on the other terms and
conditions specified in such offer or contract, subject to the provisions of
Section 1.10(f) below. If Buyer shall not so exercise its right or shall reject
the terms and conditions of such offer or contract within such thirty (30) day
period, Seller may then sell the Parcel, subject to the Torrance Lease, to said
third party purchaser, provided that such sale is for the purchase price and on
the same terms and conditions set forth in the notification to Buyer. If for any
reason, however, such sale to said purchaser is not consummated within 12 months
from the initial notification to Buyer, any subsequent sale shall again be
subject to this right of first refusal. Following any such sale to a third party
purchaser and the assumption by the third party purchaser of all of the
obligations of Seller under the Torrance Lease, Buyer will thereafter look to
the third party purchaser for performance of the Torrance Lease, and Seller will
thereafter have no further obligations with respect to the Plant Land except for
the indemnity obligations of Seller as provided in this Agreement. If Buyer
exercises its right of first refusal under this Section 1.10(c) to purchase the
Parcel, or its Option under Section 1.10(e) to purchase the Parcel, upon the
closing of such sale, the Torrance Lease will terminate, and Seller will have no
further obligations with respect to the Plant Land or the Extrusion Land, except
as set forth in the purchase agreement for the Parcel and in this Agreement.
Buyer's right of first refusal hereunder will not apply to any conveyance
described in clauses (w) - (z) above. If Seller makes a conveyance pursuant to
clause (x), Seller will remain liable for all of its duties and obligations
hereunder, and Buyer may exercise its right of first refusal and its Option
vis-a-vis the Affiliate.
(d) Buyer's right of first refusal is personal to Buyer but
may be assigned by Buyer to Ball or a Designee of Buyer and, to the extent so
assigned, the references in Section 1.10(c) to Buyer shall include references to
Ball or the Designee of Buyer, where appropriate.
(e) After the date which is three years and six months after
the Closing Date, and before the Plant Land has been conveyed to Buyer, and
provided that Seller's failure to complete the Subdivision is not directly
attributable to Buyer's act or failure to act as required under the Torrance
Lease, Buyer shall have the option to purchase (the "Option") the Parcel at the
fair market value of the Extrusion Land, as determined by an independent M.A.I.
appraiser chosen by the parties. In estimating such fair market value, the
appraiser will take into account that the Parcel is not subdivided, is being
sold "as-is" without environmental indemnification of any kind pursuant to
Section 1.10(f) but shall ignore the effect of the Torrance Lease. The Option
will be suspended during the 12-month sale period described in Section 1.10(c)
unless during such period, (i) such sale is consummated, in which case the
Option will expire or (ii) such sale is terminated, in which case the Option
will no longer be suspended. At any time after the date which is three years and
five months after the Closing Date, and before the Plant Land has been conveyed
to Buyer, Buyer shall have the right to enter, or cause its consultants to
enter, upon the Extrusion Land to make physical inspections, tests and surveys
thereof, including environmental reports and audits, soil, geology, boring,
sampling and other tests, for the purpose of determining whether Buyer will
elect to exercise its Option. Buyer shall indemnify Seller for any damage to the
Extrusion Land and any liability for personal injury or damage to other property
of Seller or its tenants directly caused by such inspection and testing and
shall require its consultants to leave the Extrusion Land in the same condition
it was in prior to such inspection and testing. Buyer shall provide Seller with
copies of the written results of all such tests and inspections but shall
otherwise keep the results of any such inspection or testing confidential except
to the extent that disclosure is required by law, judicial or administrative
process or, in the event Buyer elects to exercise its Option, the results of
such inspection and testing may be shared with the appraiser (provided the
appraiser also agrees to keep such results confidential) to aid in its
determination of fair market value of the Extrusion Land.
(f) Any purchase of the Parcel by Buyer, whether pursuant to
its right of first refusal or the exercise of the Option, shall, as to the Plant
Land only, be governed by and in compliance with the terms of this Agreement,
including the title and survey requirements of Section 4.4 and the indemnities
of Seller in Article VI. The purchase of the Parcel by Buyer pursuant to the
Option shall, as to the Extrusion Land, be "as-is" without environmental or any
other indemnities from Seller, provided Seller will deliver to Buyer a special
warranty deed, and, at Buyer's expense, an ALTA form owner's title policy (Form
B-1992 with extended coverage insuring over the general or standard exceptions)
and, at Seller's expense, a survey meeting the requirements of Section 4.4(c)
for the Parcel.
(g) The parties intend that Buyer will not have to pay for the
value of the Plant Land but once and only at the Closing Date. The parties
acknowledge that because the Torrance Lease is for a term of up to 99 years and
calls for payment of only $1.00 in rent, no third party purchaser or appraiser
is likely to attribute any value to the Plant Land and may, in fact, discount
its offer for the Extrusion Land due to the obligations imposed by the Torrance
Lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Ball and Buyer as follows:
Section 2.1 Disclosure Schedule. All representations and warranties
in this Agreement shall survive the Closing to the extent provided in Section
6.1 (and, except as otherwise provided herein, none shall merge into any
instrument of conveyance), regardless of any investigation or lack of
investigation by any of the parties to this Agreement. Seller shall have no
liability for any breach or alleged breach of any representation or warranty
relating to an Excluded Liability to the extent Seller fully and timely
discharges such Excluded Liability, without Buyer incurring any cost of
investigation or defense with respect thereto. Each representation and warranty
of Seller is made subject to the exceptions which are noted in the corresponding
section of the Disclosure Schedule. For the purposes of this Agreement, the
"Disclosure Schedule" is the schedule delivered by Seller and Ball concurrently
herewith and identified by the parties as such. Seller shall number all
exceptions noted in the Disclosure Schedule to correspond to the applicable
section of Article II to which such exception refers. EXCEPT AS SPECIFICALLY SET
FORTH IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO BALL,
BUYER OR THEIR DESIGNEES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Except as
otherwise expressly noted therein, the disclosures in any subsection of the
Disclosure Schedule thereof shall not constitute disclosure for purposes of any
other subsection.
Section 2.2 Corporate Organization. Each of Seller, RIB, and LAR is
(and at the Closing, each of RCAL and RIND will be) a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to carry on its business as it is now being conducted and to own or
lease and operate its assets. The copies of the charter, bylaws, or
corresponding organizational documents of Seller, RIB, RCAL, RIND and LAR
heretofore delivered to Buyer are true, complete and correct copies of such
instruments as in effect as of the date of this Agreement.
Section 2.3 Operation of the Business. Except for the license
agreements listed in Section 2.3 of the Disclosure Schedule, the Business is
conducted only through Seller, RCAL, RIND and LAR. Except for the Business, and
for the disposition of certain surplus equipment formerly used in the Business
at Seller's Houston can plant, and for interests held by its majority-owned
subsidiaries in Latasa, SVE, and UAC, Seller and its Affiliates are not engaged
in the design, manufacture, distribution and sale of beverage can bodies and
ends. The Business Assets taken as a whole, together with the licenses being
granted and the services being provided to Buyer under the Ancillary Agreements,
constitute all of the rights, properties and assets (tangible and intangible)
necessary for the continued conduct of the Business by Ball and Buyer as such
Business has been conducted by Seller.
Section 2.4 Authorization. Except as set forth in Section 2.4 of the
Disclosure Schedule, Seller has all necessary corporate power and authority to
enter into this Agreement and the Ancillary Agreements and to carry out the
transactions contemplated hereby and thereby. Seller's Board of Directors has
taken all corporate action required by law, Seller's Certificate of
Incorporation, its Bylaws or otherwise required to be taken by it to authorize
the execution and delivery of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby. This
Agreement constitutes, and the Ancillary Agreements to be executed by Seller
(when duly executed and delivered by Seller at or before the Closing, assuming
this Agreement and the Ancillary Agreements constitute the valid and binding
obligation of Ball and Buyer) will constitute, the valid and binding obligation
of Seller, each enforceable in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 2.5 No Violation. Except as set forth in Section 2.5 of the
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement and the Ancillary Agreements nor the consummation of the transactions
contemplated hereby or thereby will (i) violate or be in conflict with any
provision of the charter, bylaws or similar organizational document of Seller,
RIB, RCAL, RIND or LAR, (ii) be in conflict with, or constitute a default (or an
event which, with the giving of due notice or lapse of time, or both, would
constitute such a default) under, or cause the acceleration of the maturity of,
or give rise to any right of termination, imposition of fees or penalties on
Ball, Buyer or their Designees under any debt, lease, mortgage, indenture,
license, contract, instrument or other obligation to which Seller, RIB, RCAL,
RIND or LAR is a party or by which the Business Assets or the Shares are bound
or result in the creation of any Encumbrance upon any Business Assets or the
Shares, which would (A) have a Material Adverse Effect or (B) interfere with
Seller's ability to consummate the transactions contemplated by this Agreement
or any of the Ancillary Agreements, or (iii) violate any law, judgment, order,
regulation, rule, ordinance or decree (hereinafter sometimes separately referred
to as a "Law") of any foreign, federal, state or local governmental or
quasi-governmental, administrative, regulatory or judicial court, department,
commission, agency, board, bureau, instrumentality or other authority
(hereinafter sometimes referred to as an "Authority") which violation would (A)
have a Material Adverse Effect or (B) interfere with Seller's ability to
consummate the transactions contemplated by this Agreement.
Section 2.6 Consents and Approvals. Except as set forth in Section
2.6 of the Disclosure Schedule, no filing or registration with, notice to, or
authorization, consent or approval of, any third party under any Contract or any
Authority, or any required filings with, or clearance from, any Authority, is
necessary for execution and delivery of this Agreement or the Ancillary
Agreements or the consummation by Seller of the transactions contemplated hereby
or thereby or to enable Ball or Buyer to conduct the Business at its present
locations immediately after the Closing Date in a manner which is consistent
with that in which the Business is presently conducted, except for compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the Administrative Council for Economic Defense in Brazil
("Cade").
Section 2.7 Financial Statements.
(a) The unaudited balance sheets of Seller's global can
operations (consisting of the Business, Seller's interests in Latasa and SVE,
together with certain other Excluded Assets and Excluded Liabilities as
described in Section 2.7 of the Disclosure Schedule) as of December 31, 1997 and
December 31, 1996, and the related unaudited statements of income and cash flows
for the years ended December 31, 1997, 1996 and 1995 (including the notes
thereto, the "Unaudited Financial Statements"), are set forth in Section 2.7 of
the Disclosure Schedule; provided that Buyer acknowledges that the footnotes
contained in the Unaudited Financial Statements are incomplete with respect to
disclosures to be included relating to Latasa. Such financial statements (i)
have been derived from the books and records of Seller, (ii) have been prepared
in conformity with GAAP consistently applied for all periods, and (iii) present
fairly the results of operations, cash flows and financial condition of Seller's
global can operations as of the dates and for the periods specified therein.
(b) The unaudited quarterly financial statements (balance
sheet and statements of income and cash flow) for Seller's global can operations
to be prepared and delivered to Buyer for periods after December 31, 1997 (the
"Interim Financial Statements") (x) will be derived from the books and records
of Seller, (y), except as indicated below, will be prepared in conformity with
GAAP consistently applied for all periods and consistently with the principles
applied in preparation of the Audited Financial Statements and (z) will present
fairly the results of operations, cash flows and financial condition of Seller's
global can operations as of the dates and for the periods specified therein;
provided, however, that in the preparation of the Interim Financial Statements.
(i) U.S. federal, state and local and Puerto
Rican income Taxes will not be included;
(ii) debt and interest expense will not be included;
(iii) Seller's corporate-level general and
administrative expenses will not be allocated to the Business;
(iv) restructuring and environmental reserves
and costs will not be included; and
(v) footnotes will not be included, except to the extent
that quarterly financial statements on a Quarterly Report on Form 10-Q
filed under the Exchange Act in accordance with the rules and regulations
thereunder would be required to include footnotes.
Section 2.8 Accounts Receivable. All Accounts Receivable reflected
on the Closing Statement (a) arose in the ordinary course of business and (b)
are collectible in the ordinary course of business and are not subject to
counterclaims or setoffs, subject in either case to reserves reflected on the
Closing Statement. Except as set forth in Section 2.8 of the Disclosure
Schedule, Seller is not presently a party to and has not entered into any
agreement to factor, sell, pledge or otherwise dispose of any Accounts
Receivable.
Section 2.9 Inventory and Working Capital. Except as set forth in
Section 2.9 of the Disclosure Schedule, the Inventory (a) consists of items of a
quantity and quality which are usable or saleable in the ordinary course of
Seller's business, except for items of obsolete material which have been written
down on the Closing Statement to estimated net realizable value and (b) is
sufficient but not excessive in kind or amount for the conduct of the Business
as it is presently being conducted.
Based on Seller's current operating practices which, to the
Knowledge of Seller, may be continued after Closing at the discretion of Ball
and Buyer, the aggregate working capital of the Business is sufficient to meet
the current operating requirements of the Business and the sales volume of the
Business currently anticipated by Seller.
Section 2.10 Absence of Certain Changes. Except as set forth in
Section 2.10 of the Disclosure Schedule and as permitted by this Agreement,
since December 31, 1997, Seller has not, with respect to the Business,
(a) suffered any adverse change in its business, operations,
properties, assets, working capital, liabilities or condition (financial or
otherwise) which resulted in or is reasonably likely to result in a Material
Adverse Effect, and there has not been any damage, destruction, loss or other
event which resulted in, or is reasonably likely to result in, a Material
Adverse Effect;
(b) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) involving more than
$100,000 with respect to the Business, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practices of liabilities and obligations reflected or reserved against in the
Audited Balance Sheet or incurred in the ordinary course of business and
consistent with past practice since the date of the Audited Balance Sheet other
than payment, discharge and satisfaction of Excluded Liabilities;
(c) permitted or allowed any of the Business Assets to be
subject to any Encumbrance other than Permitted Exceptions;
(d) cancelled any debts of more than $100,000 or waived
any claims or rights of the Business having a value in excess of $100,000;
(e) sold, transferred or otherwise disposed of any of the
Business Assets other than sales of Inventory and other items described in
Section 4.1(a)(ii) in the ordinary course of business;
(f) granted any general increase in the compensation of
officers, senior executives or employees of the Business (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) other than in the ordinary course of business;
(g) made capital expenditures or commitments for additions to
property, plant, equipment or intangible capital assets of the Business totaling
more than $1,000,000;
(h) made any change in any method of financial or Tax
accounting or financial or Tax accounting practice;
(i) except for travel advances in the ordinary course of
business, loaned or advanced amounts in excess of $10,000 to, or sold,
transferred or leased any Business Assets to, any of the officers or employees
of the Business or any affiliate or associate of any of the officers or
employees of the Business or entered into any agreement or arrangement with
respect to the foregoing or with respect to any payments or acceleration of
payments to such parties in connection with the transactions contemplated
hereby; or
(j) agreed to take any action described in this Section.
Section 2.11 Title to Properties; Encumbrances. Except as set forth
in Section 2.11 of the Disclosure Schedule, Seller has (or as of the Closing,
RCAL and RIND will have) good, valid and marketable title to the Owned Real
Property, and valid title, or, in the case of leased Business Assets (including,
without limitation, the Leased Premises), valid and effective leases, to all the
Business Assets which it purports to own or lease (real, personal and mixed,
tangible and intangible). With respect to the Business Locations used by Seller
in the operation of the Business in Puerto Rico, except as set forth in Section
2.11 of the Disclosure Schedule, LAR will, on the Closing Date, have good, valid
and marketable title to the Owned Real Property located in Puerto Rico and valid
title, or, in the case of leased Business Assets (including, without limitation,
the Leased Premises), valid and effective leases, to all the Business Assets
located in Puerto Rico (real, personal and mixed, tangible and intangible).
Except as set forth in Section 2.11 of the Disclosure Schedule, the Owned Real
Property and Seller's interests in the remaining Business Assets (including,
without limitation, the Shares and Seller's interests in the Leased Premises but
limited in the case of the Real Property Leases and the Leased Premises to
Seller's acts) are free and clear of all title defects or objections, liens,
claims, charges, security interests or other encumbrances, including, without
limitation, leases, chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest retention arrangements
(collectively, "Encumbrances") except for liens for current Taxes that are not
yet due or Taxes that are being contested in good faith by appropriate
proceeding; provided that Seller shall indemnify Ball and Buyer and hold them
harmless from any Encumbrances arising out of any such contests. Seller has not
received written notice of any proceedings, claims or disputes affecting any
Business Locations that are reasonably likely to curtail or interfere with the
present use or adversely affect the value of such Business Locations in any
material respect. There is not any action of eminent domain or condemnation
pending or, to the Knowledge of Seller, threatened for any portion of any
Business Locations.
(a) Seller has not received any written notice in the last
three years or which is currently unresolved from any Authority having
jurisdiction over any Business Locations threatening a suspension, modification
or cancellation of certificates of occupancy or Permits required under
applicable Law to occupy and use lawfully any Business Location to conduct
business as presently conducted.
(b) To the Knowledge of Seller, Seller's use and operation of
the Business Locations in the Business as presently conducted is not dependent
on a nonconforming use or other waiver from an Authority, the absence of which
would materially limit the use of the Business Locations or the operation of the
Business as presently conducted.
(c) To the Knowledge of Seller, no portion of the Business
Locations on which any building is located is in any flood plain which requires
Seller to obtain federal flood hazard insurance.
(d) There is free and uninterrupted ingress and egress (which
in some cases may be via easement which is perpetual or, in the case of Leased
Premises, at least of a duration equal to the term of the Real Property Lease,
and suitable for the operation of the Business as presently conducted) to the
Owned Real Property and, to the Knowledge of Seller, Leased Premises from a
public street, road or highway.
Section 2.12 Equipment. Except as set forth in Section 2.12 of the
Disclosure Schedule, with respect to each Business Location, the plants,
structures, machinery, vehicles, equipment and other tangible personal property
included in the Business Assets and located at such Business Location
(including, without limitation, any Business Assets used in the operation of the
Business at such Business Location and located on any third party's property),
taken as a whole, are in good operating condition and repair (ordinary wear and
tear excepted) and are adequate for the uses to which they are being put. All
water, gas, electrical, steam, compressed air, telecommunications, sanitary and
storm sewage lines and systems and other similar systems reasonably necessary to
operate the Business as presently operated have been installed and are operating
sufficiently to conduct the Business as presently conducted. Except as expressly
set forth in this Agreement, Seller expressly disclaims any other representation
and warranty of any kind or nature, express or implied, as to the condition,
value or quality of the Business Assets and SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, OR FITNESS FOR ANY
PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE BUSINESS ASSETS. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, THE BUSINESS ASSETS SHALL BE TRANSFERRED
TO PURCHASER "AS IS" AND "WHERE IS."
Section 2.13 Intellectual Property Rights.
(a) Section 2.13 of the Disclosure Schedule contains a
complete and accurate list of the following types of Intellectual Property
Rights included in the Business Assets: (i) registrations and applications to
register Trademarks; (ii) Patents; (iii) registrations and applications to
register Copyrights and (iv) license agreements and other material agreements
relating to the development or acquisition of or granting to others the right to
use Intellectual Property Rights. There are no royalties, honoraria, fees or
other payments payable by Seller to any Person in connection with the ownership,
licensure, use, or sale of any Patents, registered Trademarks, Copyrights or
other Intellectual Property Rights which are material to the Business.
(b) (i) Seller, RIB, RCAL, RIND and LAR collectively own or
have the right to use all of the Intellectual Property Rights included in the
Business Assets, (ii) Seller is the owner of record of the registrations and
applications set forth in Section 2.13 of the Disclosure Schedule and is listed
in the records of the appropriate U.S., state or foreign agency as the owner of
record for each such registration and application and (iii) no registration or
application listed in Section 2.13 of the Disclosure Schedule is the subject of
any existing or, to the Knowledge of Seller, threatened opposition,
interference, cancellation or other proceeding before any registration authority
in any jurisdiction. The registrations listed in Section 2.13 of the Disclosure
Schedule are valid and subsisting, in proper form and enforceable, and have been
duly maintained.
(c) To the Knowledge of Seller, use of the Intellectual
Property Rights included in the Business Assets by Seller, RIB, RCAL, RIND or
LAR does not infringe upon, or misappropriate any intellectual property right of
any third party. There are no claims pending or, to the Knowledge of Seller,
threatened, and Seller has not received any notice of any claim to such effect.
To the Knowledge of Seller, no third party is infringing upon or
misappropriating any Intellectual Property Rights. No such claims have been made
by or on behalf of Seller to such effect within the past three years.
(d) There is no material default (or event which with the
giving of notice and/or passage of time would constitute a material default) by
Seller, RIB, RCAL, RIND or LAR, under any of the license agreements set forth in
Section 2.13 of the Disclosure Schedule and, to the Knowledge of Seller, by any
other party thereto.
(e) Section 2.13(e) of the Disclosure Schedule identifies the
general actions taken by Seller to date as part of a program to enable software
included in the Technology and related hardware to perform during and after the
year 2000 without error relating to date data, including, without limitation,
any error which references the wrong century or more than one century. Nothing
in this Section 2.13(e) or in Section 2.13(e) of the Disclosure Schedule shall
be construed as a guarantee by Seller that such software or hardware will
perform without error relating to such year 2000 date data.
(f) Section 2.13(f) of the Disclosure Schedule identifies all
Trademarks other than the Reynolds Marks that are used in the Business and not
transferred to Ball pursuant to Section 1.2(k).
(g) There are no Patents, Trademarks or Copyrights used
exclusively in the Business and not being transferred to Ball, Buyer or their
Designees hereunder other than those set forth in Section 2.13(g) of the
Disclosure Schedule.
Section 2.14 Certain Contracts.
(a) Section 2.14(a) of the Disclosure Schedule lists all (i)
employment or other contracts (including, without limitation, consulting,
non-competition, severance or indemnification agreements) which are included in
the Business Assets with any employee, agent, consultant or current or living
former officer or employee of Seller providing service to the Business whose
total rate of annual remuneration exceeds $90,000, except (A) those that are
terminable by Seller on 60 days' notice or less without liability, penalty or
premium and (B) at-will employment contracts, (ii) union or collective
bargaining contracts relating to employees of Seller employed in the Business,
(iii) instruments or agreements for money borrowed (including, without
limitation, any indentures, guarantees, loan agreements, sale and leaseback
agreements, or purchase money obligations incurred in connection with the
acquisition of property other than in the ordinary and usual course of business
consistent with past practice) in excess of $100,000 included in the Assumed
Liabilities, (iv) leases or subleases for personal property included in the
Business Assets which require lease payments in excess of $100,000 annually
(other than those agreements which are terminable on 60 days' notice) and the
Real Property Leases, (v) agreements for acquisitions or dispositions, purchase
or sale of assets or stock or otherwise of a business unit of the Business
entered into within the last five years, (vi) joint venture or partnership
agreements included in the Business Assets, (vii) purchase and supply contracts
in existence (or under negotiation) with a remaining (or prospective) term of
six months or more included in the Business Assets and calling for aggregate
future payments exceeding $250,000, (viii) guarantees, suretyships,
indemnification and contribution agreements included in the Business Assets and
(ix) other agreements, contracts, notes, security agreements, understandings or
commitments that obligate Seller for an amount in excess of $250,000 in the
Business Assets (the agreements described in clauses (i) through (ix) above are
collectively referred to as the "Contracts"). A true and complete copy of each
Contract (together with all amendments thereto) has been provided or made
available to Buyer. Each Contract is or upon execution will be a valid and
binding obligation of Seller. Seller is not in material breach or default under
any of the Contracts, and to the Knowledge of Seller, there has not been any
material breach or default of any Contract by any party thereto.
(b) The policy of Seller with respect to entering into
confidentiality agreements with its employees is as set forth in Section 2.14(b)
of the Disclosure Schedule. Except as set forth in Section 2.14(b) of the
Disclosure Schedule, no Contract, Permit or other understanding that would be
binding upon Ball or Buyer restricts the ability of Seller to own, possess or
use any of the Business Assets or conduct any of Seller's operations related to
the Business in any geographic area.
Section 2.15 Orders and Commitments. Except as set forth in Section
2.15 of the Disclosure Schedule, all outstanding orders and commitments of the
Business have been made in the ordinary course of the Business. Returns of
product manufactured in the Business as a percentage of sales for the year 1997
are as set forth in Section 2.15 of the Disclosure Schedule. As of the date of
this Agreement, there are no claims in excess of $100,000 per claim pending
against Seller to return any merchandise sold by the Business by reason of
alleged overshipments, defective merchandise or otherwise, or of merchandise in
the hands of customers under an understanding that such merchandise would be
returnable. As of the date of this Agreement, such claims in the aggregate do
not exceed $1,000,000.
Section 2.16 Taxes. Except as set forth in Section 2.16 of the
Disclosure Schedule,
(a) Each of Seller, RIB, RCAL, RIND and LAR has duly and
timely filed (or had filed on its behalf) all Tax Returns required to be filed
by it with respect to the Business, and each such Tax Return is true, correct
and complete in all material respects;
(b) Seller (with respect to the Business) and each of RIB,
RCAL, RIND and LAR has duly paid or made adequate provision for the due and
timely payment of all Taxes and other charges, including, without limitation,
deposits required with respect to employee withholdings, interest, penalties,
assessments and deficiencies, due or claimed to be due from it (other than
amounts being contested in good faith, adequate reserves for which have been
established);
(c) There are no liens for Taxes (other than statutory liens
for property Taxes not yet due and payable) or other such charges upon the
Business Assets or the Shares;
(d) All deficiencies and assessments resulting from
examination of the Tax Returns filed by (i) Seller with respect to the Business
Assets or (ii) by RIB, RCAL, RIND and LAR, in either case by any Authority and
declared by such Authority to be due or ordered to be paid, have been paid
(other than amounts being contested in good faith for which adequate reserves
have been established);
(e) There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of RIB, RCAL,
RIND or LAR for any period;
(f) No federal, state, local or foreign income or other
material Tax audits are pending with respect to RIB, RCAL, RIND and LAR;
(g) None of RIB, RCAL, RIND and LAR is a party to any
Tax-sharing agreement, arrangement or indemnity relating to Taxes;
(h) None of RIB, RCAL, RIND and LAR has been a member of any
affiliated group within the meaning of section 1504(a) of the Code, or any
similar affiliated or consolidated group for Tax purposes under state, local or
foreign law, or has any liability for the Taxes of any person under Treasury
Regulation section 1.1502-6 or any similar provision of state, local or foreign
law, as a transferee or successor, by contract or otherwise; and
(i) None of RIB, RCAL, RIND or LAR is a party to any contract,
agreement, arrangement or plan (and Seller is not a party to any contract,
agreement, arrangement or plan that will be assumed by Buyer, Ball or any of
their Affiliates as a result of this Agreement) that has resulted or would
result in connection with the transactions contemplated by this Agreement,
separately or in the aggregate, in the payment of (x) any "excess parachute
payments" within the meaning of section 280G of the Code (without regard to the
exceptions set forth in section 280G(b)(4) and (5) of the Code) or (y) any
amount for which a compensation deduction would be disallowed under section
162(m) of the Code.
Section 2.17 Litigation. Except as set forth in Section 2.17 of the
Disclosure Schedule, no claim, demand, action, suit, inquiry, proceeding or
investigation by or before any Authority is pending or, to the Knowledge of
Seller, threatened against or involving Seller with respect to the Business, the
Business Assets or the Shares, or which questions or challenges the validity of
this Agreement or the Ancillary Agreements or any action taken or to be taken by
Seller pursuant to this Agreement or the Ancillary Agreements or in connection
with the transactions contemplated hereby or thereby. Except as set forth in
Section 2.17 of the Disclosure Schedule, Seller is not subject to any judgment,
court order or decree, or any arbitration order issued within six years prior to
the date of this Agreement with respect to the Business or Business Assets.
Section 2.18 Compliance with Law. Except as set forth in Section
2.18 of the Disclosure Schedule and excluding those matters relating to the
representations and warranties contained in Sections 2.19, 2.20 and 2.21, the
Business has been conducted in compliance in all material respects with all
applicable Laws. Seller has not received any notification from any Authority of
any asserted present failure by Seller to comply with Laws in regard to the
Business. All material Permits held by Seller in connection with the operation
of the Business or the Business Assets are set forth in Section 2.18 of the
Disclosure Schedule.
Section 2.19 Environmental Protection. Except as set forth in
Section 2.19 of the Disclosure Schedule,
(a) Seller has obtained (or is in the process of obtaining)
all material Environmental Permits which are required under applicable
Environmental Laws for the ownership, use and operation of each parcel of Owned
Real Property and for the conduct by Seller of its activities on the Leased
Premises. All such material Environmental Permits previously obtained by Seller
are in effect or in the application process. To the Knowledge of Seller, no
action is pending to revoke any such material Environmental Permits. Seller is
in material compliance with the terms and conditions of such Environmental
Permits. All such material Environmental Permits with respect to the Business
are listed in Section 2.19(a) of the Disclosure Schedule. To the extent Seller
has not yet obtained any Environmental Permit for which it is applying, it is
not in violation of any Environmental Law as a result thereof. All material
Environmental Permits for which Seller has applied but has not obtained are
listed in Section 2.19(a) of the Disclosure Schedule.
(b) With respect to the Business, Seller, the Owned Real
Property and Seller's activities on the Leased Premises are in material
compliance with all applicable Environmental Laws.
(c) Seller has made available to Buyer true and complete
copies of all material final environmental studies made or prepared by third
parties in the last five years relating to the Business Locations in Seller's
possession, such studies being listed in Section 2.19(c) of the Disclosure
Schedule.
(d) There is no civil, criminal or administrative action,
claim, investigation, notice or demand letter pending or, to the Knowledge of
Seller, threatened, under any Environmental Laws relating to the Owned Real
Property and Seller's activities on the Leased Premises on which any substance
relating to the Business has been disposed or released.
(e) Since January 1, 1992, to the best Knowledge of
Seller,
(i) except for the generation, storage, disposal and
transportation to offsite facilities in the ordinary course of business in
compliance in all material respects with applicable Environmental Laws,
there has been no generation, storage, disposal, treatment or
transportation of any Hazardous Substances at the Owned Real Property or
arising from Seller's activities at the Leased Premises in violation of,
or which could give rise to any material obligation under, any
Environmental Laws; and
(ii) there has been no Release requiring Cleanup at the
Owned Real Property or arising from Seller's activities at the Leased
Premises.
(f) No Release or Cleanup has occurred at any Owned Real
Property resulting in the assertion or creation of an Encumbrance on any Owned
Real Property by any Authority nor, to the Knowledge of Seller, has any such
assertion of an Encumbrance been made in writing by any Authority.
(g) To the Knowledge of Seller, except for matters which are
Excluded Liabilities under Section 1.3(b)(v), Seller has not, within three years
preceding the date of this Agreement or, to the extent currently unresolved, at
any time prior to the date hereof, received any written notice or any order from
any Authority advising it that it is, with respect to any Business Location,
responsible for or potentially responsible for Cleanup or paying for the cost of
Cleanup of Hazardous Substances, and Seller has not entered into any agreements
concerning such Cleanup.
(h) To the Knowledge of Seller, the Business Locations do not
contain any (i) underground storage tanks, (ii) friable asbestos, (iii)
equipment containing PCBs, (iv) underground injection wells, or (v) septic tanks
in which any Hazardous Substances have been disposed.
Section 2.20 Labor Relations. Except as set forth in Section
2.20 of the Disclosure Schedule,
(a) Section 2.20(a) of the Disclosure Schedule identifies all
collective bargaining agreements (including, without limitation, any written
amendments or written side agreements thereto) to which Seller, RCAL, RIND or
LAR is a party that apply to the employees of the Business (the "Collective
Bargaining Agreements");
(b) each of Seller, RCAL, RIND or LAR is, with respect to the
Business, in compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, occupational safety
and health and wages and hours, except for such noncompliance that could not
reasonably be expected to have a Material Adverse Effect, and is not engaged in
any unfair labor practice as defined in the National Labor Relations Act or
other applicable Law;
(c) there is no unfair labor practice charge or complaint
against Seller, RCAL, RIND or LAR with respect to the Business pending or, to
the Knowledge of Seller, threatened before the National Labor Relations Board or
any similar Authority;
(d) there is no labor strike, dispute, slowdown, lockout or
stoppage pending or, to the Knowledge of Seller, threatened against Seller,
RCAL, RIND or LAR with respect to the Business, and during the past three years,
there has not been any such action;
(e) no written grievance rising to the fourth step of the
grievance procedures under the Collective Bargaining Agreements is pending
against Seller with respect to the Business;
(f) to the Knowledge of Seller, there are no current union
organizing activities among such employees, nor does any question concerning
representation exist concerning such employees;
(g) there are no material written personnel policies, rules or
procedures applicable to employees employed by Seller in the Business, other
than those listed in Section 2.20(a) of the Disclosure Schedule, true and
correct copies of which have been made available to Buyer;
(h) no charges against or involving Seller, RCAL, RIND or LAR
with respect to the Business are pending or, to the Knowledge of Seller,
threatened before any Authority responsible for the prevention of unlawful
employment practices;
(i) there are no lawsuits or other proceedings pending or, to
the Knowledge of Seller, threatened by or on behalf of any present or former
employee employed by Seller, RCAL, RIND or LAR or alleged to be employed by
Seller, RCAL, RIND or LAR in connection with the operation of the Business, any
applicant for such employment or classes of the foregoing alleging breach of any
express or implied contract of employment, any Law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship; and
(j) none of the employees employed by Seller, RCAL, RIND or
LAR in the Business has suffered an "employment loss" (as defined in the Worker
Adjustment and Retraining Notification Act ("WARN Act")) since three months
before the date of this Agreement.
Section 2.21 Employee Benefit Matters.
(a) Section 2.21(a) of the Disclosure Schedule contains a true
and complete list of each pension, retirement, savings, profit-sharing, stock
bonus, stock purchase, stock option, restricted stock, deferred compensation,
bonus or other incentive compensation, equity compensation plan, program,
policy, agreement, contract, arrangement or fund, including each pension plan,
fund or program within the meaning of section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), each medical, dental,
hospitalization, supplemental unemployment benefits, life insurance or other
welfare plan, program, policy, agreement, contract, arrangement or fund,
including each welfare plan, fund or program within the meaning of section 3(1)
of ERISA, each employment, termination or severance plan, program, policy,
agreement, contract or arrangement and each other employee benefit plan,
program, policy, agreement, contract, arrangement or fund, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by
Seller, RCAL, RIND or LAR or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with Seller would be deemed a
single employer within the meaning of section 4001(b) of ERISA, or to which
Seller or an ERISA Affiliate is party, that are currently maintained by Seller
for the benefit of, or to which Seller contributes on behalf of, any employee of
the Business as a result of such employee's employment in the Business (each a
"Plan"). Section 2.21(a) of the Disclosure Schedule identifies each of the Plans
that is subject to section 302 or Title IV of ERISA or section 412 of the Code
(the "Title IV Plans").
Except as set forth in Section 2.21 of the Disclosure Schedule (with
respect to paragraphs (b)-(h)):
(b) With respect to each Plan that covers Represented
Employees, Seller has heretofore delivered or made available to Buyer true and
complete copies of the current version of the Plan and any amendments thereto,
any related trust or other funding vehicle, any summaries required under ERISA
or the Code and the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under section
401(a) of the Code. To the Knowledge of Seller, no event has occurred since the
date of such determination that would affect such determination.
(c) No liability under Title IV or section 302 of ERISA has
been incurred by Seller or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a risk to Seller or any ERISA
Affiliate of incurring any such liability, other than liability for premiums due
the Pension Benefit Guaranty Corporation (which premiums have been paid when
due). To the extent this representation applies to section 4064, 4069 or 4204 of
Title IV of ERISA, it is made not only with respect to the Title IV Plans but
also with respect to any material employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to which Seller or an ERISA Affiliate
made, or was required to make, contributions during the six-year period ending
on the Closing.
(d) Neither Seller, any ERISA Affiliate, any Plan, any trust
created thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which Seller, any ERISA Affiliate, any Plan, any
such trust, or any trustee or administrator thereof, or any party dealing with
any Plan or any such trust could be subject to either a civil penalty assessed
pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant to section
4975 or 4976 of the Code.
(e) No Title IV Plan is a "multiemployer pension plan," as
defined in section 3(37) of ERISA.
(f) All contributions required to be made with respect to any
Plan on or before the Closing Date have been timely made.
(g) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law, including,
without limitation, ERISA and the Code.
(h) There are no pending or, to the Knowledge of Seller,
threatened, claims by or on behalf of any Plan by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(i) The Employee Lists and the Employee Benefits Data provided
to Buyer by Seller pursuant to Section 5.5 are true and complete as of the date
of such lists.
Section 2.22 Customers and Suppliers. Except as set forth in Section
2.22 of the Disclosure Schedule, since September 30, 1997, (a) there has not
been any material adverse change in the business relationship between Seller and
any customer of the Business which customer accounts for annual sales to Seller
of $5,000,000 or more on an annualized basis and (b) to the Knowledge of Seller,
no such customer has advised Seller that it intends to terminate its
relationship with Seller or significantly reduce its purchases from Seller.
Since September 30, 1997, there has not been any material adverse change in the
business relationship between Seller and any supplier of the Business accounting
for sales to Seller of $1,000,000 or more on an annualized basis providing
supplies to Seller which are not readily obtainable from other sources in the
ordinary course of business.
Section 2.23 Brokers and Finders. Neither Seller nor any of its
officers, directors or Affiliates has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
Section 2.24 Investment. Seller (i) understands that the Ball Shares
have not been registered under the Securities Act of 1933, as amended (the
"Act"), or under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering, and may not be sold except in a transaction registered under
the Act or exempt from such registration requirements and (ii) is acquiring the
Ball Shares solely for its own account for investment purposes, and not with a
view to the distribution thereof, other than a sale or distribution which is
registered under the Act or is exempt from such registration or except pursuant
to the registration rights provisions contained in the Stockholder's Agreement.
Section 2.25 Capitalization of Subsidiaries.
(a) Section 2.25(a) of the Disclosure Schedule lists RCAL's,
RIND's and LAR's authorized, issued and outstanding capital stock and all of the
owners thereof. Seller's interest in RCAL, RIND or LAR is free and clear of all
Encumbrances and free of any limitation or restriction on the right to vote,
sell or otherwise dispose of such interests (other than those imposed by
foreign, federal and state securities laws), and there are no outstanding (i)
securities of RCAL, RIND or LAR convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in RCAL, RIND or
LAR or (ii) options or other rights to acquire from RCAL, RIND or LAR any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in RCAL, RIND or LAR (the items in clauses (i)
and (ii) being referred to collectively as the "Domestic Subsidiary
Securities"). There are no outstanding obligations to repurchase, redeem or
otherwise acquire any outstanding Domestic Subsidiary Securities. The issued and
outstanding shares of capital stock of RCAL, RIND and LAR are duly authorized,
validly issued, fully paid and nonassessable and have not been issued in
violation of any preemptive rights, including any rights of first refusal.
(b) Section 2.25(b) of the Disclosure Schedule lists the
authorized, issued and outstanding capital stock of RIB and the direct and
indirect ownership interest of Seller and its Affiliates therein as of the date
hereof. The issued and outstanding shares of capital stock of RIB are duly
authorized, validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive rights, including any rights of first
refusal. Seller's interest in RIB is free and clear of all Encumbrances and free
of any restriction on the right to vote, sell or otherwise dispose of such
interest (other than those imposed by foreign, federal and state securities
laws), and there are no outstanding (i) securities of RIB convertible into or
exchangeable for shares of capital stock or other voting securities or ownership
interests in RIB, or (ii) options or other rights to acquire from RIB, any
capital stock, voting securities or other ownership interest in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interest in RIB. There are no outstanding obligations to
repurchase, redeem or otherwise acquire any outstanding RIB securities.
(c) Section 2.25(c) of the Disclosure Schedule lists the
ownership interests of Seller or its Affiliates in Latasa, each of the
subsidiaries of Latasa (the "Latasa Subsidiaries"), the respective authorized,
issued and outstanding capital stock of each such entity and all the owners
thereof. Except as set forth in Section 2.25(c) of the Disclosure Schedule, the
interests of Seller or its Affiliates in Latasa and of Latasa in the Latasa
Subsidiaries are free and clear of all Encumbrances and free of any limitation
or restriction on the right to vote, sell or otherwise dispose of such interests
(other than those imposed by foreign, federal and state securities laws), and
there are no outstanding (i) securities of Latasa or any of the Latasa
Subsidiaries owned by Seller or its Affiliates convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
Latasa or the Latasa Subsidiaries and (ii) options or other rights to acquire
from Latasa or the Latasa Subsidiaries any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests in Latasa or the
Latasa Subsidiaries independent of the assets transferred to Buyer. There are no
outstanding obligations to repurchase, redeem or otherwise reacquire any
outstanding securities of Latasa or the Latasa Subsidiaries. The issued and
outstanding shares of capital stock of each of Latasa and the Latasa
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and have not been issued in violation of any preemptive rights, including any
rights of first refusal.
(d) Section 2.25(d) of the Disclosure Schedule lists all
agreements, arrangements or commitments to which Seller or any of its Affiliates
is a party relating to the holding, voting or transfer of any of RIB, RCAL, RIND
and LAR securities or the governance of any of such subsidiaries.
(e) The execution, delivery and performance of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby will not create an Encumbrance on the Shares.
(f) RIB and RILA own 11,504,994 and 5,159,250 shares,
respectively, of capital stock in Latasa, which shares are duly authorized,
validly issued, fully paid and nonassessable.
(g) Reynolds and its Affiliates own 123,840 shares of
capital stock of SVE.
Section 2.26 Latasa Agreements.
(a) Seller has previously delivered to Buyer true and
complete copies of all the Latasa Agreements.
(b) Seller is not in material breach of any of the Latasa
Agreements.
(c) Other than the transactions contemplated by this
Agreement, to the Knowledge of Seller, there is no fact that would allow a party
to the Latasa Agreements to terminate any such agreement or that would result in
an Encumbrance on the Shares.
(d) Except as set forth in Section 2.26(d) of the Disclosure
Schedule, neither the execution, delivery and performance of this Agreement and
the Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby will (i) violate or be in conflict with any provision of the
charter, bylaws or similar organizational document of Latasa or any of the
Latasa Subsidiaries or (ii) be in conflict with, or constitute a default (or an
event which, with the giving of due notice or lapse of time, or both, would
constitute such a default) under, or cause the acceleration of the maturity of,
or give rise to any right of termination, imposition of fees or penalties on
Ball or Buyer under any debt, lease, mortgage, indenture, license, contract,
instrument or other obligation to which Latasa or any of the Latasa Subsidiaries
is a party or by which the Business Assets or the Shares are bound or result in
the creation of any Encumbrance upon any Business Assets or the Shares, which
would (A) have a Material Adverse Effect or (B) interfere with Seller's ability
to consummate the transactions contemplated by this Agreement or the Ancillary
Agreements; or (iii) violate any law, judgment, order, regulation, rule,
ordinance or decree of any Authority which violation would (A) have a Material
Adverse Effect or (B) interfere with Seller's ability to consummate the
transactions contemplated by this Agreement.
Section 2.27 Latasa Offering Statement. The Latasa offering
statement dated May 14, 1997 (the "Latasa Offering Statement"), a copy of which
has been previously delivered to Buyer, does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Except as set forth in Section 2.27 of the Disclosure Schedule, to
the Knowledge of Seller, since the date of the Offering Statement, no event has
occurred which could reasonably be expected to have a material adverse effect on
Latasa.
Section 2.28 Latasa Financial Statements. The unaudited balance
sheets of Latasa as of December 31, 1997 and 1996 and the related unaudited
statements of income and cash flows for the years then ended, including the
related notes thereto (in English) are set forth in Section 2.28 of the
Disclosure Schedule (the "Unaudited Latasa Financial Statements"). Such
financial statements (i) have been derived from the books and records of Latasa,
(ii) have been prepared in conformity with GAAP consistently applied for all
periods and (iii) present fairly the results of operations, cash flows and
financial condition of Latasa as of the dates and for the periods specified
therein.
Section 2.29 SVE Agreement. Seller has previously delivered to Buyer
a true and complete copy of the Continuing Know-How and Technical Services
Agreement between Seller or its Affiliate and SVE (the "SVE Technical Services
Agreement"). Seller is not in material breach of the SVE Technical Services
Agreement.
Section 2.30 Seller's Exposure Estimates. The information contained
in Section 2.30 of the Disclosure Schedule is based on Seller's records,
Seller's past business experiences and practices and Seller's current business
beliefs and expectations. Assuming the continuation of Seller's existing
business practices and existing, pending and anticipated contracts related to
Seller's existing metals cost programs and can price programs, the information
contained in Section 2.30 of the Disclosure Schedule is a reasonable estimate of
the exposure limits described therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BALL AND BUYER
Ball and Buyer jointly and severally represent and warrant to Seller
as follows:
Section 3.1 Corporate Organization, etc. Each of Ball and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, and each has full corporate power and
authority to carry on its business as it is now being conducted and to own or
lease and operate its assets and, in the case of Buyer, to operate the Business
after the Closing. The copies of the charter and bylaws of each of Ball and
Buyer delivered to Seller as of the date hereof are true, complete and correct
copies of such instruments as in effect on the date of this Agreement.
Section 3.2 Authorization, etc. Each of Ball and Buyer has all
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements and to carry out the transactions contemplated hereby and
thereby. The Board of Directors of each of Ball and Buyer has taken all action
required by law, and the charter and bylaws of each of Ball and Buyer, and
otherwise required to be taken by it to authorize the execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
the Ancillary Agreements to be executed by Ball and Buyer (when duly executed
and delivered by Ball and Buyer at or before Closing, assuming this Agreement
and the Ancillary Agreements constitute the valid and binding obligations of
Seller) will constitute, the valid and binding obligation of Ball and Buyer,
each enforceable in accordance with its terms except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 3.3 No Violation. Neither the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby will (i) violate or be in
conflict with any provision of the charter or bylaws of Ball or Buyer, (ii) as
of the Closing, violate, or be in conflict with, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or cause the acceleration of the maturity of or give rise to any right of
termination, imposition of fees or penalties on Ball or Buyer under any debt,
lease, mortgage, indenture, license, contract, instrument or other obligation to
which Ball or Buyer is a party or by which the property or assets of Ball or
Buyer are bound or result in the creation of any Encumbrance upon any property
or assets of Ball or Buyer which violation or Encumbrance would materially (A)
adversely affect the business of Ball or Buyer or (B) interfere with Buyer's or
Ball's ability to consummate the transactions contemplated by this Agreement or
the Ancillary Agreements, or (iii) violate any Law, which violation would
materially (A) adversely affect the business of Ball or Buyer or (B) interfere
with Buyer's or Ball's ability to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements.
Section 3.4 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending, or, to the best
knowledge of Ball and Buyer, threatened against or involving Ball or Buyer which
questions or challenges the validity of this Agreement or the Ancillary
Agreements or any action taken or to be taken by Ball or Buyer pursuant to this
Agreement or the Ancillary Agreements or in connection with the transactions
contemplated hereby or thereby; nor, to the best knowledge of Ball and Buyer, is
there any valid basis for any such action, proceeding or investigation.
Section 3.5 SEC Reports. Ball has filed all periodic reports
required to be filed by it under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") with the U.S. Securities and Exchange Commission (the
"SEC") since January 1, 1996 , all of which, as of their respective filing
dates, complied in all material respects with all applicable requirements of the
Exchange Act (as such documents have been amended since the time of their
filing, collectively, the "Ball SEC Reports"). None of the Ball SEC Reports,
including, without limitation, any financial statements or schedules included
therein, as of their respective dates or, if amended, as of the date of the last
such amendment, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 3.6 Brokers and Finders. Except for the fees and expenses of
Lehman Brothers (which shall be paid by Ball), neither Ball nor Buyer nor any of
their officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
Section 3.7 Authorization of Shares. The issuance of the Ball Shares
has been duly authorized by all requisite corporate action on the part of Ball,
and upon issuance in accordance with the terms hereof, the Ball Shares will be
validly issued, fully paid, and nonassessable free and clear of all encumbrances
(other than under applicable federal or state securities laws) and shall not
have been issued in violation of any preemptive rights. The authorized, issued
and outstanding shares of capital stock of Ball, all of which are validly issued
and outstanding, fully paid and non-assessable, are set forth in Section 3.7 of
the Disclosure Schedule. Except as disclosed in Section 3.7 of the Disclosure
Schedule, there are no (a) options, warrants, conversion privileges or other
rights, agreements, arrangements or other commitments obligating Ball to issue,
sell, purchase or redeem any shares of its capital stock or (b) any stock
appreciation, phantom or similar rights outstanding based upon the book value,
earnings or any other attribute of any of the capital stock of Ball. Section 3.7
of the Disclosure Schedule lists all agreements, arrangements or commitments to
which Ball or Buyer is a party relating to the holding, voting or transfer of
any of the shares in Ball or the operations or governance of Ball. Ball owns all
of the outstanding capital stock of each of its subsidiaries, including Buyer,
free of Encumbrances other than (i) liens for taxes not yet due or taxes being
contested in good faith by appropriate proceedings and (ii) any other
encumbrances incurred as a result of the Financing (as defined in Section 3.9).
Section 3.8 Consents and Approvals. Except as set forth in Section
3.8 of the Disclosure Schedule, no filing or registration with, notice to or
authorization, consent or approval of, any third party under any material
contract to which Ball or Buyer is a party or any Authority, or any required
filings with, or clearance from, any Authority, is necessary for execution and
delivery of this Agreement or the Ancillary Agreements by Ball or Buyer or the
consummation by Ball or Buyer of the transactions contemplated hereby or thereby
except for compliance with the HSR Act or Cade.
Section 3.9 Financing. Ball has received a commitment letter (the
"Commitment Letter"), dated April 22, 1998, from The First National Bank of
Chicago, First Chicago Capital Markets, Inc., Bank of America National Trust and
Savings Association, BancAmerica Robertson Stephens, Inc., Lehman Brothers Inc.
and Lehman Commercial Paper Inc. to provide $1.8 billion of debt financing (the
"Financing") to Ball and Buyer in connection with the transactions contemplated
hereby and the refinancing of other indebtedness of Ball on the terms set forth
in the Commitment Letter. A true and complete copy of the Commitment Letter has
been delivered to Seller.
ARTICLE IV
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer:
Section 4.1 Conduct of the Business.
(a) From the date hereof until the Closing Date, Seller shall
conduct the Business in the ordinary course consistent with past practice and
use all reasonable efforts to preserve intact the present business organization
and its relationships with suppliers, dealers, customers and third parties
having business relationships with the Business and keep available the services
of the present employees of the Business. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date, Seller will not, without
the prior written consent of the Chairman, Vice Chairman or President of Ball:
(i) acquire assets valued in excess of $250,000 in the
aggregate from any Person other than in the ordinary course consistent
with past practice or as provided in the capital expenditure plan included
in Section 2.10 of the Disclosure Schedule;
(ii) sell, lease, license or otherwise dispose of any
Business Assets except for sales of Inventory and the following other
items in the ordinary course consistent with past practice: (A) aluminum
scrap generated by the production process; (B) other scrap metal; (C) used
beverage cans; (D) waste oil; (E) recyclable paper, chipboards and
separators; (F) non-usable pallets; (G) corrugated cardboard; (H) waste
water treatment room slurry accumulation; and (I) packing materials and
plant process materials sold to other can and end manufacturers who are
experiencing emergency shortages;
(iii) enter into any material agreement or contract with
respect to the Business or any of the Business Assets which is not
assignable (or which requires the consent of a third party to assign
which consent has not been obtained) to Ball or Buyer;
(iv) cancel any debts in excess of $200,000 individually
or $1,000,000 in the aggregate, or waive any claims or rights of material
value related to the Business or the Business Assets;
(v) grant any increase in the rates or terms of
compensation payable or to become payable to officers or employees of
Seller related to the Business (including any such increase pursuant to
any benefit plan), except in the ordinary and usual course of business
consistent with past practice or required by any labor or other agreement
in effect as of the date hereof or as described in Section 2.10 of the
Disclosure Schedule;
(vi) enter into, extend, amend, or renew any material
contract, agreement, purchase or supply agreement or commitment or other
obligation of the Business to which Seller is a party, except in the
ordinary and usual course of business consistent with past practice;
(vii) make any material change in any management,
operation, financial, Tax or accounting principles, methods, practices or
procedures of the Business;
(viii) enter into any collective bargaining agreement
or labor contract of any kind related to the Business; or
(ix) agree or commit to do any of the foregoing.
(b) From the date hereof until Closing, Seller shall not,
without the prior written consent of the Chairman, Vice Chairman or President of
Ball or Buyer:
(i) vote, or allow any of its subsidiaries to vote, the
equity interests in Latasa held by RIB and RILA so as to materially change
the nature of the business conducted by Latasa; or
(ii) allow any of its subsidiaries to (A) dispose of, (B)
grant any rights, options or warrants with respect to or (C) create any
Encumbrances on any shares owned directly or indirectly by Seller which
represent or hold equity interests in Latasa or SVE.
Section 4.2 Access. Seller shall afford to Buyer, Ball, and their
counsel, accountants, other representatives and financing sources, reasonable
access during normal business hours and subject to Seller's safety regulations,
as Ball or Buyer may reasonably request, to the plants, offices, warehouses,
properties, advisors, auditors, officers, employees and the books and records of
Seller related to the Business, the Business Assets and the Shares, and with
Seller's consent, material customers, suppliers and joint venture partners, so
that Buyer may investigate the Business (including, without limitation,
conducting environmental investigations) and obtain information requested by
financing sources. Seller will cooperate with Ball and Buyer in their
investigation and furnish to Buyer such additional financial, operating and
other information related to the Business, Business Assets or the Shares as
Buyer shall from time to time reasonably request. If employee consent is
required for Buyer to review any personnel file, at Buyer's reasonable request
Seller shall use reasonable efforts to obtain such consent. Such investigations
shall be conducted so as not to interfere unreasonably with the operation of the
Business. Notwithstanding anything contained herein to the contrary, Seller
shall not be required to make available to Buyer, Ball or their Affiliates,
agents, or representatives any information relating to existing or contemplated
pricing, price discount, and customer rebate information or other similar
sensitive information relating to the Business. From and after the date hereof,
Seller will provide to Buyer, promptly following the end of each month, monthly
financial reports consistent with those currently provided to management of the
Business and, as available, quarterly financial statements of the Business
consistent with the representations set forth in Section 2.7.
Section 4.3 Consents. Seller shall use all reasonable efforts to
obtain all consents necessary to consummate the transactions contemplated
hereby, including those approvals set forth in Section 2.6 of the Disclosure
Schedule. Seller will provide to Buyer copies of each such consent promptly
after it is obtained. Ball and Buyer will cooperate with Seller in obtaining
such consents and shall use all reasonable efforts to obtain all consents from
parties to agreements with Ball or Buyer necessary to consummate the
transactions contemplated hereby (including those approvals referred to in
Section 3.8).
Section 4.4 Title to Real Property.
(a) Except as contemplated by Section 1.10, Seller shall
convey to Buyer, at the Closing, by special warranty deeds, in a form reasonably
acceptable to Buyer, title in fee simple to all of the Owned Real Property
subject only to (i) liens for real estate taxes and assessments and other
governmental charges which are a lien but which are not yet due and payable and
(ii) Permitted Exceptions and such additional title and survey matters as are
contemplated by Section 4.4(b) and (c) below or, in the case of Torrance,
California, as are contemplated herein or in the Torrance Lease.
(b) Seller has previously delivered to Buyer title commitments
(the "Title Commitments"), which are described in Section 4.4(b) of the
Disclosure Schedule, issued by Lawyers' Title Insurance Company (the "Title
Company"), along with copies of all documents creating exceptions, as listed in
the Title Commitments and surveys of the Owned Real Property and any other
document with respect to Real Property reasonably requested by Buyer. Buyer
hereby approves the following as "Permitted Exceptions": (i) the matters shown
on the Title Commitments and on the surveys heretofore delivered to Buyer which
are specifically identified as Permitted Exceptions in Section 4.4(b) of the
Disclosure Schedule; (ii) a deed restriction applicable to burden the Fort
Worth, Texas parcel substantially as contemplated by the Model Deed Certificate
Language set forth as part of Exhibit 4.4(b); (iii) a 20-foot utility easement
for electric lines to burden the Moultrie, Georgia parcel substantially in the
form contemplated as a part of Exhibit 4.4(b); (iv) a railroad easement to
burden the Hayward, California parcel for the benefit of the surplus property to
be retained by Seller as shown on the drawing attached as a part of Exhibit
4.4(b); (v) such matters as are to relate to the Torrance, California parcel as
are contemplated herein or in the Torrance Lease; and (vi) such matters as to
which Buyer does not timely object as set forth in Section 4.4(b) or 4.4(c) or
which are otherwise resolved either by affirmative insurance from the Title
Company or Seller's indemnity or which are waived by Buyer all as hereinafter
provided. No less than 20 days prior to Closing, Seller shall deliver to Buyer
date downs of the Title Commitments. At the Closing, Seller, provided that Buyer
pays the cost thereof, shall cause the Title Company to furnish to Buyer ALTA
form owner's policies of title insurance (Form B-1992 with extended coverage
insuring over the general or standard exceptions), or "marked-up" Title
Commitments, in amounts equal to the value of the Owned Real Property designated
by Buyer. In connection with the issuance of such title insurance, Seller shall
furnish such reasonable and customary affidavits or documents requested by the
Title Company which do not expand Seller's special warranty covenant so as to
enable the Title Company to issue to Buyer owner's policies of title insurance.
The cost of such title insurance shall be borne by Buyer. Buyer, at its sole
expense, may obtain such endorsements as Buyer may desire (including, without
limitation, survey endorsement, contiguity endorsement (if applicable),
subdivision endorsement, zoning 3.1 endorsement (or equivalent), access
endorsement and tax parcel endorsement); however, the obtaining of such
endorsements shall not be a condition of Closing and, in connection therewith,
Seller shall furnish such reasonable and customary affidavits requested by the
Title Company which do not expand Seller's special warranty covenant. If any
such date downs of the Title Commitments reveal any exceptions which are not
already Permitted Exceptions and which have an "Adverse Effect" (which term, for
purposes of this Section 4.4(b), shall mean having an effect on the applicable
parcel of Owned Real Property as a whole that is reasonably expected to be
materially adverse to the use of the Owned Real Property for industrial
purposes, except that exceptions resulting from the acts of Seller after the
date of the Title Commitments and not otherwise specifically permitted by the
terms of this Agreement or the Torrance Lease shall be deemed to have an
"Adverse Effect"), then Buyer shall give Seller notice of objection within ten
days after receipt of the date downs of the Title Commitments (otherwise the
objection shall be deemed waived). If any survey described in Section 4.4(c)
reveals any exceptions which are not already Permitted Exceptions and which have
an Adverse Effect, then Buyer shall give Seller notice of objection within ten
days after receipt of the survey (otherwise the objection shall be deemed
waived). If Buyer gives notice of objection to matters shown on the date downs
or the surveys and if the Title Company is not willing to provide Buyer with
adequate affirmative coverage insuring over the same then Ball and Buyer may
either (A) waive the exception, (B) cause Seller to indemnify and hold harmless
Buyer for any loss, claim, cause of action or damage arising from such
objections having an Adverse Effect or (C) in the event such matters have a
Material Adverse Effect, terminate the Agreement in accordance with Article IX,
including without limitation, Section 9.2(e) hereof. The cost of affirmative
title insurance over such matters shall be paid by Seller to the extent that the
cost of the title policies required by this Section 4.4 (b), with extended
coverage over general or standard exceptions, but not the cost of additional
endorsements Buyer elects to obtain (the "Title Costs"), exceeds $250,000. Buyer
shall pay all costs of affirmative insurance until the cost thereof, when added
to the Title Costs, equals $250,000. In the event Seller is required to pay
additional sums for affirmative insurance pursuant to the preceding two
sentences, Seller, at its option, may elect to indemnify Buyer for any loss,
claim, cause of action or damage arising from such objections in lieu of paying
the cost of such affirmative insurance.
(c) Seller has ordered surveys of the Owned Real Property
(other than Torrance, California, which survey shall not be provided until that
Owned Real Property has been subdivided) as hereinafter described. The surveys
shall (i) be prepared and certified by a Registered Public Surveyor or
Registered Professional Engineer, (ii) comply with 1997 ALTA/ACSM minimum detail
requirements for Urban Land Title Surveys including Table A, items 1-4, 6-11 and
13, (iii) locate all improvements, building lines, rights-of-way and easements
(identified by appropriate recording reference) and other matters of record,
evidenced by on-site observation or as determined by the surveyor's examination
of Seller's records affecting the Owned Real Property, (iv) contain a legal
description of the Owned Real Property and (v) be certified to Buyer and the
Title Company and Buyer's lender, if such name is provided prior to Closing. To
the extent Seller has not already delivered any such surveys on or before the
date of execution of this Agreement, Seller shall do so promptly following
receipt and review thereof, but in any event Seller shall deliver the remaining
surveys to Buyer at least 20 days before Closing.
Section 4.5 No Solicitation.
(a) Until Closing or the earlier termination or expiration of
this Agreement, Seller shall not, directly or indirectly, without the consent of
Buyer, through any officer, director, employee, investment banker, attorney or
agent, (i) solicit, initiate, or encourage any inquiries or proposals regarding
the sale, lease or other disposition of the Business or any substantial part of
the Business or Business Assets or the Shares other than the transactions
contemplated by or described in this Agreement (any of the foregoing inquiries
or proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions concerning, or provide any non-public
information or data to any person or entity relating to, any Acquisition
Proposal or (iii) agree to any Acquisition Proposal or otherwise facilitate any
effort to make an Acquisition Proposal. Seller will immediately terminate any
existing activities with any parties conducted heretofore with respect to any of
the foregoing and secure the return of confidential information regarding the
Business provided to any party other than Ball and Buyer in connection
therewith.
(b) Seller shall promptly notify Buyer after receipt by Seller
of any Acquisition Proposal or any inquiries indicating that any person is
considering making or wishes to make an Acquisition Proposal, identifying such
person and the details thereof.
Section 4.6 Supplements to Disclosure Schedule. From time to time
prior to the Closing, Seller will promptly supplement or amend the Disclosure
Schedule with respect to any matter hereafter arising which, if existing at the
date of this Agreement, would have been required to be set forth in the
Disclosure Schedule. Except for supplements and amendments reflecting
transactions permitted by this Agreement (including, for example, and not by way
of limitation, the execution of contracts permitted by Section 4.1), no such
supplement to or amendment shall be deemed to qualify or amend any
representation or warranty or cure any breach of any representation or warranty
made in this Agreement; provided, that if any such breach arising out of events
occurring after the date hereof and prior to the Closing is sufficiently
material that Ball and Buyer would not be obligated to close under Section 8.1
as a result thereof, their remedy for such breach, unless the parties otherwise
agree, shall be to elect not to close.
Section 4.7 Bulk Sales Laws. Each party hereby waives compliance by
Seller with the provisions of the "bulk sales," "bulk transfer" and similar laws
of any state. Seller agrees to indemnify and hold Ball, Buyer and their
respective Affiliates (including, after the Closing, LAR, RCAL and RIND)
harmless against any and all claims, losses, damages, liabilities (including Tax
liabilities), costs and expenses incurred by Buyer, Ball or any of their
respective Affiliates (including, after the Closing, LAR, RCAL and RIND) as a
result of any failure to comply with any such "bulk sales," "bulk transfer" or
similar laws.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.1 Reasonable Efforts. Subject to the terms and conditions
of this Agreement, the parties will use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary or
desirable to consummate, as promptly as practicable, the transactions
contemplated by this Agreement; provided that Ball may, in its discretion upon
written notice to Seller, extend the 7 day time period referred to in Section
1.7(a) by up to 21 days in order to complete its financing arrangements with
respect to the transactions contemplated hereby. In addition, subject to the
terms and conditions of this Agreement, Ball and Buyer will use their best
reasonable efforts to consummate the Financing in accordance with the terms of
the Commitment Letter. Each party agrees to cooperate fully with the other
parties in assisting them to comply with the provisions of this Section 5.1.
Each party agrees to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
reasonably necessary or desirable to consummate the transactions contemplated by
this Agreement.
Section 5.2 WARN Act. The parties agree to cooperate in good faith
to determine whether any notification may be required under the WARN Act as a
result of the transactions contemplated by this Agreement. Seller will be
responsible for providing any notification that may be required under the WARN
Act with respect to any employees of the Business.
Section 5.3 Regulatory and Other Authorizations; Consents.
(a) Each party will use all reasonable efforts to obtain all
authorizations, consents, orders and approvals of Authorities (including from
Cade) and all third party consents that may be or become necessary for the
execution and delivery of, and the performance of its respective obligations
pursuant to, this Agreement and the Ancillary Agreements, provided that neither
Ball nor Buyer shall be under any obligation to divest itself of any assets, to
hold assets separate or to agree to alter the manner in which Ball operates its
business, the Business is operated or the business of Latasa is operated. As
soon as practicable and in any event no more than 5 business days after the date
hereof, Seller, Ball and Buyer will each file with the United States Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice, pursuant to the HSR Act, Notification and Report Forms (FTC Form C4,
Rev. 9/95) with respect to the transactions contemplated by this Agreement and
respond as promptly as is practicable to all inquiries received from either
agency for additional information or documentation. The parties agree that no
filing will be made with Cade until after the Closing.
(b) The parties will consult with one another, and consider in
good faith the views of one another, in determining whether any action by or in
respect of, or filing with, any Authority is required or in connection with any
filings, analyses, appearances, representations, memoranda, briefs, arguments,
opinions and proposals made, or required to be made or submitted by or on behalf
of any party in connection with proceedings under or relating to the HSR Act or
any other federal, state or foreign antitrust or fair trade law. Each party
shall promptly notify the other party of any communication to that party from
any Authority in connection with any required filing with, or approval or review
by, such Authority in connection with the transactions contemplated by this
Agreement.
(c) Seller, Ball and Buyer shall each use its best efforts to
(i) lift, rescind or appeal any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby and (ii) defend any litigation seeking to enjoin, prevent or
delay the consummation of the transactions contemplated hereby or seeking
material damages as a result thereof; provided, that no party shall be required
to take any such action to the extent there is not a reasonable chance of
prevailing with respect thereto.
Section 5.4 Employee Matters for Represented Employees.
(a) The term "Represented Employees" means all of the
employees of the Business represented in collective bargaining units pursuant to
the Collective Bargaining Agreements, including those employees ("Absent
Represented Employees") on lay-off, disability or leave of absence, whether paid
or unpaid, including without limitation under the Family Medical Leave Act of
1993 ("FMLA"), military leaves or workers' compensation, and the term
"Transferred Represented Employees" shall mean all of the Represented Employees
(including Absent Represented Employees) employed by Buyer pursuant to this
Section 5.4.
(b) Effective at Closing, Buyer shall offer employment to all
Represented Employees as of the Closing Date. At Closing, except as otherwise
provided in this Section 5.4, Buyer shall also assume Seller's obligations under
the Collective Bargaining Agreements, other than with respect to plans
maintained by Seller as of the Closing Date (all such plans, collectively,
"Seller's Plans"), it being acknowledged and agreed that (i) Seller shall remain
liable to all Transferred Represented Employees for benefits under Seller's
Plans in which such employees are or will become vested as of the Closing Date
and that Buyer shall provide to Transferred Represented Employees the benefits
under the Collective Bargaining Agreements from and after the Closing Date under
the Replacement Plan (as defined in Section 5.4(f) below), and other plans of
Buyer, subject to the remainder of this Section 5.4, and (ii) Seller shall amend
Seller's Plans to provide that all Represented Employees shall be 100% vested in
their benefits accrued as of the Closing Date under all tax-qualified plans
maintained or contributed to by Seller on behalf of Represented Employees.
Seller hereby represents that it neither maintains nor contributes to any other
employee benefit plan under which Represented Employees may be eligible to
receive benefits that have the potential to vest, but not including for purposes
of this sentence any vacation pay plan.
Buyer and Seller shall cooperate and shall use their reasonable
efforts to enable all Transferred Represented Employees to commence
participation in employee benefit plans maintained by, or on behalf of, Buyer
commencing effective as of the Closing Date.
Notwithstanding the foregoing, with respect to (i) any gainsharing
plan, (ii) any plan based in whole or in part on either Seller's or Buyer's
profits, earnings, returns or revenues, or (iii) any provision of a plan
pursuant to which provision benefits or plan assets are distributed or invested
(including investments directed by plan participants or beneficiaries) in
employer securities or other forms of investment in which it would be
impracticable or infeasible for Buyer to distribute or invest (as the case may
be), or plan assets that Buyer determines should be invested, in whole or in
part, in investments different from the plan investments immediately prior to
the Closing Date, such benefits, provisions, investments or any similar
modifications or adaptations shall be subject to good faith negotiations between
Buyer and the applicable unions. Because it would be inappropriate or
impracticable for Buyer to assume the foregoing plans and provisions in their
entirety, Buyer, after negotiating with the appropriate unions, shall provide
reasonably comparable alternative benefits for Transferred Represented Employees
to replicate or substitute for Seller's profit sharing and gainsharing plans and
those provisions of the employee benefit plans that are described in clause
(iii) of the preceding sentence.
Seller represents that, to the best of its knowledge and belief the
interplant transfer provisions in Article XXXV of the Collective Bargaining
Agreements at the Bristol, Kansas City, Seattle and Tampa can plants (the
"Interplant Transfer Provisions") and , the plans and provisions described in
the preceding paragraph represent the only obligations (other than procedural or
administrative obligations) under the Collective Bargaining Agreements that
would be impracticable or inappropriate for another reasonable party to assume.
Buyer shall not assume the Interplant Transfer Provisions.
Notwithstanding anything in this Agreement to the contrary, Seller
shall reimburse Buyer for all liabilities and obligations incurred by Buyer with
respect to all Absent Represented Employees unless and until such employees
commence active employment with Buyer.
Seller shall retain (i) all liabilities and obligations with respect
to severance, termination pay and related liabilities for all Represented
Employees who terminate or are terminated by Seller on or prior to the Closing
Date, or arising in connection with the Closing by reason of any action,
omission or failure to take action by, or on behalf of, Seller, (ii) all
liabilities and obligations incurred by Buyer relating to the failure of any of
Seller's Plans to conform to, or be administered in accordance with, the
Collective Bargaining Agreement to which it relates, if applicable.
Buyer, however, shall assume and be solely responsible for any
Losses incurred by Seller as a result of any equal employment opportunity
claims, disability discrimination claims and/or claims under the Collective
Bargaining Agreements alleging a violation arising solely from Buyer's decision
not to restore an Absent Represented Employee to active employment.
(c) There will be no transfer of any funds at Closing from
Seller to Buyer regarding the contractual supplemental unemployment benefit
plans. Buyer shall assume the obligation to pay supplemental unemployment
benefits under its own plan or plans (collectively, if more than one, "Buyer's
SUB Plan") in accordance with the terms of the Collective Bargaining Agreements,
with respect to benefits payable from and after the Closing Date.
Seller, however, shall reimburse Buyer for benefits provided by
Buyer under Buyer's SUB Plan to, or on behalf of, Absent Represented Employees
(i) with respect to any restructuring initiated prior to Closing (e.g.,
Torrance), for any and all periods prior to the date such employee first becomes
actively employed by Buyer (if ever), and (ii) with respect to layoffs in the
ordinary course, for any and all payment periods commencing on, or prior to, the
60th day following the Closing Date. Seller shall include on the Closing
Statement $250,000 as an accrued liability for SUB payments pursuant to Section
1.5(a ). Seller hereby represents that Seller is not and has not been required
to fund (other than on a pay-as-you-go basis) any supplemental unemployment
compensation benefits on behalf of Seller Employees (as defined in Section
5.5(a)). Seller shall indemnify and hold Buyer and its Affiliates harmless from
and against any and all Losses with respect to (i) Seller's supplemental
unemployment compensation benefit plans or their funding arrangements or their
summary plan descriptions, (ii) any liability incurred by Buyer as a result of
Seller's breach of the foregoing representation, and (iii) any liabilities
arising out of Seller's obligation to make cash funding contributions to trusts
established pursuant to its supplemental unemployment compensation benefit plans
or to disclose such benefits or funding, or any incidents of mistakes or
noncompliance by Seller with respect to the supplemental unemployment
compensation benefits.
(d) Buyer acknowledges that certain Collective Bargaining
Agreements require Buyer to establish a 401(k) defined contribution plan as of
the Closing Date, and Buyer shall use its reasonable efforts to promptly
implement any such plan. If Buyer is unable to provide a 401(k) defined
contribution plan as of the Closing Date, Buyer shall take such reasonable steps
as may be necessary to contribute to the applicable plan or plans the required
matching or other employer contributions due for the period between the Closing
Date and the date Buyer's plan becomes effective, but not including any wage
deferral contributions pursuant to employee elections under section 401(k) of
the Code.
(e) Buyer shall recognize Transferred Represented Employees'
seniority and service with Seller and any predecessor under Buyer's employee
benefit plans (whether or not funded and whether or not subject to ERISA),
personnel policies and fringe benefit plans, programs and arrangements
established for or offered to Transferred Represented Employees to the same
extent and for the same purposes that Seller is required to recognize such
service pursuant to the Collective Bargaining Agreements. On and after the
Closing Date, Buyer and the applicable unions are free to negotiate from time to
time new terms and conditions of employment, including without limitation
seniority and benefit plans, consistent with the National Labor Relations Act.
(f) Except as otherwise provided in Section 5.4(g) regarding
the possible assumption of certain Single Location Plans (as defined therein),
on or as soon as practicable following the Closing Date, but with retroactive
effect to the Closing Date, Buyer shall establish a defined benefit pension plan
or plans (collectively, if more than one, the "Replacement Plan") providing
benefits to Transferred Represented Employees required pursuant to the
Collective Bargaining Agreements, which Replacement Plan shall (x) be designed
to qualify under section 401(a) of the Code, and (y) provide that the
Transferred Represented Employees who were participants in a Union Pension Plan
immediately before Closing and who become Transferred Represented Employees
shall commence participation in the Replacement Plan as of the Closing Date.
Each Replacement Plan shall provide Transferred Represented
Employees with credit for service with Seller for purposes of eligibility to
participate, vesting, eligibility to receive benefits, and benefit accruals
under the Replacement Plan; provided, however, that the benefit payable to a
Transferred Represented Employee under a Replacement Plan shall be offset by the
benefit payable to the Transferred Represented Employee under the applicable
Seller's Plans (collectively, the "Union Pension Plans"). Such offset (the
"Offset") shall be calculated in accordance with the principles outlined below.
The pension benefit examples set forth in Exhibit 5.4(f) are intended to
illustrate the calculations of the Offset in accordance with these principles,
but are not intended to be exhaustive.
(i) A participant may elect to begin receiving a benefit
under the Union Pension Plan as provided under that plan.
(ii) In the event that a Transferred Represented Employee
is eligible for a monthly retirement benefit (other than a retirement
benefit due to Permanent Shutdown, layoff, accident or sickness, which
benefit is hereinafter referred to as a "Special Retirement Benefit") or a
deferred vested monthly benefit under the Replacement Plan, the Offset
shall be based on the age 65 (or if later, normal retirement date) benefit
payable under the Union Pension Plan, and the benefit payable under the
Replacement Plan shall be adjusted based on age at benefit commencement
under the Replacement Plan, the participant's form of payment under the
Replacement Plan, the preretirement survivor coverage, if any, under the
Replacement Plan, and preretirement survivor coverage, if any, under the
Union Pension Plan that was in force while such participant was employed
by Buyer. Notwithstanding the foregoing, this subparagraph (ii) shall not
apply for determining the Offset for a Transferred Represented Employee
with a deferred vested monthly benefit under a Defined Benefit Single
Location Plan (as defined in Section 5.4(g)) that has not been assumed by
Buyer, which participant cannot elect to commence receiving such monthly
benefit before age 65 due to having earned fewer than 10 years of vesting
service with Seller. For such Transferred Represented Employee, the Offset
shall be equal to (a) $0 until the date immediately preceding age 65, and
(b) from and after such date, such monthly benefit that is payable under
such Defined Benefit Single Location Plan.
(iii) In the event that a Transferred Represented
Employee is eligible for a monthly retirement benefit (other than a
Special Retirement Benefit) under the Replacement Plan, the Offset shall
include the graded minimum supplement under the Union Pension Plan if such
Transferred Represented Employee is eligible for such supplement as of the
Closing Date.
(iv) In the event that a Transferred Represented Employee
is eligible for a special retirement payment under the Replacement Plan,
the Offset shall include the special, ten week, payment, if any, payable
under the Union Pension Plan but shall not include weeks of accrued
vacation, if any, as of the Closing Date, and if the special retirement
payment payable under the Union Pension Plan exceeds $0, the Transferred
Represented Employee shall commence to receive a monthly retirement
benefit under the Replacement Plan upon retirement instead of three months
following retirement.
(v) In the event that a Transferred Represented Employee
is eligible for a disability benefit or a Special Retirement Benefit under
the Replacement Plan, the Offset shall be equal to (a) $0 until the date
immediately preceding the earliest date that benefits could commence under
the Union Pension Plan, and (b) from and after such earliest date, the
benefit that could be paid under the Union Pension Plan assuming that the
benefit commences on such earliest date.
(vi) In the event that a Transferred Represented Employee
dies while employed by Buyer and the Transferred Represented Employee's
surviving spouse is eligible for a death benefit under the Replacement
Plan, the Offset shall equal the benefit, if any, which is payable under
the Union Pension Plan on account of such death.
(vii) In the event that a Transferred Represented
Employee either (A) separates from service with Buyer at a time when the
participant is eligible for a deferred vested monthly benefit under the
Replacement Plan and subsequently dies prior to the commencement of
benefits under the Replacement Plan, and the Transferred Represented
Employee's surviving spouse is eligible for a death benefit under the
Replacement Plan due to preretirement survivor coverage under the
Replacement Plan, or (B) separates from service with Buyer at a time when
the participant is eligible for a monthly retirement benefit under the
Replacement Plan and subsequently dies prior to the commencement of
benefits under the Replacement Plan, then in either case, the benefit
payable under the Replacement Plan shall be determined as in (ii) above,
and further reduced by 50% on account of payment to the surviving spouse.
(viii) In the event that a Transferred Represented
Employee dies subsequent to both separation from service with Buyer and
benefit commencement from the Replacement Plan, the death benefit, if any,
payable from the Replacement Plan shall be determined solely with regard
to the form of payment in effect at death and the monthly benefit under
the Replacement Plan.
(ix) Benefits under the Union Pension Plans shall be paid
to Transferred Represented Employees based on the plan provisions in
effect as of the Closing Date, but taking into account the amendments
described below in this Section 5.4(f).
(x) The above principles (i) through (ix) should not be
interpreted to entitle a participant in a Defined Benefit Single Location
Plan to any benefits, including but not limited to Special Retirement
Benefits and special retirement payments under the Replacement Plan or the
Union Pension Plans, other than benefits expressly contemplated by the
applicable Collective Bargaining Agreement.
Seller shall fund the Union Pension Plans as necessary to ensure
that benefits payable thereunder to Transferred Represented Employees will be
fully paid when due. In addition, Seller shall amend each Union Pension Plan
that is not a Defined Benefit Single Location Plan and that provides an
unreduced benefit upon retirement with 30 years of service so that Transferred
Represented Employees' service with Buyer will be credited under the Union
Pension Plans for purposes of determining a Transferred Represented Employee's
eligibility for, and entitlement to, a thirty-year pension under the Union
Pension Plan upon a Transferred Represented Employee's termination, resignation,
retirement or death from Buyer following the Closing Date. Further, Seller shall
amend each Union Pension Plan that is not a Defined Benefit Single Location Plan
to provide that (i) a Transferred Represented Employee who retires under a
Replacement Plan shall have his or her benefit under such Union Pension Plan
converted to a joint and 50% survivor annuity using factors applicable to a
participant who retires under such Union Pension Plan irrespective of whether
such Transferred Represented Employee was eligible to retire under such Union
Pension Plan as of the Closing Date, (ii) if a Transferred Represented Employee
elects, or does not opt out of, preretirement survivor coverage under a Union
Pension Plan, and subsequently dies while employed by Buyer and while such
coverage is in effect, the death benefit payable from the Union Pension Plan
shall commence at death in a monthly amount equal to 50% of the accrued benefit,
including the reduction for preretirement survivor coverage, and (iii) the
special retirement payment payable to a Transferred Represented Employee shall
be determined without regard to any weeks of accrued vacation.
Notwithstanding the foregoing, in the event that Buyer incurs any
additional liabilities or obligations as a result of the failure of the
applicable union or any applicable governmental agency or authority, to agree
to, or approve, the crediting of service, or the timing or methodology of the
Offset, in each case, in the manner and to the extent described in this Section
5.4(f) and Exhibit 5.4(f), thereby resulting in a duplication of pension
benefits or additional benefits beyond those contemplated by this Section 5.4(f)
and Exhibit 5.4(f), payable to or on behalf of Transferred Represented
Employees, Seller shall reimburse Buyer for any additional out-of-pocket costs
incurred by Buyer to the extent resulting from such duplication of benefits or
additional benefits beyond those contemplated by this Section 5.4(f) and Exhibit
5.4(f). In addition, Seller shall reimburse Buyer for any and all Losses
suffered by Buyer by reason of any Permanent Shutdown (as defined in Section
5.4(h)) occurring as a result of Seller's actions on or before the Closing Date
or as a result of the execution, delivery or performance of this Agreement, or
the consummation of transactions contemplated hereby, provided that Buyer has
assumed Seller's obligations under the Collective Bargaining Agreements as
required by this Section 5.4.
(g) Single Location Plans.
(i) With respect to any Business Locations where separate
tax-qualified defined benefit and/or defined contribution plans are
maintained for Transferred Represented Employees and/or Transferred
Nonrepresented Hourly Employees (as defined in Section 5.5(b)) ("Single
Location Plans"), Buyer shall have the right, in its sole discretion, to
elect, on or prior to the Closing Date, to assume sponsorship of one or
more of the Single Location Plans that are defined contribution plans (the
"Defined Contribution Single Location Plans"), and to elect, at the time
prescribed in clause (vii) below, to assume sponsorship of all (or none)
of the Single Location Plans that are defined benefit plans (the "Defined
Benefit Single Location Plans"). In this regard, if Buyer elects to assume
sponsorship of any of the Defined Contribution Single Location Plans,
Buyer may elect to either assume the trust in which the assets of any such
plan are invested, or to receive a transfer of plan assets from the plan's
trust in conjunction with the assumption of the liabilities of such plan,
and if Buyer elects to assume sponsorship of the Defined Benefit Single
Location Plans, Buyer shall receive transfers of plan assets in
conjunction with the assumption of the liabilities from each of the
respective trusts in which assets of the Defined Benefit Single Location
Plans are invested, as described below.
(ii) With respect to each Single Location Plan, Seller
has heretofore delivered to Buyer true and complete copies of the current
version of the plan and any amendments thereto, any related trust or other
funding vehicle, the most recent summary plan descriptions and summaries
of economics provided to participants under ERISA or the Code, the most
recent determination letter received from the Internal Revenue Service
with respect to each such plan and other related documents. To the
knowledge of Seller, no event has occurred since the date of such
determination that would affect such determination. The plans and related
documents provided to Buyer as of the date hereof pursuant to this Section
5.4(g)(ii) are herein referred to as the "Initial Document Production."
Commencing as of the date hereof, Seller shall use its reasonable efforts
to provide to Buyer updated plans, related trusts, amendments, summaries
of economics, summary plan descriptions, summary of material modifications
and related information required under ERISA or the Code. In addition, as
of the Closing Date, Seller shall identify for Buyer those documents
required under ERISA or the Code relating to the Single Location Plans
that Seller will not deliver to Buyer as of the Closing Date. To the
extent that Seller fails to timely provide Buyer with the documents and
information that are reasonably appropriate or needed for Buyer to operate
and administer the Single Location Plans, Seller shall indemnify and hold
harmless Buyer from any and all Losses suffered by Buyer pursuant to
Section 5.4(g)(x) related to such failure, and further, to the extent that
such failure interferes with Buyer's ability to satisfy its obligations
under Section 5.4, 5.5 or 5.6, Buyer shall be relieved of its obligations
to the extent that Buyer's inabilities result from Seller's failure, until
(A) Seller cures such failure and (B) Buyer has had a reasonable period of
time thereafter to satisfy its related obligations.
(iii) Seller hereby represents that each of the Single
Location Plans is, and has been administered, in compliance with its terms
and, to the extent required, with all applicable law, including the
applicable provisions of ERISA and the Code ;provided, however, that
Seller shall not be deemed to have breached this representation to the
extent that plan documents provided to Buyer have not been amended to
comply with applicable law, but solely with respect to those amendments
that are not required to be made as of the date hereof, or as of the
Closing Date, as the case may be. In addition, Seller hereby represents
that all documents, financial and census data and reports and other
pertinent information provided, or required to be provided to Buyer
pursuant to this Agreement, are true and complete as of the date so
provided, and that, where applicable, the terms of each Single Location
Plans or, if updated by a summary of economics, then the terms of the
applicable summary of economics are consistent with the terms of the
Collective Bargaining Agreements to which such plan or summary relates as
of the date hereof with respect to the documents provided to Buyer as of
the date hereof, and as of the date provided to Buyer with respect to the
documents provided to Buyer following the date hereof, but prior to the
Closing Date.
(iv) With respect to the Defined Contribution Single
Location Plans that Buyer may elect to assume, if any, on, or as soon as
practicable following, the Closing Date, Buyer shall take all actions
necessary and appropriate to assume such plans, and Buyer and Seller shall
cooperate to effectuate the foregoing.
(v) With respect to the Defined Benefit Single Location
Plans that Buyer may elect to assume, no later than the earlier of (A)
June 1, 1998, or (B) 45 days prior to the Closing Date, Seller or Seller's
actuary or the trustee or trustees (the "Master Trustee") of the master
trust or trusts in which the assets of the Defined Benefit Single Location
Plans are invested (the "Master Trust") shall provide to Buyer (A) a
schedule containing the projected benefit obligations, as of January 1,
1998, or such later date as Seller shall determine, for each participant,
beneficiary and alternate payee (within the meaning of section 414(p)(8)
of the Code) under each of the Defined Benefit Single Location Plans, (B)
such additional census data for all plan participants and other pertinent
census-related information that Buyer or Buyer's actuary may reasonably
request to enable Buyer to calculate the liabilities under such plans, in
each case, as of January 1, 1998, or such later date as Seller shall
determine, and (C) such other pertinent information that Buyer or Buyer's
actuary may reasonably request to evaluate such plans from a financial and
legal compliance perspective.
(vi) On the day following the last day of the month
coincident with or next following the Closing Date (the "Valuation Date"),
Seller shall provide to Buyer an estimate of the fair market value of the
assets allocable to each of the Defined Benefit Single Location Plans (the
"Guaranteed Pension Asset Value").
(vii) As soon as practicable, but in no event more than
five business days following the Valuation Date, Buyer shall notify Seller
whether or not Buyer has elected to assume the Defined Benefit Single
Location Plans. If Buyer has elected to assume such plans, then, as soon
as practicable, but in no event later than four business days following
the date that Buyer has notified Seller that it has elected to assume such
plans, Seller shall cause the Master Trustee to transfer to a trustee or
trustees designated by Buyer, in cash, assets from the Master Trust equal
to 90% of the Guaranteed Pension Asset Value.
(viii) No later than 60 days following the Valuation
Date, Seller shall cause the Master Trustee to transfer to a trustee or
trustees designated by Buyer, in cash, assets from the Master Trust equal
to the greater of (A) 10% of the Guaranteed Pension Asset Value or (B) the
fair market value of the assets allocable to each of the Defined Benefit
Single Location Plans as of the Valuation Date minus 90% of the Guaranteed
Pension Asset Value. At such time, Seller (or Seller's actuary or the
Master Trustee) shall also provide to Buyer a report of the fair market
value of the assets of each of the Defined Benefit Single Location Plans
as of the Valuation Date, financial information relating to the
calculation of such assets as of the Valuation Date, and such other
pertinent information as Buyer may reasonably request to evaluate the
report on assets prepared by the Master Trustee, and such other reports,
if any, prepared by Seller or Seller's actuary, and (C) such other
pertinent information that Buyer or Buyer's actuary may reasonably request
to evaluate such plans from a financial and legal compliance perspective,
and to evaluate the calculations prepared by the Master Trustee, and
Seller or Seller's actuary, if applicable. The report prepared valuing the
assets in the Master Trust allocable to the Defined Benefit Single
Location Plans as of the Valuation Date shall be prepared by the Master
Trustee in accordance with such rules, regulations and procedures
governing such preparation.
(ix) Seller hereby represents that the transfer of assets
and liabilities contemplated by this Section 5.4(g) shall be in compliance
with section 414(l) of the Code, to the extent applicable.
(x) Seller shall indemnify and hold Buyer and its
Affiliates harmless from and against any and all Losses with respect to
all liabilities and obligations arising under the plans that are assumed
by Buyer pursuant to this Section 5.4(g) that result from (A) the acts or
omissions of Seller, any trustee or other fiduciary with respect to such
plans, which acts or omissions occurred, or should have occurred, on or
prior to the date the applicable assets are transferred, including,
without limitation, any acts or omissions relating to any inaccuracies or
omissions in the data, documents or other information that Seller (or
Seller's actuary or the Master Trustee) were required to provide to Buyer
pursuant to this Agreement or that were reasonably appropriate or needed
for Buyer to operate and administer the Single Location Plans, or (B)
Buyer's reliance on, or taking any actions with respect to, the Initial
Document Production, to the extent that the information provided therein
differed from, or failed to conform with, any documents or subsequent
information received by Buyer from Seller, the terms of any applicable
Collective Bargaining Agreement or applicable law.
(xi) Seller and Buyer shall cooperate in the filing of
any required forms, applications or communications, and in taking all
other actions that are necessary or appropriate relating to the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, the U.S.
Department of Labor, and any other regulatory agency that has jurisdiction
over the transfers and assumptions contemplated by this Section 5.4(g) to
consummate such transfers and assumptions.
(xii) To the extent that Buyer elects to assume any or
all of the Defined Contribution Single Location Plans and all of the
Defined Benefit Single Location Plans pursuant to this Section 5.4(g)
(each, an "Assumed Benefit Plan," and collectively, the "Assumed Benefit
Plans"), Buyer shall not be required to establish a plan for the employees
at the applicable Business Locations pursuant to paragraph (f) above, or
Section 5.5 hereof.
(h) The parties to this Agreement intend that this transaction
should not be construed as a "permanent shutdown" either under the Collective
Bargaining Agreements or for purposes of Article III of Seller's Pension Plans
for Hourly Employees or otherwise ("Permanent Shutdown").
(i) All reimbursements described in this Section 5.4 shall be
made in accordance with the reimbursement procedures set forth in Section 5.5(i)
hereof. All references in this Section 5.4 to liabilities or obligations
incurred by Buyer, shall be deemed to include all liabilities or obligations
incurred by any pension plan maintained or sponsored by Buyer or Ball, or to
which Buyer or Ball is obligated to contribute, including the Replacement Plan.
(j) For purposes of Sections 5.4, 5.5 and 5.6 of this
Agreement, references to Buyer shall be interpreted to include or be replaced by
references to Ball with respect to references to the entity sponsoring or
maintaining an employee benefit plan, the entity taking or required to take any
action with respect to any such plan, the entity for whom an employee is
employed or from whom an employee has terminated employment, and the entity
incurring employee benefit related liability, in each case, as the context
permits.
Section 5.5 General Employee Matters, Employee Matters
for Nonrepresented Employees and Welfare Benefit Provisions for All
Employees.
(a) General. Seller has previously provided to Buyer the
information listed below pertaining to all employees employed by Seller in the
Business, including Headquarter Employees (as defined in Section 5.5(c)) as of
the date indicated (the "Employee Lists"). Each such person is herein referred
to individually as a "Seller Employee," and collectively as the "Seller
Employees": name, title, work location, wage grade or Hay Grade, date of birth,
status as salaried or hourly employee and union code, whether such employee is
exempt or non-exempt, monthly salary or hourly wage rate, employee's current
status, status date and reason code if employee is inactive, service dates and
the date definitions for purposes of vesting and eligibility to participate
under any employee benefit plan.
As soon as practicable, but no later than 30 days following the date
hereof, Seller shall provide to Buyer certain employee benefits data (the
"Employee Benefits Data") with respect to all Seller Employees containing the
type of information set forth on Section 5.5(a) of the Disclosure Schedule.
Seller shall provide updated Employee Benefits Data no later than 14 days
following the Closing Date.
No later than 14 days following the Closing Date, Seller shall
provide Buyer with (i) the number of remaining 1998 vacation days accrued as of
the Closing Date for each Transferred Employee (as defined below), and (ii)
Employee Lists updated as of the Closing Date.
In addition, within 180 days following the Closing Date, Seller
shall provide to Buyer (i) for each Transferred Employee, individual pension
service information, including the period of continuous service with Seller (and
including all service that Seller is required to take into account for purposes
of all applicable benefit plans), which information includes credited service
for benefit and vesting purposes, and (ii) such other information regarding
Transferred Represented Employees and Transferred Nonrepresented Hourly
Employees (as defined in Section 5.5(b)) that actuaries would reasonably agree
is sufficient and necessary to value the liabilities of, and/or administer, the
Replacement Plans and any Defined Benefit Single Location Plans that are assumed
by Buyer, pursuant to the terms of such plans, including individual accrued
benefits for each Transferred Represented Employee and Transferred
Nonrepresented Hourly Employees. In the event, however, that any Transferred
Employee terminates, retires, dies or becomes disabled during the 180 day period
following the Closing Date, upon notification of the date of separation of
service, Seller shall provide to Buyer all pension information for such person
within 5 business days of notification.
Commencing as of the date hereof, Seller shall provide to Buyer,
upon Buyer's request, such employee benefits data, including dates of hire and
breaks in service, pertaining to a specific individual or individuals,
reasonably requested by Buyer, as soon as practicable, but in no event later
than 7 days, following the date of such request. In addition, Seller shall
provide to Buyer, within 36 months following the Closing Date, break in service
information with respect to each Transferred Employee, by individual.
To the extent that Seller fails to satisfy its obligations to
provide Buyer with the information described in the foregoing paragraphs of this
Section 5.5(a) in a timely and accurate manner, Seller shall indemnify and hold
harmless Buyer from any and all Losses related to such failure, and further, to
the extent that such failure interferes with Buyer's ability to satisfy its
obligations under Section 5.4, 5.5 or 5.6 hereof, Buyer shall be relieved of its
obligations to the extent that Buyer's inabilities result from Seller's failure,
until (i) Seller cures such failure and (ii) Buyer has had a reasonable period
of time thereafter to satisfy its related obligations.
Each Seller Employee (other than any Represented Employee) who
becomes actively employed by Buyer within the time prescribed by Section 5.5 or
5.6, is herein referred to individually as a "Transferred Employee" and all such
Seller Employees collectively as "Transferred Employees," in each case, as of
the date such Transferred Employee commences active employment with Buyer. Each
Transferred Represented Employee is herein referred to individually as a
Transferred Employee and all such Transferred Represented Employees,
collectively as Transferred Employees, as of the Closing Date. Employment of
Transferred Employees by Buyer on or after the Closing Date, other than those
employees covered by a Collective Bargaining Agreement, shall be employment "at
will," and nothing herein shall be construed to be an employment agreement for
the benefit of any such employee.
Any Absent Nonrepresented Hourly Employee, as defined Section
5.5(b), or Absent Salaried Employee, as defined in Section 5.5(c), shall not be
deemed to be a Transferred Employee until such employee commences active
employment with Buyer.
Except for certain obligations relating to Assumed Benefit Plans
that are assumed by Buyer as of the Closing Date, as described in Section
5.4(g), and obligations relating to Represented Employees, as described in
Sections 5.4 and 5.5, Seller shall retain all liabilities and obligations
whatsoever pertaining to (i) all Seller Employees, or any employees of Seller
who have retired or terminated, are on lay off, short-term disability, long-term
disability, workers' compensation, leave of absence or any other inactive status
immediately prior to the Closing Date and, in each case, who do not become
Transferred Employees, whether such liabilities and obligations are incurred
prior to, on or after the Closing Date, and (ii) all Seller Employees, including
Transferred Employees, with respect to all liabilities and obligations incurred
prior to the Closing Date, and Seller shall reimburse Buyer for any and all
liabilities or obligations incurred by Buyer that are described in clauses (i)
or (ii), above. Except as otherwise provided in Sections 5.4, 5.5 and 5.6
hereof, Buyer shall be liable for all obligations incurred with respect to
Transferred Employees from the date such employees become Transferred Employees.
(b) Nonrepresented Hourly Employees. Effective at Closing,
Buyer shall offer employment to all hourly employees associated with the
Business who are not covered by a Collective Bargaining Agreement ("Seller
Nonrepresented Hourly Employees") other than those employees ("Absent
Nonrepresented Hourly Employees") on short- and long-term disability, leaves of
absence, including, without limitation, under FMLA or military leaves, lay off
or workers' compensation.
In addition, Buyer shall offer employment to all Absent
Nonrepresented Hourly Employees who are available to commence active employment
on or prior to the 180th day following the Closing Date or such later date to
the extent that Buyer is so required pursuant to applicable law. Those Seller
Nonrepresented Hourly Employees who commence active employment with Buyer as of
the Closing Date and those Absent Nonrepresented Hourly Employees who commence
active employment with Buyer within the time prescribed by this paragraph shall,
as of the date such employees commence active employment with Buyer, be
considered Transferred Employees and shall herein be referred to as the
"Transferred Nonrepresented Hourly Employees."
Buyer shall offer to Transferred Nonrepresented Hourly Employees who
commence active employment on the Closing Date the same hourly wage rate in
effect with Seller immediately prior to the Closing Date, and benefits
substantially comparable to those benefits provided to such employees by Seller
immediately prior to the Closing Date. Buyer shall offer to Transferred
Nonrepresented Hourly Employees who commence active employment after the Closing
Date the same hourly wage rate in effect for similarly situated employees of
Buyer at that location, and benefits substantially comparable to those benefits
provided to similarly situated employees of Buyer at that location, in each
case, as of the date such employees commence active employment with Buyer.
Notwithstanding the foregoing, Buyer shall have no obligation to guarantee to
continue the hourly wage rate or benefits provided to Transferred Nonrepresented
Hourly Employees pursuant to this paragraph.
Buyer shall recognize Transferred Nonrepresented Hourly Employees'
service with Seller to the same extent and for the same purposes (other than for
purposes of benefit accrual under defined benefit plans) that Seller is required
to recognize such service pursuant to the terms of Seller's plans, in accordance
with the provisions governing crediting of service from time to time under
Buyer's employee benefit plans (whether or not funded and whether or not subject
to ERISA) and personnel policies; provided, however, that Buyer shall be
required to credit service with Seller under Buyer's employee benefit plans only
if, and to the extent that, Buyer gives credit to similarly situated employees
of Buyer for comparable service performed by such employees for Buyer.
Except as provided in Section 5.6(a)(4), Seller shall be solely
responsible for, and shall retain all liabilities and obligations for, all
Absent Nonrepresented Hourly Employees unless and until such employees become
Transferred Employees. Seller shall be solely responsible for, and shall retain
all liabilities and obligations with respect to, severance, termination pay and
related liabilities for all Seller Nonrepresented Hourly Employees who terminate
or are terminated by Seller prior to the date such employees become Transferred
Employees, and shall reimburse Buyer for any and all liabilities and obligations
incurred by Buyer that are retained by Seller or for which Seller is obligated
to reimburse Buyer pursuant to this paragraph.
(c) Salaried Employees Including Headquarter Employees,
Commencing Employment as of the Closing Date. Effective at Closing, Buyer may
offer employment to (i) any salaried employees associated with the Business who
are employed at Seller's Can Division headquarters, and (ii) any salaried
employees listed on Section 5.5(c)(2) of the Disclosure Schedule hereto located
at operating locations but who are not directly associated with plant
responsibilities (e.g., regional sales or services employees) (collectively, the
"Headquarter Employees"), in either case, whom Buyer, in its sole discretion,
chooses to employ.
Effective at Closing, Buyer shall also offer employment to all
salaried employees located at operating locations and directly associated with
plant responsibilities of the Business (collectively, the "Plant Salaried
Employees") other than those employees ("Absent Salaried Employees") on short-
and long-term disability, leaves of absence, including, without limitation,
under FMLA or military leaves, layoff or workers' compensation. The definition
of Absent Salaried Employees shall not include any Headquarter Employees.
In addition, Buyer shall offer employment to all Absent Salaried
Employees who are available to commence active employment on or prior to the
180th day following the Closing Date or such later date to the extent that Buyer
is so required pursuant to applicable law.
Those salaried employees of Seller described in this Section 5.5(c),
including Headquarter Employees ("Seller Salaried Employees") who commence
active employment with Buyer within the time prescribed by this Section 5.5(c)
or Section 5.6 shall, as of the date such employees commence active employment
with Buyer, be herein referred to as "Transferred
Salaried Employees."
Buyer shall offer to Transferred Salaried Employees who commence
active employment with Buyer as of the Closing Date the same salary levels in
effect with Seller immediately prior to the Closing Date, and benefits
consistent with benefits provided to similarly situated employees of Buyer as of
the Closing Date. Buyer shall offer to Transferred Salaried Employees who
commence active employment with Buyer after the Closing Date salary levels
consistent with salary levels in effect for similarly situated employees of
Buyer and benefits consistent with benefits provided to similarly situated
employees of Buyer, in either case, as of the date such employees commence
active employment with Buyer. Notwithstanding the foregoing, (i) Buyer shall
have no obligation to guarantee to continue the salary levels or benefits
provided to such Transferred Salaried Employees pursuant to this paragraph, (ii)
Buyer shall have no obligation to provide Transferred Salaried Employees who are
not participants as of the Closing Date in an incentive plan maintained by
Seller with incentive compensation or bonuses, or to include such employees as
participants in any incentive compensation or bonus plans, and (iii) with
respect to Transferred Salaried Employees who were participants in Seller's
Performance Incentive Plan for 1997 during the 1997 calendar year, Buyer shall
permit such employees to participate in the annual cash incentive compensation
plan, if any, maintained by Buyer from and after the Closing Date at such levels
as shall be determined by Buyer in its sole discretion, from time to time,
pursuant to the terms of Buyer's plans. Prior to the date hereof, Seller shall
have provided Buyer with a true and complete list of the Transferred Salaried
Employees described in clause (iii) above.
Buyer shall recognize Transferred Salaried Employees service with
Seller to the same extent and for the same purposes (other than for purposes of
benefit accrual under defined benefit plans) that Seller is required to
recognize such service pursuant to the terms of Seller's plans, in accordance
with the provisions governing crediting of service from time to time under
Buyer's employee benefit plans (whether or not funded and whether or not subject
to ERISA) and personnel policies; provided, however, that Buyer shall be
required to credit service with Seller under Buyer's employee benefit plans only
if, and to the extent that, Buyer gives credit to similarly situated employees
of Buyer for comparable service performed by such employees for Buyer.
Except as provided in Section 5.6(a)(4), Seller shall be solely
responsible for, and shall retain all liabilities and obligations for, all
Absent Salaried Employees unless and until such employees become Transferred
Employees. Seller shall be solely responsible for, and shall retain all
liabilities and obligations with respect to, severance, termination pay and
related liabilities for all Seller Salaried Employees who terminate or are
terminated by Seller prior to the date such employees become Transferred
Employees, and shall reimburse Buyer for any and all liabilities and obligations
incurred by Buyer that are retained by Seller or for which Seller is obligated
to reimburse Buyer pursuant to this paragraph.
(d) Employee Defined Benefit Pension Benefits.
(i) Transferred Nonrepresented Hourly Employees. Buyer
shall provide Transferred Nonrepresented Hourly Employees with pension
benefits substantially comparable in the aggregate to those benefits
provided to them immediately prior to the Closing Date by Seller pursuant
to the terms of Seller's pension plans that are intended to qualify under
section 401(a) of the Code; provided, however, that Buyer shall have no
obligation to provide any gainsharing plan, any plan based in whole or in
part on either Seller's or Buyer's profits, earnings, returns or revenues,
any plan pursuant to which benefits or plan assets are distributed or
invested in employer securities or other form of investment in which it
would be impracticable or infeasible for Buyer to distribute or invest, as
the case may be, or any plan the assets of which Buyer determines should
be invested, in whole or in part, in investments different from the plan
investments immediately prior to the Closing Date (including participant
directed investments).
Effective on, or as soon as practicable following, the Closing
Date, Seller shall timely amend Seller's tax-qualified pension plans that
cover Transferred Nonrepresented Hourly Employees to provide that all
Nonrepresented Hourly Employees participating in such plans shall be 100%
vested in their benefits accrued under such plans as of the Closing Date.
(ii) Transferred Salaried Employees. With respect to
Transferred Salaried Employees, effective as of the Closing Date or, if
later, the date such employees become Transferred Salaried Employees,
Buyer shall provide or cause to be provided coverage under a tax-qualified
defined benefit plan maintained by Buyer, which is intended to provide
benefits consistent with the benefits provided to similarly situated
employees of Buyer, and that provides benefits for periods of service of
such employees occurring on or after the Closing Date, or if later, the
date such employees become Transferred Salaried Employees. Buyer shall
recognize, for purposes of vesting and eligibility for participation,
ancillary benefits or early retirement or disability subsidies, but not
for purposes of benefit accrual or final average compensation, under such
plan, all service credited to such Transferred Salaried Employees for such
purposes under the tax-qualified defined benefit plans maintained by
Seller for such employees immediately prior to the Closing Date, or if
later the date such employees become Transferred Employees. Buyer shall
have no liability or obligation whatsoever with respect to the defined
benefit plans retained by Seller pursuant to this Section 5.5.
Effective on, or as soon as practicable following, the Closing Date,
Seller shall timely amend Seller's tax-qualified pension plans that cover
Transferred Salaried Employees to provide that all Transferred Salaried
Employees participating in such plans shall be 100% vested in their benefits
accrued under such plans as of the Closing Date.
(e) Defined Contribution Plans. Effective on, or as soon as
practicable following, the Closing Date, Buyer shall adopt a tax-qualified
defined contribution plan or plans, or amend an existing defined contribution
plan or plans, as necessary or appropriate, to permit Transferred Employees to
direct that distributions from Seller's defined contribution plans that satisfy
the requirements of an "eligible rollover distribution" within the meaning of
section 402(c)(4) of the Code be rolled over into Buyer's plan or plans.
Notwithstanding the foregoing, the parties agree that Buyer shall have no
obligation to accept (directly or indirectly) participant loans as rollovers
into Buyer's plans, and in no event shall Buyer's failure to accept participant
loans be deemed to be a breach of, or failure by Buyer to satisfy its
obligations under, Section 5.4. Buyer and Seller shall cooperate as necessary to
effectuate the foregoing. In addition, Seller shall use reasonable efforts to
take all actions necessary or appropriate to enable Buyer, at Buyer's election,
to accept direct rollovers of participant loans from Seller's defined
contribution plans.
(f) Welfare Benefits.
(i) Post-Retirement Medical and Life Insurance Benefit
Liability For All Employees. Seller shall retain all liabilities and
obligations for all post-retirement medical and life insurance liabilities
payable under the terms of Seller's post-retirement plans for employees
("Post-Retirement Eligible Employees") receiving or eligible to receive
post-retirement medical and life insurance benefits as of the Closing
Date, including those who are eligible for post-retirement medical and
life insurance benefits upon termination of employment or commencement of
pension benefits as of the Closing Date, or if later, the date such
employees become Transferred Employees.
Post-Retirement Eligible Employees shall be primarily covered
by Buyer's active medical plans and shall be covered secondarily, using a
"carve-out" method of claims payment, by Seller's post-retirement medical
plans while actively employed by Buyer. Once such employees terminate
employment with Buyer, such employees shall be covered primarily by the
post-retirement medical plans maintained by Seller as of the Closing Date,
and shall be covered secondarily, using a "carve-out" method of claims
payment, by the post-retirement medical plans, if any, maintained by Buyer
as of the date of retirement for similarly situated employees. For
purposes of the foregoing sentence, a "carve-out" method of claims payment
shall mean that for the same covered health care expense, the benefits
payable by the secondary claims payor are reduced by the benefits payable
by the primary claims payor.
With respect to Transferred Employees who are not
PostRetirement Eligible Employees, when such employees terminate
employment with Buyer, Buyer shall provide such employees post-retirement
medical and life insurance benefits in accordance with the terms of
Buyer's plan or plans, if any (including requirements for eligibility and
participation), then in effect for such employees.
With respect to those employees who have not satisfied the age
and service requirements for "Rule of 90" post-retirement benefits as of
the Closing Date pursuant to the terms of Seller's post-retirement welfare
plans, and consequently are required to contribute toward their coverage,
Seller shall not be required to give such employees credit for service
with Buyer for purposes of reducing such employees' required contributions
for such coverage.
Each of Seller and Buyer retains the right to change at any
time, and from time to time, any and all of its employee benefit plans,
including those plans providing medical and other welfare benefits to its
retired employees, including those who may become Transferred Employees,
provided that no change may be made that would single out the Transferred
Employees for special adverse treatment or that would adversely affect
Transferred Employees differently than other similarly situated employees
of Seller or Buyer. Notwithstanding the foregoing, if in accordance with
the foregoing sentence, Seller changes the kind and/or level of the
benefits covered by its retiree medical benefit plans from those in effect
as of the Closing Date, Seller shall reimburse Buyer for any additional
out-of-pocket costs incurred by Buyer as a result of such change. In like
manner, if Buyer changes the kind and/or level of the medical benefits
covered by the plans it maintains for its active employees from those in
effect as of the Closing Date, Buyer shall reimburse Seller for any
additional out-of-pocket costs incurred by Seller under its retiree
medical plans as a result of such change.
(ii) Active Welfare Benefits. Effective as of the Closing
Date (or such later date as a Seller Employee becomes a Transferred
Employee), Buyer shall provide, or cause to be provided, without any
waiting period, where applicable, medical, life insurance, accident,
sickness and other group insurance benefits and short-term and long-term
disability benefits ("Welfare Benefits") to all Transferred Employees and,
to the extent applicable, their respective eligible dependents, in plans
maintained by, or for the benefit of, Buyer ("Buyer's Welfare Plans").
Benefits under Buyer's Welfare Plans, (A) shall be, with respect to
Transferred Nonrepresented Hourly Employees who commence active employment
with Buyer on the Closing Date, substantially comparable to those benefits
provided to such employees by Seller immediately prior to the Closing
Date, and with respect to Transferred Nonrepresented Hourly Employees who
commence active employment with Buyer after the Closing Date,
substantially comparable to those benefits provided to similarly situated
employees of Buyer as of the date such employee commences active
employment with Buyer, and (B) with respect to Transferred Salaried
Employees, shall be consistent with benefits provided to similarly
situated employees of Buyer. With respect to Transferred Represented
Employees, Buyer's Welfare Plans shall conform to the terms of the
applicable collective bargaining agreements.
Buyer shall be responsible for medical expenses covered under the
terms of the applicable Buyer's Welfare Plans incurred by a Transferred Employee
and/or his or her covered dependents who are enrolled in such plans on and after
the later of (A) the Closing Date or (B) the date such employee becomes a
Transferred Employee. Seller shall be responsible for medical expenses covered
under the terms of Seller's welfare plans (the "Seller's Welfare Plans")
incurred prior to the Closing Date or the date the employee becomes a
Transferred Employee, if later, by a Transferred Employee or a covered
dependent. If a Transferred Employee or a covered dependent of a Transferred
Employee is hospitalized immediately prior to the Closing Date, Seller's Welfare
Plans shall pay the covered medical expenses of such person until he or she is
discharged from the hospital, to the extent coverage is provided under the terms
of Seller's Welfare Plans.
Buyer shall be responsible for claims for Welfare Benefits other
than medical claims covered under Buyer's Welfare Plans that are incurred by a
Transferred Employee and/or his or her covered dependents who are enrolled in
such plans on and after the later of (A) the Closing Date or (B) the date such
employee becomes a Transferred Employee.
For purposes of this Section 5.5(f), a claim will be deemed
"incurred" on the date that the event that gives rise to the claim occurs (for
purposes of life insurance, severance and sickness, accident and disability
programs), or on the date that treatment or services are provided (for purposes
of healthcare programs).
Seller shall be responsible for, and shall reimburse Buyer for
claims for Welfare Benefits other than medical claims, in each case with respect
to Seller Employees and their covered dependents, whether covered under Seller's
Welfare Plans, Buyer's Welfare Plans, or otherwise, that are incurred prior to
the later of the Closing Date and the date the affected Seller Employee becomes
a Transferred Employee.
(g) Workers' Compensation Claims. Seller shall be responsible
for and shall pay any and all workers' compensation and other similar statutory
claims asserted by or with respect to Seller Employees in respect of any injury
or other compensable event or occupational illness or disease that occurred or
is attributable to any event, state of facts or condition that existed or
occurred in whole before the later of the Closing Date and the date the
applicable Seller Employee becomes a Transferred Employee. Buyer shall be
responsible for and shall pay any and all workers' compensation and other
similar statutory claims asserted by or with respect to any Transferred
Employees in respect of any injury or any other compensable event or
occupational illness or disease that occurred or is attributable to any event,
state of facts or condition that existed or occurred in whole after the later of
the Closing Date and the date the applicable Transferred Employee becomes a
Transferred Employee.
If the liabilities for any claims for injuries or other compensable
events or occupational illnesses or diseases of any Transferred Employee who was
employed by Seller before the Closing Date and was actively employed by Buyer on
or after the Closing Date is attributable in part to causes occurring before the
Closing Date and in part to causes occurring on or subsequent to the Closing
Date and is the basis of a workers' compensation or other similar statutory
claim, the liability for any such claims shall be shared by Seller and Buyer in
the proportion of the period of employment of such Transferred Employee with
Seller and the period of active employment with Buyer, if any. In the event that
one party hereto is required by an applicable state workers' compensation law to
pay workers' compensation otherwise allocated to the other party pursuant to
this Section 5.5(g), the party obligated to pay such amount pursuant to this
Section shall reimburse the paying party.
(h) Alternate Arrangements; Parties' Cooperation.
Notwithstanding anything in Section 5.4, 5.5 or 5.6 to the contrary, to the
extent that Buyer, in its sole discretion, deems it necessary or appropriate in
order to implement Section 5.4, 5.5 or 5.6, or otherwise to fulfill its
obligations hereunder during a transition period from and following the Closing
Date, Buyer may cause the benefits and coverage described in Section 5.4, 5.5 or
5.6, to be provided under separate arrangements that are not maintained by
Buyer, including leased or contracted plans or arrangements.
Buyer and Seller shall cooperate and shall use reasonable efforts
(i) to enable Buyer to satisfy its obligations under Sections 5.4, 5.5 and 5.6,
(ii) to facilitate Buyer's relationships with the applicable unions, and (iii)
to facilitate the administration of Buyer's and Seller's employee benefit plans.
(i) Reimbursement. The parties to this Agreement agree that
the provisions of Sections 5.4, 5.5 and 5.6 set forth the intent of the parties
with regard to the allocation of liabilities, responsibilities and costs
relating to employees of the Business and the payment of benefits to such
employees before, on, and after the Closing Date. If one party makes a payment
that under the terms of Section 5.4, 5.5 or 5.6 should have been made by or on
behalf of the other party, whether by mistake or in accordance with a ruling,
regulation, or order of an Authority, or as a payment where a reimbursement is
expressly contemplated pursuant to Section 5.4, 5.5 or 5.6, then the party that
is obligated under the provisions of Section 5.4, 5.5 or 5.6, to make such
payment or reimbursement, as the case may be, shall reimburse the party that
actually made the payment or who is entitled to the reimbursement (or for whose
benefit the payment was made). Anything in this Agreement to the contrary
notwithstanding, the reimbursement obligations under Section 5.4, 5.5 or 5.6
shall remain in force and effect so long as either party is making payments to
which these provisions apply; provided however, that a specific request for a
reimbursement must be made no later than two years following the date that the
related reimbursement obligation arose.
All reimbursements under this Section 5.5(i) shall be paid to the
party to be reimbursed once each month for the first two years following the
Closing Date and once each calendar quarter thereafter, in either case, within
thirty (30) days after receipt of a bill from the party to be reimbursed (which
bill shall not be submitted more frequently than monthly, or quarterly, as the
case may be) describing each element of reimbursement claimed and shall be
subject to reasonable timely audit and verification by the other party, and
their accountants, actuaries and/or consultants.
(j) COBRA. With respect to each (i) current and former
employee of Seller who does not become a Transferred Employee, (i) each
Transferred Employee for any period prior to the date any such employee becomes
a Transferred Employee, and (iii) each other individual who is a "qualified
beneficiary" with respect to such current or former employee, in connection with
a "group health plan" maintained by Seller or an Affiliate (as such terms are
defined in Code section 4980B), Seller shall be responsible for providing "group
health plan" continuation coverage with regard to any event that occurs before
the employee becomes a Transferred Employee. Seller shall indemnify and hold
Buyer and its Affiliates harmless from and against any and all Losses with
respect to such individual arising in connection with group health plan
continuation required under Code section 4980B or Part 6 of Subtitle B of ERISA.
Section 5.6 Special Employment and Transition Rules for
Salaried Employees.
(a) Employment of Salaried Employees.
(i) No later than 14 days before the Closing Date, Buyer
shall provide Seller with a list identifying those Headquarter Employees
whom Buyer desires to remain employed by Seller on and after the Closing
Date, but who shall on and after the Closing Date perform services for
Buyer, at the direction of Buyer (the "Seconded Employees"). It is not
intended that Seconded Employees will perform services covered by the
transition agreements described in Section 1.7(d). Once identified, except
with respect to the "Extended Seconded Employees," as defined below, a
Seconded Employee shall remain employed by Seller in this capacity for 180
days from the Closing Date (the "Selection Period") or for such shorter
period as Buyer may determine if it so notifies Seller at least 14 days in
advance with regard to a particular Seconded Employee. Prior to the
expiration of the Selection Period, Buyer may extend the Selection Period
for up to an additional 60 days with respect to no more than 35 Seconded
Employees (the "Extended Seconded Employees"), who shall be selected by
Buyer in its sole discretion. Buyer shall provide Seller at least 14 days
before the end of the original Selection Period with a list identifying
the Extended Seconded Employees. For purposes of the Extended Seconded
Employees, if any, the Selection Period shall mean the period commencing
on the Closing Date and terminating 240 days following the Closing Date,
or for such shorter period as Buyer may determine if it so notifies Seller
at least 14 days in advance with regard to a particular Extended Seconded
Employee. Buyer shall reimburse Seller monthly in arrears in accordance
with Section 5.6(a)(1) of the Disclosure Schedule for the costs incurred
by Seller with respect to the salary and benefits provided by Seller to
the Seconded Employees during the Selection Period.
(ii) At any time during the Selection Period, Buyer in
its sole discretion may offer employment to any or all of the Seconded
Employees. A Seconded Employee who becomes employed by Buyer by the end of
the Selection Period shall be treated as a Transferred Salaried Employee
for purposes of this Agreement as of the date such employee commences
active employment with Buyer.
(iii) A Seconded Employee who has not been employed by
Buyer by the end of the Selection Period (or by the end of such shorter
period as Buyer may determine if it so notifies Seller at least 14 days in
advance with regard to a particular Seconded Employee) shall be either
retained or terminated by Seller in Seller's sole discretion, but in
either case Buyer shall have no further reimbursement or other obligation
with regard to such Seconded Employee after the end of the Selection
Period (or after such shorter period as Buyer may determine with regard to
a particular Seconded Employee). Buyer shall give Seller at least 14 days
advance notice with regard to any Seconded Employee to whom Buyer does not
intend to offer employment by the end of the Selection Period.
(iv) Buyer shall indemnify Seller against, and shall hold
it harmless from, any and all Losses incurred or suffered as a result of
any claim by (A) a Seconded Employee (during the period such employee was
seconded to Buyer, but in no event after the Selection Period), (B) an
Absent Nonrepresented Hourly Employee or an Absent Salaried Employee (in
each case, during the period from the Closing Date to the 180th day
thereafter), in each case, that arises out of or in any way relates to the
acts or omissions of Buyer, including, without limitation, claims arising
under federal, state or local statute(s) (including, without limitation,
Title VII of the Civil Rights Act, as amended, the Age Discrimination in
Employment Act, as amended, the Equal Pay Act, as amended, the Americans
with Disabilities Act, as amended, and all other statutes regarding the
terms and conditions of employment), regulation(s) or ordinance(s), under
the common law or equity (including any claims for wrongful discharge or
otherwise).
(v) Seller shall indemnify Buyer against, and shall hold
it harmless from, any and all Losses incurred or suffered as a result of
any claim by a Seconded Employee, an Absent Nonrepresented Hourly Employee
or an Absent Salaried Employee that arises out of or in any way relates to
the acts or omissions of Seller, including, without limitation, claims
arising under federal, state or local statute(s) (including, without
limitation, Title VII of the Civil Rights Act, as amended, the Age
Discrimination in Employment Act, as amended, the Equal Pay Act, as
amended, the Americans with Disabilities Act, as amended, and all other
statutes regarding the terms and conditions of employment), regulation(s)
or ordinance(s), under the common law or equity (including any claims for
wrongful discharge or otherwise).
(b) Severance Obligation.
(i) Notwithstanding anything in this Agreement to the
contrary except for Buyer's reimbursement obligations as set forth in
Section 5.6(a)(i) and (iv), Seller shall retain all liabilities and
obligations, including but not limited to severance obligations,
pertaining to Headquarter Employees and Plant Salaried Employees who do
not become Transferred Salaried Employees pursuant to this Agreement,
including, without limitation, Seconded Employees who terminate employment
on or prior to the end of the Selection Period without becoming
Transferred Salaried Employees. Seller shall reimburse Buyer for any and
all liabilities and obligations incurred by Buyer that are retained by
Seller pursuant to this paragraph.
(ii) If a Seller Nonrepresented Hourly Employee becomes a
Transferred Nonrepresented Hourly Employee, or a Salaried Employee becomes
a Transferred Salaried Employee, and in either case, Buyer terminates such
employee's employment other than for cause, then Buyer shall be obligated
to pay such employee severance benefits, if any, determined pursuant to
the terms of Buyer's severance plan or policy, if any, in effect at such
time, based on combined service with Buyer plus service credited with
Seller, to the extent and for the same purposes that such service was
required to have been taken into account for purposes of Seller's
severance plan in effect as of the Closing Date, or if later, the date the
individual becomes a Transferred Employee.
(c) Nonsolicitation Agreement. Except for the four individuals
listed on Section 5.6(c) of the Disclosure Schedule of this Agreement, Seller
shall refrain, and shall use its best efforts to cause its Affiliates to
refrain, from (i) interfering with Buyer's efforts to hire any of the employees
employed by Seller in the Business, including its Headquarter Employees and (ii)
without obtaining prior written consent from Buyer, offering employment to any
Transferred Employees from the date of this Agreement until the end of 24 months
following the Closing Date, unless such employee has been terminated from Buyer
for at least six continuous months. Notwithstanding the foregoing, Seller may
offer employment (i) to any Plant Salaried Employee who does not become a
Transferred Salaried Employee as of the Closing Date, or such later date as an
Absent Salaried Employee is available to commence employment with Buyer, if
applicable; (ii) to any Headquarter Employee who does not become a Seconded
Employee or a Transferred Salaried Employee as of the Closing Date; and (iii) to
any Seconded Employee who does not become a Transferred Employee by the end of
the Selection Period. Seller agrees that (x) if it retains a Seconded Employee
to whom Buyer has offered employment and such employee has rejected Buyer's
offer, then Seller shall reimburse Buyer for any and all amounts paid by Buyer
to Seller to cover the costs of benefits for such Seconded Employee during the
Selection Period (but not for the direct cost of compensation or FICA or FUTA
(as defined in Section 5.6(d) hereof)), and (y) if Seller hires any Transferred
Employee prior to the earlier of 24 months following the Closing Date and six
months following such employee's termination of employment from Buyer, Seller
shall reimburse Buyer for all relocation, severance and related costs and
expenses paid by or on behalf of Buyer for such Transferred Employee.
(d) Employment Taxes. Seller, Buyer and Ball shall (i) treat
Buyer and Ball each as a "successor employer" and Seller as a "predecessor,"
within the meaning of section 3121(a)(1) of the Code and for purposes of Taxes
imposed under the United States Federal Unemployment Tax Act ("FUTA") or the
United States Federal Insurance Contributions Act ("FICA") and (ii) cooperate
with each other to avoid, to the extent possible, the filing of more than one
Internal Revenue Service Form W-2 with respect to each Transferred Employee for
the calendar year within which the Closing Date occurs. At the request of Buyer
with respect to any particular applicable Tax Law relating to employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, healthcare or other similar Tax other than Taxes imposed under FICA and
FUTA, Seller, Buyer and Ball shall (i) treat Buyer and Ball each as a successor
employer and Seller as predecessor employer, within the meaning of the relevant
provisions of such Tax Law, with respect to Transferred Employees who are
employed by Buyer, to the extent permitted by applicable state and local laws
and (ii) cooperate with each other to avoid, to the extent possible, the filing
of more than one individual information reporting form pursuant to each such Tax
Law with respect to each such Transferred Employee for the calendar year within
which the Closing Date occurs.
(e) Reimbursement. All reimbursements described in this
Section 5.6, including Section 5.6(a)(1) of the Disclosure Schedule, shall be
made in accordance with the reimbursement procedures set forth in Section 5.5(i)
hereof.
(f) Indemnification Procedures. Any claim for indemnification
made under Sections 5.4, 5.5 or 5.6 hereunder shall be made according to, and
shall be governed by, the procedures contained in Section 6.4(c)- (h) of this
Agreement.
Section 5.7 Tax Matters.
(a) Consolidated Subsidiaries. Seller represents and warrants
that each of LAR, RCAL and RIND is a fully consolidated subsidiary of Seller for
federal income Tax purposes at Closing. Each of LAR, RCAL and RIND will be
included in the consolidated Tax Return of Seller for federal income Tax
purposes for the taxable period of each of LAR, RCAL and RIND that includes the
date of Closing.
(b) Section 338 Elections and Forms. With respect to the
acquisition of the stock of LAR, RCAL and RIND hereunder, Seller, Ball and Buyer
shall jointly make all available Section 338(h)(10) Elections, and with respect
to the acquisition of the stock of RIB hereunder, Buyer or Ball shall make a
Section 338(g) Election, in each case in accordance with applicable Tax Laws on
a timely basis and as set forth herein. Seller, Ball and Buyer will supply in
advance to one another copies of all correspondence, filings or communications
(or memoranda setting forth the substance thereof) to be sent or made by Ball,
Buyer or Seller or their respective representatives to or with the IRS relating
to any Section 338 Elections. Buyer, Ball and Seller agree to report the
transfers under this Agreement consistent with any Section 338 Elections and the
allocations provided by Section 5.7(d), and shall take no position contrary
thereto unless required to do so by applicable Tax Laws pursuant to a
"determination" (as described in section 1313 of the Code).
(c) Preparation of Forms. Buyer shall be responsible for the
preparation and filing of all Section 338 Forms in accordance with applicable
Tax Laws and the terms of this Agreement; provided that Seller shall be
responsible for filing any form related to a Section 338 Election that must be
filed with a Tax Return of Seller or one of its Affiliates. Buyer shall deliver
such forms and related documents to Seller at least 20 days prior to the date
such Section 338 Forms are required to be filed under applicable Tax Laws.
Seller shall provide all information reasonably requested by Buyer and shall
execute and deliver to Buyer such documents or forms as are reasonably requested
by Buyer and are required by any Tax Laws to properly complete the Section 338
Forms, no more than 10 days after the date such documents or forms are requested
by Buyer. Seller shall be responsible for the preparation and filing of the Tax
Returns of LAR, RCAL and RIND for all taxable years ending on or before the
Closing Date (including, without limitation, any consolidated, combined or
unitary group return of which LAR, RCAL or RIND is a member which includes the
gain or loss on the deemed sale of assets of LAR, RCAL and RIND under section
338 of the Code or similar state or local statute).
(d) Allocation. Seller and Buyer will allocate the "Aggregate
Deemed Sales Price" arising from the Section 338(g) Elections and the "Modified
Aggregate Deemed Sale Price" arising from the Section 338(h)(10) Elections, as
computed under applicable Treasury Regulations (or similar state law provisions)
with respect to the acquisition of shares of stock of RIB, LAR, RCAL and RIND
among the assets of RIB, LAR, RCAL and RIND, respectively, for tax purposes in
accordance with the provisions of Section 1.9.
(e) Taxable Periods Ending On or Before the Closing Date.
Except as set forth in Section 1.6, Seller shall be liable for, shall pay and
shall indemnify and hold Buyer, Ball, RIB, LAR, RCAL and RIND harmless against,
all Taxes of Seller, RIB, LAR, RCAL, RIND and their Affiliates for any taxable
year or taxable period ending on or before the Closing Date due or payable with
respect to the Business or the operations, assets or business of Seller, LAR,
RCAL, RIND and their Affiliates on or before the Closing Date, including any
Taxes resulting from the making of the Section 338 Elections and any liability
for Taxes pursuant to Treasury Regulations ss.ss. 1.1502-6, 1.338-5(b)(3) or
1.338(h)(10)-1(e)(5) (or any similar provision of Law). All liabilities and
obligations between RIB, LAR, RCAL or RIND on the one hand, and Seller or its
Affiliates on the other hand, under any tax allocation agreement or arrangement
in effect prior to Closing (other than this Agreement or as set forth herein)
shall cease to apply to RIB, LAR, RCAL and RIND as of the Closing.
(f) Taxable Periods Commencing After the Closing Date. Buyer
shall be liable for, shall pay and shall indemnify and hold Seller and its
Affiliates harmless against, any and all Taxes of RIB, LAR, RCAL and RIND for
any taxable year or taxable period commencing after the Closing Date other than
Taxes resulting from Section 338 Elections.
(g) Taxable Periods Commencing On or Before the Closing Date
and Ending After the Closing Date. Except as set forth in Section 1.6, any Taxes
for a taxable period beginning on or before the Closing Date and ending after
the Closing Date (the "Closing Period") with respect to RIB, LAR, RCAL or RIND
shall be apportioned between Seller and Buyer as if the Closing Period had ended
at the Closing but with Seller bearing the effect of all Section 338 Elections.
For purposes of Section 5.7(e), (f) and (g), the portion of the Closing Period
deemed to end on the Closing Date shall be deemed to be a taxable period (the
"Pre-Closing Period"). All real property Taxes, personal property Taxes,
intangible Taxes and similar ad valorem obligations levied with respect to the
Business Assets or assets held by RIB, LAR, RCAL or RIND for the Closing Period
shall be apportioned between Seller and Buyer as of the Closing Date based on
the number of days of such taxable period included in the Pre-Closing Period and
the number of days of such taxable period after the Closing Date. Upon receipt
of any bill for Taxes relating to the Closing Period, Seller, Buyer or their
respective Affiliates, as the case may be, shall present to the other a
statement setting forth amounts of any reimbursement due under this Section
5.7(g) together with such supporting evidence as is reasonably necessary to
calculate the apportioned amount. The apportioned amount shall be paid by the
party owing the reimbursement to the other party as soon as possible but no
later than 30 days after delivery of such statement.
(h) Refunds or Credits. Except as otherwise set forth in this
Agreement, any refunds or credits of Taxes, to the extent that such refunds or
credits are attributable to taxable periods ending on or before the Closing Date
shall be for the account of Seller, and, to the extent that such refunds or
credits are attributable to taxable periods beginning after the Closing Date,
such refunds or credits shall be for the account of Buyer. To the extent that
such refunds or credits are attributable to Taxes for the Closing Period that
are described in Section 5.7(g), such refunds and credits shall be for the
account of the party who bears responsibility for such Taxes pursuant to Section
5.7(g). Buyer shall, or shall cause RIB, LAR, RCAL or RIND to, forward to Seller
or to reimburse Seller for any such refunds or credits due Seller pursuant to
this Section 5.7(h) within 15 days after receipt thereof by any of Buyer, Ball,
RIB, LAR, RCAL or RIND that are for the account of Seller hereunder, and Seller
shall forward to Buyer or reimburse Buyer for any refunds or credits that are
for the account of Buyer within 15 days after receipt thereof by Seller or its
Affiliates that are for the account of Buyer hereunder; provided, however, that
the refunding party shall be entitled to deduct from the amount to be refunded a
proportionate share of reasonable costs and expenses incurred by such refunding
party in obtaining such refund and provided further that the amount of costs and
expenses deducted by the refunding party from the amount to be paid to the other
party shall not exceed such other party's share of such refund.
(i) Certificates. Seller shall, on the Closing Date, provide
Buyer with any clearance certificates or similar documents which may be required
by any foreign or domestic Taxing Authority to relieve Buyer of any obligation
to withhold any portion of the Purchase Price or to hold Buyer harmless for any
sales or use or other Tax liability, including, without limitation, an affidavit
described in section 1445(b)(2) of the Code.
(j) Mutual Cooperation. Seller and Buyer shall each (i)
provide the other with such assistance as may reasonably be requested by either
of them in connection with the preparation of any Tax Return, audit or other
examination by any Taxing Authority relating to liability for Taxes, (ii) retain
and provide the other, at the other's expense, with any records or other
information which may be relevant to such Tax Return, audit or examination,
proceeding or determination and (iii) provide the other, at the other's expense,
with any requested information relating to final determination of any such audit
or examination, proceeding or determination that affects any amount required to
be shown on any Tax Return of the other for any period. Without limiting the
foregoing, Buyer and Ball on the one hand, and Seller on the other hand, shall
cooperate in taking all reasonable actions to obtain and provide each other with
information necessary to allow either party to determine and claim United States
foreign Tax credits with respect to foreign income Taxes paid by LAR, RIB and
Latasa (including the Latasa Subsidiaries) attributable to any Closing Period.
Specifically and without limitation, the parties shall provide to each other, as
applicable, official receipts (or other evidence acceptable to the United States
Internal Revenue Service) showing the amount of foreign income Tax paid by each
of LAR, RIB and Latasa (including the Latasa Subsidiaries) with respect to its
applicable Closing Period, copies of the foreign income Tax Returns filed by
each of LAR, RIB and Latasa (including the Latasa Subsidiaries) for its
applicable Closing Period and schedules prorating the taxable income of LAR, RIB
and Latasa (including the Latasa Subsidiaries) for its applicable Closing Period
between the Pre-Closing Period and the portion of such Closing Period after the
Closing Date.
(k) Contests. Whenever any Taxing Authority asserts a claim,
makes an assessment, or otherwise disputes the amount of Taxes owed by RIB, LAR,
RCAL or RIND for which Seller is or may be liable under this Agreement, Buyer
shall promptly inform Seller, and Seller shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute to the extent such proceedings or determinations
would affect the amount of Taxes for which Seller is liable under this
Agreement; provided, however, that Seller shall not enter into any such
settlement without the consent of Buyer (which consent shall not be unreasonably
withheld) if such settlement could reasonably be expected to affect the amount
of Taxes for which Buyer or Ball is liable under this Agreement. Whenever any
Taxing Authority asserts a claim, makes an assessment or otherwise disputes the
amount of Taxes for which Buyer or Ball is liable under this Agreement, Seller
shall promptly inform Buyer, and Buyer shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute to the extent such proceedings would affect the
amount of Taxes for which Buyer or Ball is liable under this Agreement;
provided, however, that Buyer shall not enter into any such settlement without
the consent of Seller (which consent shall not be unreasonably withheld) if such
settlement could reasonably be expected to affect the amount of Taxes for which
Seller is liable under this Agreement.
(l) Resolution of Disagreements between Seller and Buyer. If
Seller, on the one hand, and Buyer or Ball, on the other hand, disagree as to
the amount of Taxes for which each is liable under this Agreement or are unable
to agree on any matter relating to the Section 338 Elections, Seller and Buyer
shall promptly consult each other in an effort to resolve such dispute. If any
such point of disagreement cannot be resolved within 15 days of the date of
consultation (which period may be extended by mutual agreement of Buyer and
Seller), Seller and Buyer shall within 10 days after such 15-day period jointly
engage the Neutral Auditor to act as an arbitrator to resolve all points of
disagreement concerning tax accounting matters with respect to this Agreement.
All fees and expenses relating to the work performed by the Neutral Auditor in
accordance with this Section 5.7(l) shall be borne equally by Seller and Buyer,
unless otherwise ordered by the Neutral Auditor.
(m) Puerto Rico Tax Exemption. Seller will use all reasonable
efforts to assist Ball, Buyer and LAR in obtaining such approvals and consents
as are necessary so that from and after the Closing Ball, Buyer and LAR will
have the full benefit of the partial Puerto Rico Tax exemptions that are
currently enjoyed by LAR with respect to the operation of the Business in Puerto
Rico.
Section 5.8 Non-Competition.
(a) Seller agrees that, to assure Ball and Buyer that Buyer
will retain the value of the Business as a "going concern," for a period of six
years beginning on the Closing Date, Seller shall not, directly or indirectly,
itself or through one or more Affiliates, engage or have an interest, anywhere
in the world, alone or in association with others, as partner or shareholder or
through the investment of capital, lending of money or property, provision of
management or engineering services, technology or know-how, or otherwise, in the
development, manufacture, distribution, sale or marketing of products or
services that are competitive with the products or services provided by the
Business, consisting of metal beverage cans and ends and PET beverage
containers. Notwithstanding the foregoing, Seller and its Affiliates may, after
the Closing, engage or continue to engage in the following business activities
related to metal beverage can bodies and ends: the development, manufacture,
distribution, sale and marketing of can, end and tab sheet; the recycling and
reclamation of metal beverage can bodies and ends; Machinery Operations; the
design, manufacture and sale of printing cylinders, printing plates and color
separations used by Persons other than Seller and its Affiliates in the
manufacture of metal beverage can bodies and ends; and ancillary services
customarily provided to manufacturers of metal beverage can bodies and ends by
persons engaged in the foregoing businesses, provided that such services are
directly related to such businesses and do not use any Intellectual Property
Rights. In addition, notwithstanding the foregoing, Seller may:
(i) from and after the Closing Date, own an equity
interest of not greater than 50% in the Russian company or group of
companies which owns the Sayansk aluminum smelter and/or the Samara
rolling mill (such company or group, "Siberian Aluminum"), even though
Siberian Aluminum in turn owns a significant interest in the
Rostar-Dmitrov aluminum can and end manufacturing plant near Moscow;
provided that Seller shall use all reasonable efforts as an equity holder
in Siberian Aluminum, if Siberian Aluminum includes can, end and tab sheet
operations, to facilitate the supply of can, end and tab sheet to the can
and end plant near Moscow established by PLM Beverage Can Manufacturing
ZAO on mutually acceptable terms;
(ii) from and after the third anniversary of the Closing
Date, own an equity interest of not greater than 50% in any Person which,
in addition to its primary business or businesses, is engaged in the
development, manufacture, distribution, sale or marketing of metal
beverage cans and ends provided that the portion of such Person's
consolidated revenues attributable to activities related to metal beverage
cans and ends does not exceed 20% of its total consolidated revenues and
such Person's manufacturing activities are conducted solely in Russia,
China or India; provided further that (x) subject to other obligations
such Person may have, Seller shall use all reasonable efforts as an equity
holder in such Person to cause such Person to offer to Ball the
opportunity to invest in such metal beverage can and end business and/or
to provide management and engineering services, technology and know-how to
such business on mutually acceptable terms, and (y) Seller shall, if such
Person's operations include can, end and tab sheet operations, use all
reasonable efforts as an equity holder to facilitate the supply of can,
end and tab sheet on mutually acceptable terms to any can and/or end
manufacturing ventures in Russia, China and India in which Ball or any of
its Affiliates has an equity interest; and
(iii) from and after the Closing Date, continue to own
its current 27.5% equity interest in UAC and continue activities directly
related to the current operations of UAC pursuant to its current
agreements with UAC;
and for greater certainty, Seller and its Affiliates shall not, as a consequence
of clauses (i), (ii) or (iii) hereof, be permitted, in respect of any Person, to
provide management or engineering services, technology or know-how to any
operations engaged in the development, manufacture, distribution, sale or
marketing of metal beverage cans and ends and PET beverage containers.
(b) Seller shall not at any time on or after the Closing Date,
directly or indirectly, through one or more Affiliates, use or purport to
authorize any person to use any name, mark, logo, trade dress or other
identifying words or images which are the same as or confusingly similar to any
of those included in the Intellectual Property Rights, whether or not such use
would be in a business in which Seller is prohibited from engaging pursuant to
Section 5.8(a) provided, that this Section 5.8(b) shall not apply to any
registered trademark which Ball, its successors or assigns has allowed to expire
commencing one year after such expiration.
(c) The provisions of this Section 5.8 shall not be deemed to
prohibit Seller from acquiring not more than 5% of any class of securities of
any company with a class of securities registered under the Exchange Act (or any
similar foreign statute) or otherwise publicly traded, provided that Seller does
not have control over or does not attempt to control or influence such company.
(d) If, at the time of enforcement of this Section 5.8, a
court shall hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area. Seller acknowledges and agrees that Ball and Buyer
would be damaged irreparably if any of the provisions of this Section 5.8 are
not performed in accordance with their specific terms or otherwise are breached.
Accordingly, Seller and Buyer each agrees that the other party shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Section 5.8 and to enforce specifically the terms and provisions of this Section
5.8 in any action instituted in any court having jurisdiction over the parties
and the matter, in addition to any other remedy to which it may be entitled, at
law or in equity.
Section 5.9 Confidentiality.
(a) Prior to the Closing, each party will hold and will cause
its consultants and advisors to hold in confidence, all documents and
information concerning the other party furnished it by such other party or its
representatives in connection with the transactions contemplated by this
Agreement pursuant to the terms of the Confidentiality Agreement, dated May 28,
1997 between Seller and Buyer, as amended (the "Confidentiality Agreement").
(b) Prior to and after the Closing, Seller, Ball and Buyer
will hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors, agents and
Affiliates to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information (x) concerning the Business, the Business Assets, the
Shares and Seller and provided to Ball or Buyer or (y) concerning Ball or Buyer
and provided to Seller, except to the extent that such information can be shown
to have been or to have become (i) generally available to the public other than
as a result of disclosure by the officers, directors, employees,
representatives, consultants or advisors of Seller, Ball or Buyer, (ii)
disclosed to the other party from a source other than the officers, directors,
employees, representatives, consultants or advisors of Seller, Ball or Buyer
from a source that was permitted to disclose it or (iii) known to the other
party before the date of the disclosure of such information. However, nothing
contained in this Section 5.9(b) shall (i) prevent any party from using or
disclosing information to (A) perform its obligations or enforce its rights
hereunder or (B) to defend or prosecute any claim or (ii) preclude the
disclosure of such information on the condition that it remain confidential to
auditors, attorneys, lenders, financial advisors and other consultants and
advisors in connection with the performance of their duties in preparation for
consummation of the transactions contemplated hereby.
Section 5.10 Materials Received After Closing. Following the
Closing, Buyer may receive and open all mail, telecopies or telexes addressed to
Seller and deal with the contents thereof in its discretion to the extent that
such mail, telecopies or telexes and the contents thereof relate to the
Business, Business Assets or the Shares. Ball and Buyer shall promptly deliver
to Seller all material they receive (including mail, checks, money, telecopies,
telefaxes and the contents thereof) which is addressed to Seller or its
Affiliates to the extent it does not relate to the Business, the Business Assets
or the Shares or to the extent it deals with Excluded Assets or Excluded
Liabilities. Seller shall promptly deliver to Ball or Buyer, as the case may be,
all of the mail, checks, money, telecopies, telexes and the contents thereof
with respect to the Business, the Business Assets or the Shares received by
Seller following the Closing.
Section 5.11 Access to Books and Records.
(a) Each party agrees that from and after the Closing Date to
the seventh anniversary thereof, during normal business hours, it will permit
(at no charge, cost or expense to such party and without unreasonable disruption
of such party's business) the other party and its auditors, through their
authorized representatives, to have reasonable access to and to examine and take
copies of all books and records (including, without limitation, correspondence,
memoranda, books of account, tax reports and returns and the like) included in
the Business Information or otherwise reasonably relating to the Business or the
Business Assets (including, without limitation, records with respect to Tax,
pension, severance and litigation matters) and reasonably relating to events
occurring prior to the Closing Date and to events occurring subsequent to the
Closing Date which are related to or arise out of events occurring prior to the
Closing Date, in any case, subject to the confidentiality provisions of Section
5.9.
(b) Each party will direct its employees to render any
assistance which the other party may reasonably request in examining or using
such books and records. Until the seventh anniversary of the Closing Date,
neither party will destroy any files or records which are subject to this
Section 5.11 without giving reasonable notice to the other party, and within 30
days of receipt of such notice, the other party may cause to be delivered to it
the records intended to be destroyed; provided, however, that books or records
relating to Tax matters may not in any event be destroyed for seven years after
the Closing Date (and, if at the expiration thereof, any Tax audit or judicial
proceeding is in progress or the applicable statute of limitations has been
extended, for such longer period as such audit or judicial proceeding is in
progress or such statutory period is extended).
(c) Seller shall request that records of the type described in
Section 5.11(a) in possession of its independent accountants be retained by them
for the customary retention period established by the firm (but not less than
the applicable statute of limitations period) and that such records be made
available to Buyer on request.
(d) Seller is currently engaged in a study to establish
Seller's right to research and experimentation tax credits for the years 1990
through 1997. In connection with this study, Seller may require information
pertaining to the Business or the Business Assets, including, without
limitation, interviews with persons employed in the Business prior to the
Closing Date. Ball or Buyer shall permit Seller reasonable access (solely for
purposes of the study) to any such persons and/or information in the employ or
possession of Ball, Buyer or any Affiliate of either, at Seller's expense but
without any charge for any interviewee's time.
Section 5.12 Actions by Ball. Ball shall be jointly and severally
liable with Buyer for all obligations of Buyer (or any assignee or Designee of
Ball or Buyer) hereunder or under the Ancillary Agreements. Ball hereby
guarantees Buyer's (or any assignee's or Designee's) performance of all
obligations required of Buyer by this Agreement or the Ancillary Agreements.
Section 5.13 Delivery of Financial Statements.
(a) Within 30 days after the date hereof, Seller shall deliver
to Buyer the financial statements of Seller's global can operations referred to
in Section 2.7(a), except that such financial statements shall be audited and
shall be delivered with the report thereon of Ernst and Young LLP, independent
certified public accountants (the "Audited Financial Statements"). Insofar as
the Audited Financial Statements pertain to the U.S. domestic operations of the
Business, they shall not differ in any respect from the Unaudited Financial
Statements previously delivered to Buyer. The amounts included in the balance
sheets, results of operations and cash flows included in the Audited Financial
Statements which relate to Latasa shall not differ in any material respect from
those contained in the Unaudited Financial Statements previously delivered to
Buyer.
(b) Within 30 days after the date hereof, Seller shall deliver
to Buyer the financial statements of Latasa referred to in Section 2.28, except
that such statements shall be audited and shall be delivered with the report
thereon of Price Waterhouse, independent certified public accountants (the
"Audited Latasa Financial Statements"). The Audited Latasa Financial Statements
shall not differ in any material respect from the Unaudited Latasa Financial
Statements previously delivered to Buyer.
Section 5.14 Litigation Support. With respect to any litigation
being conducted by Seller, Buyer, Ball or their Affiliates, not the subject of
indemnification under Article VI hereof, but relating to the Business, the
Business Assets, the Shares, the Assumed Liabilities or the Excluded
Liabilities, the other party shall cooperate with the litigating party and its
counsel in such action, make available personnel and provide such testimony and
access to books and records as shall be reasonably necessary in connection with
such action, provided that the litigating party shall reimburse the other party
for reasonable out-of-pocket costs and expenses (including reimbursement for
employees' time) for furnishing such cooperation.
Section 5.15 Returns. At Seller's request and expense, Ball and
Buyer shall use reasonable efforts to assist Seller in the processing of any
returns by, and the provision of any replacement products to, customers of the
Business for product sales as to which Seller remains liable.
Section 5.16 Accounts Receivable. If any Accounts Receivable
reflected in the Final Closing Statement remain uncollected six months after the
Closing Date, Seller shall purchase such Accounts Receivable from Buyer at the
amounts reflected in the Final Closing Statement therefor less (i) amounts
previously paid to Ball or Buyer with respect thereto and (ii) any reserve for
uncollectible amounts included in the Final Closing Statement. Such purchase
shall be completed within seven days of receipt by Seller of a written request
from Buyer to such effect. If no such notice has been received by Seller within
nine months after Closing, Seller's obligations under this paragraph shall
expire.
Section 5.17 Inadvertently Retained Information. Ball, Buyer and
Seller acknowledge that the Business and certain other portions of Seller's
operations (including, without limitation, the Machinery Operations) have been
run on an integrated basis. Accordingly, Seller may have in its possession after
Closing documents (whether in paper, mylar, microfilm or electronically stored
form) containing or embodying Business Information or Intellectual Property
Rights, and Buyer or Ball may have in its possession after Closing documents
(whether in paper, mylar, microfilm or electronically stored form) containing or
embodying confidential business information or intellectual property of Seller
which are Excluded Assets (in either case, "Inadvertently Retained
Information"). Each of Ball, Buyer and their Designees and Seller shall (i) use
Inadvertently Retained Information only to the extent expressly permitted by
this Agreement or the Ancillary Agreements and (ii) as the existence of
Inadvertently Retained Information comes to its attention, use reasonable
efforts to destroy or expunge it or return it to Ball, Buyer and their Designees
or Seller, as the case may be; provided, however, Ball, Buyer, their Designees
and Latasa and its subsidiaries shall not be required to destroy, expunge or
return documents which Seller or its Affiliates make available to third party
purchasers of goods and services from Seller or its Affiliates or would make
available if the Business were a third party purchaser of goods and services
from Seller or its Affiliates.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
Section 6.1 Survival of Representations, Warranties and Covenants.
All representations and warranties of each party contained in this Agreement
shall survive the Closing, regardless of any investigation made by the other
party, for a period ending on the second anniversary of the Closing Date, except
that: (i) the representations and warranties set forth in Sections 2.4, 2.23,
3.2 and 3.6 shall survive indefinitely and (ii) the representations and
warranties set forth in Section 2.16 shall survive until the expiration of the
applicable statutes of limitation plus 90 days. The covenants and agreements
contained herein shall survive the Closing without limitation as to time unless
the covenant or agreement specifies a term, in which case such covenant or
agreement shall survive for such specified term. The respective expiration dates
for the survival of the representations and warranties and the covenants shall
be referred to herein as the relevant "Expiration Date." All representations
with respect to title to Owned Real Property shall be merged into the respective
special warranty deeds and shall not survive the Closing.
Section 6.2 Indemnification by Ball and Buyer. Ball and Buyer agree
to indemnify, defend and hold Seller, its officers, directors, employees,
agents, Affiliates and representatives harmless, from and against any and all
cost, expense, loss, liability or damage (except punitive damages attributable
to an Indemnified Party's acts or omissions) and actions and claims in respect
thereof (including, without limitation, amounts paid in settlement and herein
referred to as "Losses" suffered or incurred by reason of (i) the
representations and warranties of Ball and Buyer in Article III hereof or the
Article V Representations of Ball and Buyer being untrue (without giving effect
to any qualification contained therein as to materiality, Material Adverse
Effect or knowledge of any party) as of the date hereof and as of the Closing
Date, notice of which is given to Ball and Buyer on or prior to the relevant
Expiration Date, (ii) any nonfulfillment of any covenant or agreement of Ball
and Buyer in this Agreement, notice of which is given to Buyer on or prior to
the relevant Expiration Date, (iii) subject to Section 6.5 with respect to the
Assumed Liabilities referred to in Section 1.3(a)(v), any failure to pay and
discharge the Assumed Liabilities, (iv) claims arising out of conduct of the
Business by Buyer, Ball or their Designees after the Closing Date to the extent
Seller is not obligated to indemnify Ball or Buyer with respect thereto pursuant
to Section 6.3, and (v) all reasonable costs and expenses, including, without
limitation, legal fees and expenses, incurred in connection with enforcing the
indemnification rights of Seller pursuant to this Section 6.2.
Section 6.3 Indemnification by Seller. Seller agrees to indemnify,
defend and hold Ball and Buyer, their officers, directors, employees, agents,
Affiliates and representatives harmless from and against all Losses suffered or
incurred by reason of (i) the representations and warranties of Seller in
Article II hereof or the Article V Representations of Seller being untrue
(without giving effect to any qualification contained therein as to materiality,
Material Adverse Effect or knowledge of any party in Sections 2.5, 2.11(b),
2.11(c), 2.13(a) (last sentence), 2.13(c) (first two sentences), 2.13(d) (with
respect to defaults by Seller), 2.14 (with respect to defaults by Seller), 2.16,
2.18, 2.20(b), 2.20(c), 2.21(b), 2.21(g), 2.26(b) and 2.29) as of the date
hereof and as of the Closing Date, notice of which is given to Seller on or
prior to the relevant Expiration Date; (ii) any nonfulfillment of any covenant
or agreement of Seller in this Agreement, notice of which is given to Seller on
or prior to the relevant Expiration Date; (iii) any liability, obligation or
contract of Seller not specifically assumed by Ball or Buyer hereunder
(including, but not limited to, the Excluded Liabilities); (iv) any Losses
arising out of or in connection with Seller's or Buyer's non-compliance with any
so-called bulk transfer laws set forth in Section 4.7; (v) any Tax liability
caused by the recapture of any deferred intercompany gains or excess loss
accounts or by any consolidated return liability arising under Treasury
Regulation Section 1.1502-6 or similar provision of state, local or foreign law;
and (vi) all reasonable costs and expenses, including, without limitation, legal
fees and expenses, incurred in connection with enforcing the indemnification
rights of Ball and Buyer pursuant to this Section 6.3. Notwithstanding anything
contained herein to the contrary, any claims for which indemnification is
provided under Section 6.5 shall not be subject to this Section 6.3, and
notwithstanding anything herein to the contrary, if Seller shall be required to
indemnify both Ball and Buyer with respect to the same matter, the satisfaction
of such indemnity to one of them shall discharge its obligation to the other to
the extent of the amount paid.
Section 6.4 Claims for Indemnification.
(a) Limits on Indemnification. Notwithstanding the provisions
of Sections 6.2 and 6.3, to the extent that (x) Seller incurs a Loss under
Section 6.2(i) or (y) Ball or Buyer incurs a Loss under Section 6.3(i) (other
than with respect to a breach of the representation set forth in Section 2.13(g)
for which Ball and Buyer shall be entitled to indemnification without such
limits), the other party shall be required to indemnify and hold harmless the
party incurring the Loss with respect to such Loss only if the aggregate of all
such Losses to that party exceeds $3.75 million and then only with respect to
Losses in excess of that amount, provided that the foregoing limit does not
apply to Seller's breach of any representation or warranty relating to Taxes.
Notwithstanding anything contained in this Agreement, Seller's indemnification
obligations shall not, in the aggregate, exceed the Purchase Price.
(b) Notwithstanding any provision hereof to the contrary, (i)
Seller's obligations with respect to any breach of the representations and
warranties set forth in the first sentence of Section 2.8 shall be solely as
provided in Section 5.16 (ii) Seller's obligations with respect to any breach of
the representations and warranties set forth in Section 2.9(a) insofar as any
such breach relates to obsolete or slow-moving Inventory shall be solely as
provided in Section 1.5(d) and (iii) Seller's indemnification obligations under
Section 1.7(e) shall be limited to $1,000,000.00 in the aggregate.
(c) General. The parties intend that all indemnification
claims be made as promptly as practicable by the party seeking indemnification
(the "Indemnified Party"). Whenever any claim shall arise for indemnification,
the Indemnified Party shall promptly notify the party from whom indemnification
is sought (the "Indemnifying Party") of the claim, and the facts constituting
the basis for such claim. The failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party of any liability that it may have to the
Indemnified Party, except to the extent the Indemnifying Party demonstrates that
the defense of such action is prejudiced thereby.
(d) Claims by Third Parties. With respect to claims made by
third parties, the Indemnifying Party, upon acknowledgment of its liability for
the claim, shall be entitled to assume control of the defense of such action or
claim with counsel reasonably satisfactory to the Indemnified Party, provided,
however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel at its own
expense to assist in the handling of such claim;
(ii) no Indemnifying Party shall consent to the entry of
any judgment or enter into any settlement if such judgment or settlement
(A) does not include as an unconditional term thereof the giving by each
claimant or plaintiff to each Indemnified Party of a release from all
liability in respect to such claim or (B) if as a result of such consent
or settlement injunctive or other equitable relief would be imposed
against the Indemnified Party or such judgment or settlement could
materially interfere with the business, operations or assets of the
Indemnified Party;
(iii) if the Indemnifying Party does not assume control
of the defense of such claim in accordance with the foregoing provisions
within 10 days after receipt of notice of the claim, the Indemnified Party
shall have the right to defend such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor
in accordance with this Article VI, provided that without the prior
written consent of the Indemnifying Party the Indemnified Party shall not
be entitled to consent to the entry of any judgment or enter into any
settlement (A) if such consent or settlement does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnifying Party of a release from all liability in respect of such
claim or (B) if as a result of such consent or settlement injunctive or
other equitable relief would be imposed against the Indemnifying Party or
such judgment or settlement could materially interfere with the business
operations or assets of the Indemnifying Party; and
(iv) the Indemnified Party shall make available to the
Indemnifying Party and its attorneys, accountants and other
representatives all books and records in its possession relating to such
claim and the parties shall otherwise render each other assistance as may
be reasonably requested to ensure the proper and adequate defense to the
claim.
(e) Remedies Cumulative. Subject to Section 10.12, the
remedies provided herein shall be cumulative and shall not preclude assertion by
any party of any rights or the seeking of any other remedies against any other
party.
(f) Disclosure. Except as otherwise provided herein, no action
by an Indemnified Party to determine the extent of indemnified liability,
including, without limitation, voluntary disclosure to Authorities or potential
claimants, shall in any way affect such Indemnified Party's right to
indemnification from the Indemnifying Party.
(g) Subrogation. In connection with any indemnity payment
hereunder, an Indemnifying Party shall not be entitled to require that any
action be brought against any third party before an action is brought against
the Indemnifying Party hereunder by an Indemnified Party but, to the extent of
such payment, the Indemnifying Party shall be subrogated to any such right of
action of the Indemnified Party against any third party (other than any third
party insurer) in respect of the Loss to which such payment relates; provided,
however, that until the Indemnified Party recovers full payment of such Loss,
any claims of the Indemnifying Party against any such third party are hereby
made expressly subordinated and subject, in right of payment, to the Indemnified
Party's rights against such third party.
(h) No Duplication of Remedies. If a party is entitled to
indemnification under more than one provision of this Agreement for the same
Loss, it shall be entitled to only a single recovery for such Loss, or, if
applicable, such Loss shall only be taken into account once in the calculation
of the $3.75 million threshold amount set forth in Section 6.4(a).
(i) Certain Employee Benefits Representations. Statements in
Sections 5.4, 5.5 and 5.6 hereof which use the word "represent" and derivations
thereof (the "Article V Representations") shall be deemed "representations" for
purposes of Section 6.3(i) hereof (if made by Seller) and Section 6.2(i) hereof
(if made by Ball or Buyer). Notwithstanding the foregoing, any provision of
Sections 5.4, 5.5 and 5.6 that expressly provides for indemnification or
reimbursement of any party shall not be subject to the limitations contained in
Section 6.4(a) hereof.
Section 6.5 Environmental Indemnification.
(a) Without regard to whether any breach of a representation
or warranty is involved, subject to the limits set forth in Section 6.5(b) and
the provisions of Exhibit 6.5, Seller shall indemnify and hold harmless Ball and
Buyer against Losses (as calculated herein) arising out of any Environmental
Condition existing at the Business Locations, to the extent attributable to any
condition existing at or before the Closing or event occurring at or before the
Closing, (i) that, as of the Closing, constitutes a violation of applicable
Environmental Law or (ii) with respect to which there is liability for Cleanup
before or after the Closing under applicable Environmental Law in effect as of
the Closing, any such Loss being referred to herein as an "Environmental Loss."
(b) With respect to Environmental Losses relating to
matters that are initially asserted:
(i) on or before the third anniversary of
Closing, Seller shall be responsible for 100% of the Loss;
(ii) on or before the fourth anniversary of
Closing, Seller shall be responsible for 80% of the Loss;
(iii) on or before the fifth anniversary of
Closing, Seller shall be responsible for 60% of the Loss; and
(iv) on or before the date five years and six months
after the Closing, Seller shall be responsible for 40% of the Loss.
Notwithstanding any provision hereof to the contrary, with regard to matters
initially asserted after the date five years and six months after the Closing,
Seller shall have no responsibility pursuant to this Agreement for any Loss
under any Environmental Law other than for any Offsite Obligations.
(c) All claims for indemnification under either Section 6.3
(i) (with respect to a breach of Section 2.19 relating to matters located on the
Business Locations) or this Section 6.5 with respect to Environmental Laws shall
be subject to the provisions of this Section 6.5 and the provisions of Exhibit
6.5.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATION
The obligation of Seller to consummate the sale of the Business, the
Business Assets and the Shares pursuant to this Agreement shall be subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions, unless waived in writing by Seller:
Section 7.1 Representations and Warranties True. The representations
and warranties contained in Article III and in all certificates and other
documents delivered by Ball or Buyer to Seller pursuant to this Agreement shall
be true, complete and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of another date) as of the Closing Date as though such representations and
warranties were made on and as of such date, except for changes expressly
contemplated by the terms of this Agreement.
Section 7.2 Performance. Ball and Buyer shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by Ball
and Buyer or both, as the case may be, at or before the Closing.
Section 7.3 No Injunction, Litigation, etc. On the Closing Date,
there shall be no injunction, writ, preliminary restraining order or any order
of any nature issued by a court of competent jurisdiction directing that the
transactions provided for in this Agreement or any of them not be consummated as
so provided. No order of any Authority shall be in effect which restrains or
prohibits the consummation of the transactions contemplated by this Agreement,
and there shall not have been threatened, nor shall there be pending, any action
or proceeding in any such court or before any such governmental agency seeking
to prohibit or delay, or challenging the validity of, the transactions
contemplated by this Agreement.
Section 7.4 Stockholder's Agreement. If any Ball Shares are issued
pursuant hereto, Ball shall have executed and delivered the Stockholder's
Agreement.
Section 7.5 Legal Opinion. Ball shall have furnished Seller with a
legal opinion from its general counsel substantially in the form set forth in
Exhibit 7.5.
Section 7.6 HSR Act Waiting Periods. All waiting periods applicable
to this Agreement and the transactions contemplated hereby under the HSR Act
shall have expired or been terminated.
Section 7.7 Certificates. Ball and Buyer shall have furnished Seller
with such certificates of their officers to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Seller, including, without limitation, a certificate as to the effectiveness of
attached resolutions authorizing execution by Ball and Buyer of this Agreement
and the Stockholder's Agreement and the consummation by Ball and Buyer of the
transactions contemplated hereby.
Section 7.8 Consents. Those consents of third parties identified in
Section 7.8 of the Disclosure Schedule shall have been obtained.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATION
The obligation of Ball and Buyer to consummate the purchase of the
Business, the Business Assets and the Shares pursuant to this Agreement shall be
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, unless waived in writing by Ball and Buyer:
Section 8.1 Representations and Warranties True. The representations
and warranties contained in Article II hereof, the Disclosure Schedule and in
all certificates and other documents delivered by Seller to Ball or Buyer
pursuant to this Agreement shall be true, complete and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of another date) as of the Closing Date
as though such representations and warranties were made on and as of such date,
except for changes expressly contemplated by the terms of this Agreement.
Section 8.2 Performance. Seller shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be performed or complied with by Seller at or before the
Closing.
Section 8.3 No Injunction, Litigation, etc. On the Closing Date,
there shall be no injunction, writ, preliminary restraining order or any order
of any nature issued by a court of competent jurisdiction directing that the
transactions provided for in this Agreement or any of them not be consummated as
so provided. No order of any Authority shall be in effect which restrains or
prohibits the consummation of the transactions contemplated by this Agreement,
and there shall not have been threatened, nor shall there be pending, any action
or proceeding in any such court or before any such governmental agency seeking
to prohibit or delay, or challenging the validity of, the transactions
contemplated by this Agreement.
Section 8.4 Governmental Filings and Consents; Third Party Consents.
All governmental filings or consents required to be made or obtained prior to
the Closing Date by Seller in connection with the execution and delivery of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby shall have been made or obtained. All
authorizations, consents and approvals of any third party (other than an
Authority) required in connection with the execution and delivery of this
Agreement and the Ancillary Agreements and the transactions contemplated hereby
and thereby which are material to the operation of the Business or the
consummation by Seller of the transactions contemplated hereby (including those
expressly set forth in Section 8.4 of the Disclosure Schedule) shall have been
obtained.
Section 8.5 Stockholder's Agreement. If any Ball Shares are issued
pursuant hereto, Seller shall have executed and delivered the Stockholder's
Agreement.
Section 8.6 HSR Act Waiting Periods. All waiting periods applicable
to this Agreement and the transactions contemplated hereby under the HSR Act
shall have expired or been terminated.
Section 8.7 No Material Adverse Change. Since December 31, 1997, no
condition, event, change or occurrence, or any series of the foregoing, shall
exist or shall have occurred which, individually or in the aggregate, has had,
or is reasonably likely to have, a Material Adverse Effect.
Section 8.8 Certificates. Seller shall have furnished Buyer with
such certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Buyer, including, without limitation, certificates as to the effectiveness of
attached resolutions authorizing execution by Seller of this Agreement and the
Stockholder's Agreement and the consummation by Seller of the transactions
contemplated hereby.
Section 8.9 Financing Conditions. The conditions set forth in
clauses (i), (ii) and (iii) of the fourth paragraph of the Commitment
(commencing at the end of page two thereof and continuing on the top of page
three thereof) Letter and under the heading "Conditions Precedent Due Diligence"
on the Term Sheet attached thereto (the "Due Diligence Condition") shall have
been satisfied; provided that, only with respect to the condition set forth in
clause (i) of the fourth paragraph of the Commitment Letter (the "Documentation
Condition") and the Due Diligence Condition, the condition set forth in this
Section 8 shall expire and be of no further effect at the close of business on
the 45th day after the date hereof.
Section 8.10 Actions by Seller. Seller shall have completed all
of the actions described in Annex 8.10.
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.1 Methods of Termination. This Agreement and the
transactions contemplated herein may be terminated and abandoned at any time
prior to the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller if the Closing shall not
have occurred on or before December 31, 1998;
(c) by either Seller or Buyer if any court of competent
jurisdiction in the United States or other Authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby, and such order, decree or
ruling or other action shall have become final and nonappealable after the
affected party or parties have made all reasonable efforts to contest and appeal
the issuance of such order, decree, ruling or other action;
(d) by either Buyer or Seller (provided that the terminating
party is not then in material breach of any representation, warranty or covenant
in this Agreement) if there shall have been a material breach of any of the
representations, warranties or covenants in this Agreement on the part of the
other party, which breach is not cured within 30 days following written notice
to the party committing such breach, or which breach, by its nature, cannot be
cured prior to Closing; and
(e) by Buyer on the next business day following the 45th day
after the date hereof if either the Documentation Condition or the Due Diligence
Condition has not been satisfied on or before such 45th day.
Section 9.2 Procedure upon Termination. In the event of termination
and abandonment of this Agreement pursuant to Section 9.1 hereof, written notice
thereof shall forthwith be given to the other party, and the transactions
contemplated by this Agreement shall be terminated and abandoned. If the
transactions contemplated by this Agreement are so terminated and abandoned:
(a) each party, if requested, will redeliver all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same;
(b) all confidential information received by Seller with
respect to Ball or Buyer or their Affiliates shall be treated in accordance with
the Confidentiality Agreement and Section 5.9 hereof;
(c) all confidential information received by Ball or Buyer
with respect to Seller or its Affiliates shall be treated in accordance with the
Confidentiality Agreement and Section 5.9 hereof;
(d) notwithstanding any such termination, Sections 5.9,
9.2, 10.3 and 10.12 shall remain in full force and effect; and
(e) no party and none of its respective directors, officers,
Affiliates or agents shall have any liability to the other parties to this
Agreement or the Ancillary Agreements as a result of the transactions
contemplated hereby or thereby, except for the willful breach of this Agreement
or any breach of the provisions of this Agreement that survive such termination
pursuant to Section 9.2(d).
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Amendment and Modification. This Agreement may be
amended, modified and supplemented only by written agreement of Seller, Ball and
Buyer.
Section 10.2 Waiver of Compliance. Any failure of Seller on the one
hand, or Ball and Buyer on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by an
authorized representative of Buyer or Seller, respectively, but such waiver or
failure to insist upon compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 10.3 Expenses, etc. Except as otherwise set forth herein,
whether or not the transactions contemplated by this Agreement shall be
consummated, the fees and expenses incurred by a party in connection with this
Agreement shall be borne by such party.
Section 10.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or sent by overnight courier
or telecopy (and promptly confirmed by certified mail, return receipt
requested):
(a) if to Seller, to:
Reynolds Metals Company
6601 West Broad Street
Richmond, Virginia 23230
Attention: General Counsel
Telecopier: (804) 281-3740
and a copy to:
McGuire, Woods, Battle & Boothe, LLP
One James Center
901 E. Cary Street
Richmond, Virginia 23219-4030
Attention: Marshall H. Earl, Jr., Esq.
Telecopier: (804) 698-2044
or to such other person or address as Seller shall furnish to Ball and Buyer in
writing.
(b) if to Ball or Buyer, to:
Ball Corporation
Ball Metal Beverage Container Corp.
10 Longs Peak Drive
Broomfield, Colorado 80021-2510
Attention: General Counsel
Telecopier: (303) 460-2691
and a copy to:
Skadden, Arps, Slate, Meagher &
Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
Telecopier: (312) 407-0411
or to such other person or address as Ball or Buyer shall furnish to Seller in
writing.
Section 10.5 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either
party without the prior written consent of the other party, except by operation
of law and except that Buyer may assign its rights under this Agreement, in
whole or in part, to Ball or any direct or indirect wholly-owned subsidiary or
subsidiaries of Ball.
Section 10.6 Publicity. Neither Seller nor Ball and Buyer shall make
any announcement or statement concerning this Agreement or the transactions
contemplated hereby to the general public or Seller's Employees without the
prior consent of the other party. This provision shall not apply, however, to
any announcement or written statement required to be made by law or the
regulations of any federal or state governmental agency, except that the party
required to make such announcement shall, whenever practicable, consult with the
other party concerning the timing and content of such announcement before such
announcement is made.
Section 10.7 Governing Law. This Agreement and the legal relations
among the parties shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to its conflicts of law doctrine.
Section 10.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 10.9 Headings. The headings of the Sections and Articles of
this Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
Section 10.10 Entire Agreement. This Agreement, including the
Annexes and Exhibits hereto, the Disclosure Schedule, the Ancillary Agreements,
the other documents and certificates delivered pursuant to this Agreement and
the Confidentiality Agreement set forth the entire agreement and understanding
of the parties in respect of the subject matter hereof and supersede all prior
agreements, representations or warranties, whether oral or written, by any party
unless a contrary intention is indicated by a specific reference to this clause
in any such written agreement.
Section 10.11 Third Parties. Except as specifically referred to
herein, nothing herein shall be construed to give to any Person other than the
parties and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
Section 10.12 Dispute Resolution.
(a) Except as otherwise provided in this Agreement or any
Ancillary Agreement, including by way of example Exhibit 6.5, all disputes,
controversies or claims (a "Dispute") arising between Seller on the one hand,
and Buyer, Ball or their Designees, on the other hand, arising out of or
relating to this Agreement and the subject matter hereof, will be settled as
provided herein. The parties may by written agreement modify the specified time
limitations and procedures.
(b) The parties shall promptly attempt to resolve any Dispute
by negotiation. If a Dispute is not resolved by negotiations in the normal
course of business, and a party wishes to pursue the matter further, it shall
give the other party written notice requesting "Higher Level Executive
Negotiations." Specifically, Executives of both parties at levels one step above
the personnel who have previously been involved in the Dispute shall meet at a
mutually acceptable time and place in Chicago, Illinois (or such other place as
the parties mutually agree), within 15 calendar days after giving such notice,
and thereafter as often as they reasonably deem necessary, to attempt to resolve
the Dispute.
(c) If a Dispute has not been resolved by Higher Level
Executive Negotiations within 30 calendar days of the claiming party's giving
notice, and the claiming party wishes to pursue the matter further, it shall
give the responding party written notice requesting a "Senior Executive
Abbreviated Mini- Trial," as described in this Section 10.12(c). The Dispute
shall be referred to senior executives of the parties who have authority to
settle the dispute. The senior executives shall meet at a time and place in
Chicago, Illinois (or such other place as the parties mutually agree), mutually
agreed upon within 15 calendar days after such notice requesting a Senior
Executive Abbreviated Mini-Trial. The claiming party will make a presentation of
its position to the senior executives. The presentation will not exceed one hour
in length. The responding party will then make its presentation, not to exceed
one hour in length. The claiming party may make a rebuttal not to exceed 20
minutes in length. The responding party may make an answer to the rebuttal not
to exceed 20 minutes in length. The presentations of the parties may be made by
counsel or other persons designated by the senior executives. When the
presentations have been concluded, the senior executives will discuss the matter
privately. In preparation for the meeting, a senior executive may make a
non-binding request to the other party to provide limited information believed
to be important and significant in achieving a resolution. The senior executives
may also involve a mediator if they mutually agree. Unless the parties otherwise
agree, any such mediator will be appointed by the Center for Public Resources,
New York, New York, a not-for-profit dispute resolution organization.
(d) If any Dispute is not resolved by the foregoing dispute
resolution processes, the parties shall resolve such Dispute exclusively by
litigation; provided, however, that neither party shall commence litigation
until (i) Higher Level Executive Negotiations and the Senior Executive
Abbreviated Mini-Trial have been conducted in accordance with this dispute
resolution provision, (ii) the time specified for such (together with any
additional time the parties have agreed upon) has expired or (iii) a party has
breached its obligation to participate in the pre-litigation dispute resolution
process. The parties agree to use all reasonable efforts to expedite any such
litigation with respect to a Dispute.
(e) For all claims that are resolved by litigation, the
prevailing party, to the extent it prevails on its claims, will be entitled to
its attorneys' and experts' fees and disbursements incurred in resolving the
dispute (including those of in-house counsel and experts) and any other expense
directly related to the dispute.
(f) For all claims that are resolved by litigation, interest
on any claim that is determined to be payable will accrue from the time the
claim is originally made at an interest rate per annum equal to the Prime Rate
in effect from time to time.
(g) For all claims that are resolved by litigation, the
parties consent to the exclusive jurisdiction of any state or federal court
located in Delaware and irrevocably agree that all such actions or proceedings
arising out of or related to this Agreement shall be litigated in such courts.
Each party accepts for itself and in connection with its respective properties,
generally and unconditionally, the exclusive jurisdiction and venue of the
aforesaid courts and waives any defense of forum non conveniens, and irrevocably
agrees to be bound by any nonappealable judgement rendered in connection with
this Agreement. THE PARTIES EXPRESSLY WAIVE THEIR RIGHTS TO A TRIAL BY JURY.
(h) Notwithstanding anything to the contrary contained herein,
and in addition to any other remedy available to such party, Seller, Ball or
Buyer may seek provisional or permanent equitable relief to enforce the
provisions of this Agreement and remedy any breach hereof, including, without
limitation, temporary restraining orders and preliminary or permanent
injunctions, in addition to the other remedies set forth herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
BALL CORPORATION
By:______________________________
Name: R. David Hoover
Title: Vice Chairman and Chief
Financial Officer
BALL METAL BEVERAGE CONTAINER CORP.
By:___________________________________
Name: George A. Matsik
Title: Chairman and Chief Executive
Officer
REYNOLDS METALS COMPANY
By:________________________________
Name: D. Michael Jones
Title: Senior Vice President and
General Counsel
ANNEX A
DEFINED TERMS
"Affiliate(s)" means, with respect to any Person, (i) an entity of
which such Person is a direct or indirect subsidiary, (ii) a direct or indirect
subsidiary of such Person or (iii) a Person that controls, is controlled by or
is under common control with such Person, provided that Latasa shall not be
deemed to be an Affiliate of Seller.
"Cleanup" means all actions required by any Authority or under any
Environmental Law to contain or otherwise ameliorate an Environmental Condition,
including preventing a Release and performing preremedial studies and
investigations and postremedial monitoring and care.
"Code" means the Internal Revenue Code of 1986, as amended.
"Copyrights" means all registered and unregistered copyrights
(including, without limitation, copyrights in software and databases) and
registrations and applications for copyright registration, all rights of
authorship therein, and all rights to sue for past infringement thereof.
"Designee" means a direct or indirect wholly-owned subsidiary of
Ball or Buyer whose specific obligations Ball guarantees in accordance with
Section 5.12.
"Environment" means ambient air, surface water, groundwater, land
surface or land subsurface.
"Environmental Condition" means any condition existing at any
Business Location (or at any nearby property as a result of migration through
the air, soil, groundwater or stormwater run-off from a Business Location) to
the extent (i) resulting from a Release of any Hazardous Substance into the
Environment or (ii) resulting from the violation of or noncompliance with any
Environmental Law.
"Environmental Laws" means all Laws and standards applicable to
Seller or the Business Locations relating to pollution or protection of the
Environment, including, without limitation, Laws relating to Releases or
threatened Releases of Hazardous Substances into the Environment or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances and all Laws with regard
to record keeping, notification, disclosure and reporting requirements
respecting Hazardous Substances.
"Environmental Permits" means licenses, permits, approvals,
applications and authorizations from any Authority, whether federal, state or
local, domestic or foreign, which are required under or issued under
Environmental Laws.
"Hazardous Substances" means pollutants, contaminants, pesticides,
petroleum and petroleum products, polychlorinated biphenyl ("PCBs"), asbestos,
any "hazardous substance" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 41 U.S.C. ss. 9601, et seq., as
amended and reauthorized ("CERCLA"), any "hazardous waste" as defined in the
Resource Conservation and Recovery Act ("RCRA").
"Knowledge of Seller" means the knowledge, both actual knowledge and
knowledge that should be known in the ordinary course of their duties, of the
following persons employed by Seller or its Affiliates:
William E. Leahey, Jr.* Senior Vice President, Global Cans
D. Michael Jones Senior Vice President and General Counsel
Edmund H. Polonitza Vice President, Planning & Development
F. Robert Newman Vice President, Human Resources
Chuck D. McLane, Jr. Director, Financial Reporting & Analysis
C. S. Weidman Director, Employee Relations
Homer M. Cole Director, Health and Safety
Cathy C. Taylor Director, Environmental Quality
F. R. Ellsworth Director, Real Estate & Administrative
Services
Lucile J. Anutta Senior Employee Benefits Counsel
Donna C. Dabney Secretary and Assistant General Counsel
Edwin A. Harper Senior Division Counsel
Patrick R. Laden Chief Labor Counsel
Robert C. Lyne, Jr. Senior Patent Counsel
James E. McKinnon Chief Environmental Counsel
E. Michael Lewandowski* Director, Finance & Administration
C. Griffin Jones* Director, Manufacturing
Roger H. Donaldson* Director, Technology
Cornell D. Ward* Director, Human Resources
Paul G. Cobbledick* Director, Sales and Marketing
Paulo R. Rochet* Director, Business Development
Thomas P. Mackell* Director, Materials Management
Managers, Can and End Plants*
*Global Can Business employees
"Machinery Technology" means all technical information and know-how,
confidential or non-confidential, inventions, whether patented or unpatented,
and trade secrets, including, without limitation, all information and know-how
related to increasing manufacturing efficiency and profitability, patterns,
plans, designs, research data, formulae, manufacturing, sales, service or other
processes, operating manuals, drawings, equipment and parts lists (with related
descriptions and instructions), manuals, data, records, procedures, packaging
instructions, product specifications, analytical methods, sources and
specifications for raw materials, manufacturing and quality control procedures,
toxicity and health and safety information, environmental compliance and
regulatory information, research and development records and reports and other
documents relating to the foregoing including the contents of any invention
disclosures and open invention dockets for which no patent application has been
filed, in each case to the extent the foregoing relates exclusively or primarily
to the Machinery Operations.
"Material Adverse Effect" means an individual or cumulative adverse
change in, or effect on, the business, customers, operations, properties,
condition (financial or otherwise), assets or liabilities of the Business taken
as a whole that is reasonably expected to be materially adverse to the business,
customers, operations, properties, condition (financial or otherwise), assets or
liabilities of the Business taken as a whole.
"Patents" means all patents, patent applications and related patent
rights, including all reissues, divisionals, continuations and
continuations-in-part, extensions, all improvements thereon and all rights to
sue for past infringement thereof.
"Permits" means licenses, permits, consents, approvals,
applications, product registrations and authorizations from any Authority,
whether federal, state or local, domestic or foreign, other than
Environmental Permits, including, without limitation, licenses, permits or
approvals from, and registrations with, U.S. Equal Employment Opportunity
Commission ("EEOC"), U.S. Occupational Safety and Health Administration, U.S.
Federal Trade Commission, U.S. Department of Justice, U.S. Department of
Commerce, U.S. Department of Transportation, U.S. Food and Drug
Administration, U.S. Department of Agriculture or Authorities responsible
for the administration of workers' compensation laws.
"Person" means an individual, corporation, partnership, association,
trust, limited liability company or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the Environment of any Hazardous Substances not including any
such action which results in exposure to employees solely within a work place or
omissions from the engine or exhaust of a motor vehicle, rolling stock or
vessel.
"Section 338 Elections" means both a Section 338(g) Election and a
Section 338(h)(10) Election.
"Section 338(g) Election" means an election described in section
338(g) of the Code or deemed election described in section 338(e) of the Code.
The Term "Section 338(g) Election" shall also include any substantially similar
elections under a state or local statute corresponding to federal Laws.
"Section 338(h)(10) Election" means an election described in section
338(h)(10) of the Code. The Term "Section 338(h)(10) Election" shall also
include any substantially similar election under a state or local statute
corresponding to federal Laws.
"Section 338 Forms" shall mean all returns, documents, statements,
and other forms that are required to be submitted to any federal, state, county,
or other local Taxing Authority in connection with a Section 338(g) Election or
a Section 338(h)(10) Election. Section 338 Forms shall include, without
limitation, any "statement of section 338 election" and United States Internal
Revenue Service Form 8023 (together with any schedules or attachments thereto
that are required pursuant to Treas. Reg. ss. 1.338-1 or Treas. Reg. ss.
1.338(h)(10)-1.
"Tax Laws" means the Code and any other Laws relating to Taxes and
any official administrative pronouncements released thereunder.
"Tax Return(s)" means any return, report, information return or
other document (including any related or supporting information and any
amendment to any of the foregoing) filed or required to be filed with any Taxing
Authority with respect to Taxes.
"Taxing Authority" means any domestic or foreign governmental
authority responsible for the imposition, collection or administration of any
Tax.
"Technology" means all technical information and know-how,
confidential or non-confidential, inventions, whether patented or unpatented,
and trade secrets, including, without limitation, all information and know-how
related to increasing manufacturing efficiency and profitability, patterns,
plans, designs, research data, formulae, manufacturing, sales, service or other
processes, operating manuals, drawings, equipment and parts lists (with related
descriptions and instructions), manuals, data, records, procedures, packaging
instructions, product specifications, analytical methods, sources and
specifications for raw materials, manufacturing and quality control procedures,
toxicity and health and safety information, environmental compliance and
regulatory information, research and development records and reports and other
documents relating to the foregoing including the contents of any invention
disclosures and open invention dockets for which no patent application has been
filed, in each case to the extent the foregoing relates exclusively or primarily
to the Business.
"Trademarks" means all common law and registered trademarks, service
marks, logos, trade dress and trade names, the goodwill of the business
symbolized thereby, other business, product or service identifiers and all
registrations and applications for registration of the foregoing and all rights
to sue for past infringement or dilution thereof.
The following terms shall have the definitions contained in the sections of
the Asset Purchase Agreement identified below:
DEFINED TERM SECTION
Absent Nonrepresented Hourly Employees 5.5(b)
Absent Represented Employees 5.4(a)
Absent Salaried Employees 5.5(c)
Accounts Receivable 1.1(h)
Acquisition Proposal 4.5(a)(i)
Act 2.24(i)
Adverse Effect 4.4(b)
Affiliate(s) Annex A
Aggregate Deemed Sales Price 5.7(d)
Agreement Preamble
Agreement Regarding Performance of Technical
Services 1.7(c)(viii)
Ancillary Agreements 1.7(d)
Article V Representations 6.4(i)
Assignment and Assumption Agreement 1.7(c)(ii)
Assignment and Assumption of Leases 1.7(b)(ix)
Assumed Benefit Plan(s) 5.4(g)(xii)
Assumed Liabilities 1.3(a)
Audited Balance Sheet 1.5(a)
Audited Financial Statements 5.13(a)
Audited Latasa 1997 Financial Statements 5.13(b)
Authority 2.5
Ball Preamble
Ball SEC Reports 3.5
Ball Shares 1.4
Bill of Sale 1.7(b)(ii)
Business Preamble
Business Assets 1.1
Business Information 1.1(d)
Business Locations 1.1(a)
Buyer Preamble
Buyer's SUB Plan 5.4(c)
Buyer's Welfare Plans 5.5(f)(ii)
Cade 2.6
Cash Price 1.4
CERCLA Annex A
Cleanup Annex A
Closing 1.1
Closing Date 1.7(a)
Closing Period 5.7(g)
Closing Statement 1.5(a)
Code Annex A
Collective Bargaining Agreements 2.20(a)
Commitment Letter 3.9
Confidentiality Agreement 5.9(a)
Contracts 2.14(a)
Copyrights Annex A
Cross-License Agreement 1.7(d)(ix)
Data Processing Services Agreement 1.2(t)
Defined Benefit Single Location Plans 5.4(g)(i)
Defined Contribution Single Location Plans 5.4(g)(i)
Designated Value 1.4
Designee Annex A
Differential 1.10(b)
Disclosure Schedule 2.1
Dispute 10.12(a)
Documentation Condition 8.9
Domestic Subsidiary Securities 2.25(a)
Due Diligence Condition 8.9
EEOC Annex A
Employee Benefits Data 5.5(a)
Employee Lists 5.5(a)
employment loss 2.20(j)
Encumbrances 2.11
Environment Annex A
Environmental Condition Annex A
Environmental Laws Annex A
Environmental Loss 6.5(a)
Environmental Permits Annex A
Equipment 1.1(b)
ERISA 2.21(a)
ERISA Affiliate 2.21(a)
Exchange Act 3.5
Excluded Assets 1.2
Excluded Liabilities 1.3(b)
Extended Seconded Employees 5.6(a)(i)
Extrusion Land 1.10(a)
Expiration Date 6.1
FICA 5.6(d)
Filed Intellectual Property 1.7(b)
Final Closing Statement 1.5(b)
Financing 3.9
FMLA 5.4(a)
FUTA 5.6(d)
GAAP 1.5(a)
Guaranteed Pension Asset Value 5.4(g)(vi)
Hazardous Substances Annex A
Headquarter Employees 5.5(c)
Higher Level Executive Negotiations 10.12(b)
HSR Act 2.6
Human Resources Services Agreement 1.7(d)(xi)
Inadvertently Retained Information 5.17
Incentive Loan Agreement 1.7(d)(iv)
Indemnified Party 6.4(c)
Indemnifying Party 6.4(c)
Initial Document Production 5.4(g)(ii)
Intellectual Property Rights 1.1(c)
Interim Financial Statements 2.7(b)
Interplant Transfer Provisions 5.4(b)
Inventory 1.1(g)
Inventory Carrying Value 1.5(d)
Knowledge of Seller Annex A
LAR Preamble
Latasa Preamble
Latasa Agreements 1.1(f)
Latasa Offering Statement 2.27
Latasa Subsidiaries 2.25(c)
Law(s) 2.5
Leased Premises 1.1(a)
Loss(es) 6.2
Machinery Operations Preamble
Machinery Technology Annex A
Master Trust 5.4(g)(v)
Master Trustee 5.4(g)(v)
Material Adverse Effect Annex A
Modified Aggregate Deemed Sale Price 5.7(d)
Neutral Auditor 1.5(c)
Non-Exclusive Contract(s) 1.1(j)
Non-Exclusive Permit(s) 1.1(e)
Offset 5.4(f)
Offsite Obligations 1.3(b)(v)
Option 1.10(e)
Owned Real Property 1.1(a)
Parcel 1.10(a)
Patents Annex A
Payroll Services Agreement 1.7(d)(vi)
PCBs Annex A
Permanent Shutdown 5.4(h)
Permits Annex A
Permitted Exceptions 4.4(b)
Person Annex A
Plan(s) 2.21(a)
Plant Land 1.10(a)
Plant Salaried Employees 5.5(c)
Post-Retirement Eligible Employees 5.5(f)(i)
Pre-Closing Period 5.7(g)
Prime Rate 1.5(e)
Purchase Price 1.4
RCAL Preamble
RCRA Annex A
Real Property Leases 1.1(a)
Release Annex A
Replacement Plan 5.4(f)
Represented Employees 5.4(a)
Resolution Period 1.5(b)
Retained Contracts 1.2(f)
Reynolds Marks 1.2(k)
RIB Preamble
RILA Preamble
RIND Preamble
SEC 3.5
Seconded Employees 5.6(a)(i)
Section 338 Elections Annex A
Section 338(g) Election Annex A
Section 338(h)(10) Election Annex A
Section 338 Forms Annex A
Selection Period 5.6(a)(i)
Seller Preamble
Seller Employee(s) 5.5(a)
Seller Nonrepresented Hourly Employees 5.5(b)
Seller Salaried Employees 5.5(c)
Seller's Plans 5.4(b)
Seller's Welfare Plans 5.5(f)
Senior Executive Abbreviated Mini-Trial 10.12(c)
Shares 1.1
Siberian Aluminum 5.8(a)(i)
Single Location Plans 5.4(g)(i)
Special Retirement Benefit 5.4(f)(ii)
Stockholder's Agreement Preamble
Subdivision 1.10(a)
Supply Program Agreement 1.7(d)(iii)
SVE Preamble
SVE Technical Services Agreement 2.29
Tax Laws Annex A
Tax Return(s) Annex A
Taxes 1.3(b)(i)
Taxing Authority Annex A
Technology Annex A
Title Commitments 4.4(b)
Title Company 4.4(b)
Title Costs 4.4(b)
Title IV Plans 2.21(a)
Torrance Lease 1.10(a)
Trademarks Annex A
Trademark License Agreement 1.7(d)(viii)
Transferred Employee(s) 5.5(a)
Transferred Nonrepresented Hourly Employees 5.5(b)
Transferred Represented Employees 5.4(a)
Transferred Salaried Employees 5.5(c)
Transition Services Agreement 1.7(d)(v)
Transitional Trademark License Agreement 1.7(d)(ii)
Transportation Services Agreement 1.7(d)(x)
UAC Preamble
Unaudited Financial Statements 2.7(a)
Unaudited Latasa Financial Statements 2.28
Union Pension Plans 5.4(f)
Valuation Date 5.4(g)(vi)
WARN Act 2.20(j)
Welfare Benefits 5.5(f)(ii)
Working Capital 1.5(a)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
BALL CORPORATION
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
MARCH 29, 1998 AND THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF
MARCH 29, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-29-1998
<CASH> 41,300
<SECURITIES> 0
<RECEIVABLES> 315,700
<ALLOWANCES> 0
<INVENTORY> 414,700
<CURRENT-ASSETS> 818,800
<PP&E> 1,543,700
<DEPRECIATION> 662,400
<TOTAL-ASSETS> 2,107,000
<CURRENT-LIABILITIES> 861,600
<BONDS> 359,500
0
22,900
<COMMON> 342,000
<OTHER-SE> 271,300
<TOTAL-LIABILITY-AND-EQUITY> 2,107,000
<SALES> 549,700
<TOTAL-REVENUES> 549,700
<CGS> 491,200
<TOTAL-COSTS> 491,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,700
<INCOME-PRETAX> 6,100
<INCOME-TAX> 3,100
<INCOME-CONTINUING> 5,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,300
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.14
<PAGE>
</TABLE>
EXHIBIT 99.1
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the Reform Act), Ball is hereby filing cautionary
statements identifying important factors that could cause Ball's actual results
to differ materially from those projected in forward-looking statements of Ball.
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements, and many of these statements are
contained in Part I, Item 2, "Business.". The Reform Act defines forward-looking
statements as statements that express or imply an expectation or belief and
contain a projection, plan or assumption with regard to, among other things,
future revenues, income, earnings per share or capital structure. Such
statements of future events or performance involve estimates, assumptions, and
uncertainties and are qualified in their entirety by reference to, and are
accompanied by, the following important factors that could cause Ball's actual
results to differ materially from those contained in forward-looking statements
made by or on behalf of Ball.
Some important factors that could cause Ball's actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include, but are not limited to, fluctuation in customer growth and demand,
weather, fuel costs and availability, regulatory action, Federal and State
legislation, interest rates, labor strikes, maintenance and capital expenditures
and local economic conditions. In addition, Ball's ability to have available an
appropriate amount of production capacity in a timely manner can significantly
impact Ball's financial performance. The timing of deregulation and competition,
product development and introductions and technology changes are also important
potential factors. Other important factors include the following:
Difficulties in obtaining raw materials, supplies, power and natural resources
needed for the production of metal and plastic containers as well as
telecommunications and aerospace products could affect Ball's ability to ship
containers and telecommunications and aerospace products.
The pricing of raw materials, supplies, power and natural resources needed for
the production of metal and plastic containers as well as telecommunications and
aerospace products, pricing and ability to sell scrap associated with the
production of metal containers and the effect of changes in the cost of
warehousing the Company's products could adversely affect the Company's
financial performance.
Technological or market acceptance issues regarding the business of EarthWatch,
performance failures and related contracts or subcontracts, the success or lack
of success of the satellite launches and business of EarthWatch, the failure of
EarthWatch to receive additional financing needed for EarthWatch to continue to
make payments, or any events which would require the Company to provide
additional financial support for EarthWatch Incorporated.
The inability to achieve technological advances in the Company's businesses. The
inability of the Company to achieve year 2000 compliance.
Cancellation or termination of government contracts for the U.S. Government,
other customers or other government contractors.
The effects of, and changes in, laws, regulations, other activities of
governments (including political situations and inflationary economies),
agencies and similar organizations, including, but not limited to, those
effecting frequency, use and availability of metal and plastic containers, the
authorization and control over the availability of government contracts and the
nature and continuation of those contracts and the related services provided
thereunder, the use of remote sensing data and changes in domestic and
international tax laws could negatively impact the Company's financial
performance.
The effects of changes in the Company's organization or in the compensation
and/or benefit plans; any changes in agreements regarding investments or joint
ventures in which the Company has an investment; the ability of the Company to
acquire other businesses; the inability of the Company to close the proposed
transaction with Reynolds; the amount, type or cost of the Company's financing
and changes to that financing, could adversely impact Ball's financial
performance.
Risks involved in purchasing and selling products and services and receiving
payments in currencies other than the U.S. dollar. The devaluation of
international currencies and the ability to refinance M.C. Packaging and to
obtain adequate credit resources for foreseeable financing requirements of the
Company's businesses.
<PAGE>
