Certified Public Accountants 

Avocat à la Cour de Paris et Avocat au Barreau de New-York

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Statement of Facts

Emballages France S.A. 

Emballages France S.A. manufactures and sells in Europe, North America and Asia high-end aluminum containers for essential oils and certain other products.  (Click here for a copy of its abbreviated balance sheet and P&L) 

Emballages France S.A. is owned by various members of the Dupont family and the President of the company for the last 12 years has been Mr. Laurence Dupont.

North American Distribution by American Packaging, Inc.

In 1992, American Packaging, Inc., a Delaware corporation, became a de facto exclusive distributor of Emballages France products in the United States. Over the next two years, the business relationship progressed and mutual trust was established. Accordingly, in 1994, the parties were prepared to enter into an exclusive 10 year arrangement which was memorialized as a Heads of Agreement. Such arrangement will reach its term on December 31, 2005.

In the market segment for high-end aluminum containers, one large German company and one large American company (both publicly traded with a large range of products) respective has a 30% and 50% share of the North American market. Emballages France S.A.'s products represent the remaining 20%

30 % of Emballages France S.A. 's sales and 35% of its profits are derived from the sale of its products to American Packaging, Inc. Sales to American Packaging, Inc. have increased by 10% per year for the last three years and are expected to continue to do so.

50 % of American Packaging, Inc.'s sales and 60% of its profits are derived from the resale of products manufacture by Emballages France S.A.   (Click here for a copy of its abbreviated balance sheet and P&L)

American Packaging, Inc.'s President, George Smith, is 70 years old and he spends 8 month per year at his Florida home. The chief operating officer at the  New Jersey corporate offices is an American. He is 60 years old and has expressed a wish to retire within 5 years. The President and COO respectively receive  salaries of  $ 200 k and $150 k, plus generous fringe benefits. Neither executive has an employment contract.

Mr. George Smith is also the Chairman of the Board of G. S. Packaging, Inc., a Delaware corporation owned by Mr. George Smith and his son, Robert Smith. Mr. Robert Smith is the President of such company. G. S. Packaging, Inc. distributes stainless steel containers. 

Although Mr. Laurence Dupont does not know the identity of all the customers of American Packaging, Inc. and of G. S. Packaging, Inc., he believes that the products are complementary. In the past, Mr. George Smith had advised Mr. Dupont that the lines of products are not in competition with each other and they have been jointly marketed to American customers. This arrangement appears to work and Mr. Dupont would be pleased to continue the close marketing relationship.

The Presidents of the French and American companies have excellent relations and have discussed a possible acquisition with Emballages France S.A. paying 6 times last years profits before taxes, approximately $ _____k. It is not clear if an asset or stock acquisition is contemplated. There have been no discussions of tax issues relating to allocation of part of the purchase price to non-compete and consulting agreements.

Legal, tax and accounting advice sought 

The President of Emballages France S.A. has asked for legal, accounting and tax advice as he wishes to sign a purchase and sale agreement within three months and to hold a closing thereafter by June 30, 2003. 

What issues and questions should Emballages France S.A.'s Attorney and CPA consider raising with the President?