[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65328-65338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30834]



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FEDERAL TRADE COMMISSION
[File No. 951 0072]


Devro International PLC; Proposed Consent Agreement With Analysis 
to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: This consent agreement, accepted subject to final Commission 
approval, settles alleged violations of 

[[Page 65329]]
federal law prohibiting unfair or deceptive acts and practices and 
unfair methods of competition allegedly arising from the acquisition by 
Devro International of Teepak International. Devro and Teepak are the 
two largest producers of collagen sausage casings (the skins into which 
various meat products are stuffed before being cooked or smoked) in the 
United States. The consent agreement, among other things, would require 
Devro to divest Devro North America, the assets it uses to manufacture 
and distribute collagen sausage casings in the United States and 
Canada. The assets to be divested include a manufacturing plant in 
Somerville, New Jersey, and a finishing plant in Ontario, Canada. The 
divestiture would have to be completed within three months of the date 
the order becomes final, and the assets would have to be sold to a 
buyer (1) that does not already produce collagen sausage casings for 
sale in the United States, and (2) that is approved by the Commission. 
If the divestiture is not completed on time, the consent agreement 
would permit the Commission to appoint a trustee to complete it.

DATES: Comments must be received on or before February 20, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, Sixth Street and Pennsylvania Avenue, NW., Washington, DC 
20580.

FOR FURTHER INFORMATION CONTACT: William Baer, FTC/H-374, Washington, 
DC 20580 (202) 326-2932; Ronald Rowe, FTC/S-2602, Washington, DC 20580 
(202) 326-2610; or Joseph Brownman, FTC/S-2108, Washington, DC 20580 
(202) 326-2950.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Sec. 2.34 of the 
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission''), having initiated an 
investigation of the proposed acquisition by Devro International plc 
and Devro Inc. of the outstanding voting securities of Teepak 
International, Inc. and it now appearing that Devro International plc 
and Devro Inc. (hereinafter sometimes referred to as the ``Proposed 
Respondents'') are willing to enter into an agreement containing an 
order to divest certain assets and providing for other relief:
    It is hereby agreed by and between the Proposed Respondents, by 
their duly authorized officers and attorneys, and counsel for the 
Commission, that:
    1. Proposed Respondent Devro International plc is a corporation 
organized, existing, and doing business under and by virtue of the laws 
of Scotland, with its office and principal place of business at 
Moodiesburn, Chryston, G69 OJE, Scotland.
    2. Proposed Respondent Devro Inc. is a corporation organized, 
existing, and doing business under and by virtue of the laws of the 
State of Delaware with its office and principal place of business at 
Southside Avenue, Somerville, New Jersey.
    3. Teepak International, Inc. is a corporation organized, existing, 
and doing business under and by virtue of the laws of the State of 
Delaware, with its office and principal place of business at Three 
Westbrook Corporate Center, Suite 1000, Westchester, Illinois 60153.
    4. Proposed Respondents admit all the jurisdictional facts set 
forth in the draft of complaint here attached.
    5. Proposed Respondents waive:
    a. any further procedural steps;
    b. the requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    c. all rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this Agreement; 
and
    d. any claim under the Equal Access to Justice Act.
    6. Proposed Respondents shall submit, within five (5) days of the 
date this Agreement is signed by Proposed Respondents, an initial 
compliance report, as contemplated by Rules 2.33 and 4.9(b)(7) of the 
Commission's Rules of Practice and Procedure, 16 C.F.R. 2.33 and 
4.9(b)(7), duly signed by the Proposed Respondents, setting forth in 
precise detail the manner in which Proposed Respondents will comply 
with Parts II and III of the proposed consent order, when and if 
entered, the Agreement to Condition Acquisition, and the Agreement to 
Hold Separate. Among other things, the report shall include:
    a. A full and complete description of Proposed Respondents' 
compliance and planned compliance with the terms and conditions of the 
Agreement to Hold Separate, including:
    (1) The names, telephone numbers, and business affiliations of the 
persons that Proposed Respondents intend to appoint, or are considering 
appointing, or have appointed, as members of the Management Team, 
pursuant to Paragraph 4 (a) of the Agreement to Hold Separate;
    (2) the name(s), telephone number(s), and business affiliation(s) 
of the person(s) that Proposed Respondents intend to appoint, are 
considering appointing, or have appointed, as independent auditor/
manager, pursuant to Paragraph 4 (b) of the Agreement To Hold Separate; 
and
    (3) copies of all written communications, internal memoranda, and 
reports and recommendations concerning the terms of the Agreement to 
Hold Separate.
    b. A full and complete description of Proposed Respondents' 
compliance and planned compliance with the terms and conditions of the 
Agreement to Condition Acquisition, including:
    (1) The resolution, or draft resolution, that Devro International 
plc will present to its shareholders;
    (2) the date that Devro International plc anticipates that its 
shareholders will vote on the resolution;
    (3) the date that Devro International plc anticipates learning the 
outcome of the vote by the shareholders on the resolution; and
    (4) copies of all written communications, internal memoranda, and 
reports and recommendations concerning the terms of the Agreement to 
Condition Acquisition.
    c. A full and complete description of the efforts planned or 
underway to comply with the terms and conditions of the proposed order, 
including:
    (1) A list of the firms to which Proposed Respondents (i) have 
offered, and (ii) intend to offer, the Assets To Be Divested;
    (2) the names and telephone numbers of the representatives of the 
firms listed in response to part c. (1) of this Paragraph that Proposed 
Respondents have already contacted to offer the Assets To Be Divested;
    (3) the names, addresses, telephone numbers and business 
affiliations of at least three (3) potential trustees that would be 
acceptable to Proposed Respondents should the appointment of a trustee 
be deemed appropriate by the Commission;
    (4) the procedures that Proposed Respondents will employ in finding 
a 

[[Page 65330]]
proposed acquirer of the Assets To Be Divested;
    (5) all criteria that Proposed Respondents will employ for choosing 
a proposed acquirer of the Assets To Be Divested in the event that 
offers for these assets are made by more than one firm;
    (6) a full and complete description of all of the Assets To Be 
Divested;
    (7) all descriptions, characterizations, and explanations of the 
Assets To Be Divested that may already have been provided, or that 
Proposed Respondents intend to provide, to potential acquirers;
    (8) a full and complete description of the financial condition and 
potential viability as an independent business of the Assets To Be 
Divested;
    (9) all descriptions, characterizations, and explanations of the 
financial condition and potential viability as an independent business 
of the Assets To Be Divested that may already have been provided, or 
that Proposed Respondents intend to provide, to potential acquirers; 
and
    (10) copies of all written communications, internal memoranda, and 
reports and recommendations concerning divestiture.
    7. This Agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
Agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either withdraw its acceptance 
of this Agreement and so notify the Proposed Respondents, in which 
event it will take such action as it may consider appropriate, or issue 
and serve its complaint (in such form as the circumstances may require) 
and decision, in disposition of the proceeding.
    8. This Agreement is for settlement purposes only and does not 
constitute an admission by the Proposed Respondents that the law has 
been violated as alleged in the draft of complaint here attached, or 
that the facts as alleged in the draft complaint, other than 
jurisdictional facts, are true.
    9. This Agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Sec. 2.34 of the Commission's 
Rules, the Commission may, without further notice to the Proposed 
Respondents, (1) issue its complaint corresponding in form and 
substance with the draft of complaint here attached and its decision 
containing the following order to divest in disposition of the 
proceeding and (2) make information public with respect thereto. When 
so entered, the order to divest shall have the same force and effect 
and may be altered, modified or set aside in the same manner and within 
the same time provided by statute for other orders. The order shall 
become final upon service. Delivery by the U.S. Postal Service of the 
complaint and decision containing the agreed-to order to the Proposed 
Respondents' counsel at the address as stated in this Agreement shall 
constitute service. The Proposed Respondents waive any right they may 
have to any other manner of service. The complaint may be used in 
construing the terms of the order, and no agreement, understanding, 
representation, or interpretation not contained in the order or the 
agreement may be used to vary or contradict the terms of the order.
    10. The Proposed Respondents have read the proposed complaint and 
order contemplated hereby. The Proposed Respondents understand that 
once the order has been issued, they will be required to file one or 
more compliance reports showing that they have fully complied with the 
order. The Proposed Respondents further understand that they may be 
liable for civil penalties in the amount provided by law for each 
violation of the order after it becomes final.
    11. Proposed Respondents agree to be bound by all of the terms of 
the Agreement to Condition Acquisition and the Agreement to Hold 
Separate, attached to this Agreement and made a part hereof as Appendix 
I and Appendix II, respectively, upon acceptance by the Commission of 
this Agreement Containing Consent Order for public comment.
    12. Proposed Respondents agree to notify the Commission's Bureau of 
Competition in writing, within twenty-four (24) hours, of the action 
taken by the shareholders of Devro International plc regarding (a) the 
proposed acquisition by Devro International plc of Teepak 
International, Inc. (``the Acquisition''), (b) the divestiture of the 
Assets To Be Divested under the terms of this Agreement Containing 
Consent Order (``the Divestiture''), and (c) the unlimited 
indemnification of the independent auditor/manager, retroactive as of 
the date of the appointment of the auditor/manager, pursuant to the 
Agreement to Condition Acquisition and the Agreement to Hold Separate 
(``the Retroactive Indemnification'').
    13. Subsequent to approval of this Agreement Containing Consent 
Order and acceptance for public comment of the Consent Order by the 
Commission and unconditional approval by the shareholders of Devro 
International plc of (a) the Acquisition, (b) the Divestiture, and (c) 
the Retroactive Indemnification, with written notice having been given 
to the Commission's Bureau of Competition, in writing, within twenty-
four (24) hours, of the unconditional approval by the shareholders, 
Devro International plc may consummate the Acquisition.
    14. In the event the shareholders of Devro International plc, prior 
to the expiration of the sixty (60) day public comment period, fail 
unconditionally to approve (a) the Acquisition, (b) the Divestiture, 
and (c) the Retroactive Indemnification, Proposed Respondents, having 
no authority to consummate the Acquisition, will, within twenty-four 
(24) hours of the failure of the shareholders of Devro International 
plc unconditionally to approve (a) the Acquisition, (b) the 
Divestiture, and (c) the Retroactive Indemnification, notify the 
Commission of such failure and withdraw any Hart-Scott-Rodino Premerger 
Notification and Report Form that may have been filed under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. 18a. After 
such timely notification and withdrawal, pursuant to the terms of this 
Paragraph, the Commission will not issue the following divestiture 
order.

Order

I
    It is ordered That, as used in this Order, the following 
definitions shall apply:
    A. ``Devro International plc'' means that company and its 
predecessors, subsidiaries, divisions, groups and affiliates controlled 
by Devro International plc, and its respective directors, officers, 
employees, agents, and representatives, and the respective successors 
and assigns of each.
    B. ``Devro Inc.'' means that company and its predecessors, 
subsidiaries, divisions, groups and affiliates controlled by Devro Inc. 
and its respective directors, officers, employees, agents, and 
representatives, and the respective successors and assigns of each.
    C. ``Devro Canada'' means DCI Devro Canada Inc., and its 
predecessors, subsidiaries, divisions, groups and affiliates controlled 
by DCI Devro Canada Inc. and its respective directors, officers, 
employees, agents, and 

[[Page 65331]]
representatives, and the respective successors and assigns of each.
    D. ``Teepak'' means Teepak International, Inc., and its 
predecessors, subsidiaries, divisions, groups and affiliates controlled 
by Teepak International, Inc. and its respective directors, officers, 
employees, agents, and representatives, and the respective successors 
and assigns of each. The definition of ``Teepak'' specifically excludes 
Devro International plc, Devro Inc., and Devro Canada. For purposes of 
Parts VII and VIII of this Order, after the Acquisition, Teepak will be 
regarded as part of Respondent Devro International plc.
    E. ``Respondents'' means Devro International plc and Devro Inc.
    F. ``Acquisition'' means the proposed acquisition by Devro 
International plc of the outstanding voting securities of Teepak 
International, Inc.
    G. ``Assets To Be Divested'' means:
    1. All assets related to the collagen sausage casings business of 
Devro Inc. and Devro Canada, including, but not limited to:
    a. All production and finishing facilities, plant, and equipment of 
Devro Inc., including the plant located at Somerville, New Jersey, and, 
wherever located, all machinery, fixtures, equipment, kitchen 
facilities, laboratory testing equipment and facilities, research and 
development facilities and programs, vehicles, transportation 
facilities, furniture, tools and other tangible personal property, 
customer lists, vendor lists, catalogs, sales promotion literature, 
advertising materials, technical information, and management 
information systems;
    b. All production and finishing facilities, plant, and equipment of 
Devro Canada, including the plant located in Markham, Ontario, Canada, 
and, wherever located, and to the extent they exist, all machinery, 
fixtures, equipment, kitchen facilities, laboratory testing equipment 
and facilities, research and development facilities and programs, 
vehicles, transportation facilities, furniture, tools and other 
tangible personal property, customer lists, vendor lists, catalogs, 
sales promotion literature, advertising materials, technical 
information, and management information systems;
    c. All intellectual property, including product and process 
patents, patent rights, patent improvements, process improvements, 
trademarks, service marks, copyrights, technology, knowhow, basic 
research, trade secrets, goodwill, or trademarks that Devro Inc. or 
Devro Canada use, license, have rights to, or otherwise have an 
interest in; provided, however, that Devro International may retain all 
rights to the trademark Devro, tradename ``Devro'', and the 
stylized letter ``D'';
    d. All Devro Inc. and Devro Canada inventory and storage capacity;
    e. All rights, titles, and interest in and to real property owned 
or leased by Devro Inc. and Devro Canada, together with all 
appurtenances, licenses, and permits;
    f. All rights, titles, and interests in and to contracts entered 
into in the ordinary course of business between Devro Inc. and Devro 
Canada with customers, suppliers, sales representatives, distributors, 
agents, personal property lessors, personal property lessees, 
licensors, licensees, consignors, and consignees;
    g. All rights of Devro Inc. and Devro Canada, under warranties and 
guarantees, express or implied;
    h. All books, records, and files of Devro Inc. and Devro Canada;
    i. All items of prepaid expense to Devro Inc. and Devro Canada; and
    2. From Devro International plc:
    a. On a non-exclusive basis, with no right to sub-license to a 
third party, all rights to any information or intellectual property 
relating to Devro International (but not any information or 
intellectual property of Teepak in existence at the time of the 
Acquisition) in development or already developed by Devro International 
at the time of the divestiture, plus all enhancements, improvements or 
perfections thereof within twenty-four (24) months of the divestiture, 
including information or intellectual property relating to product and 
process patents, patent rights, patent improvements, technology, 
knowhow, basic research, or trade secrets regarding any research and 
development programs or activities, wherever located, to the extent 
that such information or intellectual property relate to the 
manufacture, finishing, distribution, or sale of collagen sausage 
casings; and
    b. All additional tangible and intangible assets of Devro 
International, wherever located, reasonably necessary to enable the 
acquirer of the Assets To Be Divested to manufacture, finish, 
distribute, and market collagen sausage casings in substantially the 
same manner, quality, and quantity achieved by Devro Inc. and Devro 
Canada prior to the divestiture, other than any tangible or intangible 
assets of Teepak in existence at the time of the Acquisition.
    H. ``Excluded Assets'' means the following entities: Devro Limited, 
Devro Holdings Limited, Devro Pty Limited, Devro BV, Devro Asia 
Limited, Devro GmbH, and Devro KK, and Teepak and its tangible and 
intangible assets in existence at the time of the Acquisition. The term 
``Excluded Assets'' does not include (that is, the following assets are 
not Excluded Assets) specifically identifiable tangible and intangible 
assets of these excluded entities (other than those of Teepak at the 
time of the divestiture) related to the manufacture and finishing of 
collagen sausage casings.
    I. ``Commission'' means the Federal Trade Commission.
II
    It is further ordered That:
    A. Within three (3) months of the date the order becomes final, 
Respondents shall divest, absolutely and in good faith, at no minimum 
price, the Assets To Be Divested.
    B. The purpose of the divestiture of the Assets To Be Divested is 
to ensure the continued use of the Assets To Be Divested as a viable, 
competitive, and independent business, in the same business in which 
the Assets To Be Divested are engaged at the time of the Acquisition, 
and to remedy the lessening of competition resulting from the 
Acquisition as alleged in the Commission's Complaint.
    C. The proposed acquirer shall not be a firm that has been engaged 
in the manufacture of collagen sausage casings for sale, other than to 
itself, in the United States.
    D. The Assets To Be Divested shall be divested only to an acquirer 
that receives the prior approval of the Commission and only in a manner 
that receives the prior approval of the Commission.
III
    It is further ordered That:
    A. If Respondents have not divested the Assets To Be Divested, 
absolutely and in good faith, with the Commission's prior approval, 
within three (3) months of the date this Order becomes final, the 
Commission may appoint a trustee to divest the Assets To Be Divested. 
In the event that the Commission or the Attorney General brings an 
action pursuant to section 5(l) of the Federal Trade Commission Act, 15 
U.S.C. 45(l), or any other statute enforced by the Commission, 
Respondents shall consent to the appointment of a trustee in such 
action. Neither the appointment of a trustee nor a decision not to 
appoint a trustee under this Paragraph shall preclude the Commission or 
the Attorney General from seeking civil penalties or any other relief 
available to it, including a court-appointed trustee, pursuant to 
section 5(l) of the Federal Trade Commission Act, or any other statute 
enforced by the 

[[Page 65332]]
Commission, for any failure by Respondents to comply with this Order.
    B. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph III. A. of this Order, Respondents shall consent to the 
following terms and conditions regarding the trustee's powers, duties, 
authority, and responsibilities:
    1. The Commission shall select the trustee, subject to the consent 
of Respondents, which consent shall not be unreasonably withheld. The 
trustee shall be a person with experience and expertise in acquisitions 
and divestitures. If Respondents have not opposed, in writing, 
including the reasons for opposing, the selection of any proposed 
trustee within ten (10) days after notice by the staff of the 
Commission to Respondents of the identity of any proposed trustee, 
Respondents shall be deemed to have consented to the selection of the 
proposed trustee.
    2. Subject to the prior approval of the Commission, and consistent 
with the provisions of Paragraphs II. B.-D. of this Order, the trustee 
shall have the exclusive power and authority to divest the Assets To Be 
Divested.
    3. Within ten (10) days after appointment of the trustee, 
Respondents shall execute a trust agreement that, subject to the prior 
approval of the Commission and, in the case of a court-appointed 
trustee, of the court, transfers to the trustee all rights and powers 
necessary to permit the trustee to effect the divestiture required by 
this Order.
    4. The trustee shall have six (6) months from the date the 
Commission approves the trust agreement described in Paragraph III. B. 
3. to accomplish the divestiture, which shall be subject to the prior 
approval of the Commission. If, however, at the end of the six-month 
period, the trustee has submitted a plan of divestiture or believes 
that divestiture can be achieved within a reasonable time, the 
divestiture period may be extended by the Commission, or, in the case 
of a court-appointed trustee, by the court; provided, however, the 
Commission may extend this period only two (2) times for up to an 
additional twelve (12) months each time.
    5. The trustee shall, to the extent not prohibited by United States 
or Canadian law, have full and complete access to the personnel, books, 
records and facilities related to the Assets To Be Divested or to any 
other relevant information, as the trustee may reasonably request. 
Respondents shall develop such financial or other information as such 
trustee may request and shall cooperate with the trustee. Respondents 
shall take no action to interfere with or impede the trustee's 
accomplishment of the divestiture. Any delays in divestiture caused by 
Respondents shall extend the time for divestiture under this Paragraph 
in an amount equal to the delay, as determined by the Commission or, 
for a court-appointed trustee, by the court.
    6. The trustee shall use his or her best efforts to negotiate the 
most favorable price and terms available in each contract that is 
submitted to the Commission, subject to Respondents' absolute and 
unconditional obligation to divest at no minimum price. The divestiture 
shall be made in the manner and to the acquirer as set out in Part II 
of this Order; provided, however, if the trustee receives bona fide 
offers from more than one acquiring entity, and if the Commission 
determines to approve more than one such acquiring entity, the trustee 
shall divest to the acquiring entity or entities selected by 
Respondents from among those approved by the Commission.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of Respondents, on such reasonable and customary terms 
and conditions as the Commission or a court may set. The trustee shall 
have the authority to employ, at the cost and expense of Respondents, 
and at reasonable fees, such consultants, accountants, attorneys, 
investment bankers, business brokers, appraisers, and other 
representatives and assistants as are necessary to carry out the 
trustee's duties and responsibilities. The trustee shall account for 
all monies derived from the divestiture and all expenses incurred. 
After approval by the Commission and, in the case of a court-appointed 
trustee, by the court, of the account of the trustee, including fees 
for his or her services, all remaining monies shall be paid at the 
direction of the Respondents, and the trustee's power shall be 
terminated. The trustee's compensation shall be based at least in 
significant part on a commission arrangement contingent on the 
trustee's divesting the Assets To Be Divested.
    8. Respondents shall indemnify the trustee and hold the trustee 
harmless against any losses, claims, damages, liabilities, or expenses 
arising out of, or in connection with, the performance of the trustee's 
duties, including all reasonable fees of counsel and other expenses 
incurred in connection with the preparation for, or defense of any 
claim, whether or not resulting in any liability, except to the extent 
that such liabilities, losses, damages, claims, or expenses result from 
misfeasance, gross negligence, willful or wanton acts, or bad faith by 
the trustee.
    9. If the trustee ceases to act or fails to act diligently, a 
substitute trustee shall be appointed in the same manner as provided in 
Paragraph III. A. of this Order.
    10. In the event the trustee is unable to divest the Assets To Be 
Divested, the trustee may divest such additional assets of Respondent 
Devro International, other than the Excluded Assets, as may be 
reasonably necessary to enable the trustee to divest the Assets To Be 
Divested.
    11. The Commission or, in the case of a court-appointed trustee, 
the court, may on its own initiative or at the request of the trustee 
issue such additional orders or directions as may be necessary or 
appropriate to accomplish the divestiture required by this Order.
    12. The trustee shall have no obligation or authority to operate or 
maintain the Assets To Be Divested.
    13. The trustee shall report in writing to Respondents and the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish divestiture.
IV
    It is further ordered That:
    A. Upon reasonable notice to Respondents from the acquirer approved 
by the Commission pursuant to this Order, Respondents shall provide 
such assistance to the acquirer as is reasonably necessary to enable 
the acquirer to manufacture, finish, distribute and market collagen 
sausage casings in substantially the same manner, quality, and quantity 
achieved by Devro Inc. and Devro Canada prior to the divestiture. Such 
assistance shall include reasonable consultation with knowledgeable 
employees of Respondents and training at the acquirer's facility for a 
period of time sufficient to ensure that the acquirer's personnel are 
appropriately trained in the manufacture, finishing, distribution, and 
marketing of collagen sausage casings in the manner carried on by Devro 
Inc. and Devro Canada prior to the divestiture. Respondents, however, 
shall not be required to continue providing such assistance for more 
than two (2) years from the date of the divestiture. Respondents may 
charge the acquirer at a rate no greater than their direct costs for 
providing such technical assistance.
    B. Respondents shall facilitate and not interfere with the hiring 
by the acquirer approved by the Commission of employees of Devro Inc. 
and Devro 

[[Page 65333]]
Canada who may desire to undertake employment.
    C. Pending divestiture of the Assets To Be Divested, Respondents 
shall take such actions as are reasonably necessary to maintain the 
viability and marketability of the Assets To Be Divested and to prevent 
their destruction, removal, wasting, deterioration or impairment of any 
kind, except for ordinary wear and tear.
V
    It is further ordered That Respondents shall continue to comply 
with all terms of the Agreement to Hold Separate attached to this Order 
and made a part hereof as Appendix II. Said Agreement shall remain in 
force and effect until the Assets To Be Divested have been divested as 
required by this Order.
VI
    It is further ordered That:
    Within thirty (30) days after the date this Order becomes final and 
every thirty (30) days thereafter until Respondents have fully complied 
with the provisions of Parts II, III, and IV of this Order, Respondents 
shall submit to the Commission a verified written report setting forth 
in detail the manner and form in which they intend to comply, are 
complying, or have complied with this Order. Respondents shall include 
in their compliance reports, among other things that are required from 
time to time, a full description of the efforts being made to comply 
with the Order, and their compliance with the terms and conditions of 
the Agreement To Condition Acquisition and the Agreement To Hold 
Separate, and set forth the monthly sales of Devro Inc. and Devro 
Canada during the preceding two months and compared to the monthly 
sales during the same months in the preceding calendar year. 
Respondents shall include in their compliance reports copies of all 
written communications, internal memoranda, and reports and 
recommendations concerning divestiture and the manner in which the 
Assets To Be Divested are being held separate.
VII
    It is further ordered That, for the purpose of determining or 
securing compliance with this Order, and subject to any legally 
recognized privilege, upon written request and reasonable notice, each 
Respondent shall permit any duly authorized representative of the 
Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of Respondent relating to any matters contained in this 
Order; and
    B. Upon five (5) days' notice to the appropriate Respondent, and 
without restraint or interference, to interview officers, directors, or 
employees of the Respondent, who may have counsel present.
VIII
    It is further ordered That Respondents shall notify the Commission 
at least thirty (30) days prior to any proposed change in the corporate 
respondents such as dissolution, assignment, sale resulting in the 
emergence of a successor corporation, or the creation or dissolution of 
subsidiaries or any other change in the corporations that may affect 
compliance obligations arising out of the Order.

Appendix I

Agreement To Condition Acquisition on Shareholder Approval of 
Divestiture and Retroactive Indemnification

    This Agreement To Condition Acquisition on Shareholder Approval 
of Divestiture and Retroactive Indemnification (``Agreement To 
Condition Acquisition'') is by and between Devro International plc, 
a corporation organized, existing, and doing business under and by 
virtue of the laws of Scotland, with its office and principal place 
of business at Moodiesburn, Chryston, Scotland; Devro Inc., a 
corporation organized, existing, and doing business under and by 
virtue of the laws of the State of Delaware with its office and 
principal place of business at Somerville, New Jersey; and the 
Federal Trade Commission (``Commission''), an independent agency of 
the United States Government, established under the Federal Trade 
Commission Act of 1914, 15 U.S.C. 41, et seq.
    Whereas Devro International plc entered into an agreement with 
Hillside Industries Incorporated for Devro International plc to 
acquire the outstanding voting securities of Teepak International 
Inc. (``Teepak''), a Delaware corporation (hereinafter ``the 
Acquisition'');
    Whereas Devro International plc and Devro Inc. manufacture, 
finish, distribute, and sell collagen sausage casings, and DCI Devro 
Canada Inc. (``Devro Canada'') finishes, distributes, and sells 
collagen sausage casings;
    Whereas Teepak, with principal offices located at Westchester, 
Illinois, among other things, also manufactures, finishes, 
distributes, and sells collagen sausage casings;
    Whereas the Commission is investigating the Acquisition to 
determine whether it would violate any statute enforced by the 
Commission;
    Whereas Devro International plc and Devro Inc. are willing (a) 
to enter into an Agreement Containing Consent Order requiring them 
to divest certain Assets To Be Divested, as defined in Part I of the 
proposed Consent Order of the Agreement Containing Consent Order, 
which include the collagen sausage casings business of Devro Inc., 
Devro Canada, and assets of Devro International plc related thereto 
(hereinafter ``the Divestiture''); (b) to enter into an Agreement To 
Hold Separate requiring that the Assets To Be Divested be held 
separate and apart from the remainder of the assets of Devro 
International pending their divestiture; and (c) to arrange and 
provide for the unlimited indemnification for the independent 
auditor/manager, retroactive as of the date of the appointment of 
the auditor/manager, pursuant to this Agreement To Condition 
Acquisition and the Agreement To Hold Separate (hereinafter ``the 
Retroactive Indemnification'');
    Whereas if the Commission accepts the attached Agreement 
Containing Consent Order, which would require the divestiture of the 
Assets To Be Divested, the Commission is required to place the 
Consent Order on the public record for a period of at least sixty 
(60) days and may subsequently withdraw such acceptance pursuant to 
the provisions of Rule 2.34 of the Commission's Rules of Practice 
and Procedure, 16 C.F.R. 2.34;
    Whereas the Commission is advised and concerned that, under the 
applicable law of the United Kingdom, Devro International will be 
unable to commit to, or be bound by, certain of the terms of the 
Agreement Containing Consent Order and the Agreement To Hold 
Separate unless and until those terms are approved by the 
shareholders of Devro International plc;
    Whereas the Commission is advised that, under the applicable law 
of the United Kingdom, Devro International plc will not be able to 
seek shareholder approval for (a) the Divestiture or (b) the 
Retroactive Indemnification, until after all of the terms of the 
Agreement Containing Consent Order, the Agreement To Hold Separate, 
and this Agreement To Condition Acquisition are made known to the 
shareholders of Devro International plc, which can only happen after 
the Commission accepts the Agreement Containing Consent Order for 
public comment, and the Agreement To Hold Separate and the Agreement 
To Condition Acquisition;
    Whereas the Commission will not accept for public comment an 
Agreement Containing Consent Order or an Agreement to Hold Separate 
that is not binding on the Proposed Respondents;
    Whereas the undersigned officials of Devro International plc and 
Devro Inc. and their attorneys at this time are authorized to make 
the following binding commitments:
    1. Devro International plc and Devro Inc. will seek shareholder 
approval for, at the same time, as part of a single package, and as 
a mutually contingent matter, (a) the Acquisition, (b) the 
Divestiture, and (c) the Retroactive Indemnification;
    2. the shareholder approval will be sought, and if 
unconditionally obtained, (a) the Acquisition, (b) the Divestiture, 
and (c) the Retroactive Indemnification will be fully authorized, no 
less than seven (7) days prior to the completion of the sixty (60) 
day public comment period during which the 

[[Page 65334]]
Agreement Containing Consent Order will have been placed on the public 
record;
    3. Devro International plc and Devro Inc. will advise the 
Commission's Bureau of Competition in writing, within twenty-four 
(24) hours, of all actions taken by the shareholders in connection 
with the effort to obtain approval for (a) the Acquisition, (b) the 
Divestiture, and (c) the Retroactive Indemnification; and
    4. Devro International plc, Devro Inc., and all entities 
controlled by either of them will not acquire, directly or 
indirectly, Teepak or any of its assets without unconditional 
shareholder approvals having been obtained and fully authorized for 
(a) the Divestiture and (b) the Retroactive Indemnification;
    Whereas Devro International plc represents to the Commission 
that (1) the directors of Devro International plc will officially 
recommend to the shareholders of Devro International plc that they 
approve (a) the Acquisition, (b) the Divestiture, and (c) the 
Retroactive Indemnification; (2) Devro International plc will use 
its best efforts to obtain shareholder approval for (a) the 
Acquisition, (b) the Divestiture, and (c) the Retroactive 
Indemnification; (3) in light of (1) and (2) above, it would be 
highly unusual if the shareholders of Devro International plc were 
to reject (a) the Acquisition, (b) the Divestiture, and (c) the 
Retroactive Indemnification; and (4) Devro International plc fully 
expects the shareholders of Devro International plc to approve (a) 
the Acquisition, (b) the Divestiture, and (c) the Retroactive 
Indemnification;
    Whereas shareholder approval of (a) the Acquisition, (b) the 
Divestiture, and (c) the Retroactive Indemnification will be 
presented to the shareholders for their approval as part of a single 
resolution, to be voted upon as a package only, and Devro 
International plc and Devro Inc. will not be authorized to 
consummate the Acquisition unless and until they are also authorized 
(a) to make the Divestiture and (b) to grant the Retroactive 
Indemnification;
    Whereas shareholder approval for (a) the Acquisition, (b) the 
Divestiture, and (c) the Retroactive Indemnification will be sought, 
and determined, prior to the time that the Commission will consider 
whether to accept the final Agreement Containing Consent Order under 
the Commission's Rules;
    Whereas the Commission is concerned that if an agreement is not 
reached regarding the nature and timing of the shareholder approval 
and the commitment on the part of Devro International and Devro Inc. 
not to consummate the acquisition unless and until the requisite 
shareholder approvals are obtained, appropriate divestiture 
resulting from any proceeding challenging the Acquisition might not 
be possible or might produce a less than effective remedy;
    Whereas the Commission is concerned that if the Acquisition is 
consummated, it will be necessary to preserve the Commission's 
ability to require the Divestiture and the continued viability and 
competitiveness of the Assets To Be Divested;
    Whereas Devro International plc and Devro Inc.'s entering into 
this Agreement shall in no way be construed as an admission by them 
that the Acquisition is illegal;
    Whereas Devro International plc and Devro Inc. understand that 
no act or transaction contemplated by this Agreement shall be deemed 
immune or exempt from the provisions of the antitrust laws or the 
Federal Trade Commission Act by reason of anything contained in this 
Agreement;
    Now, therefore, the parties agree, upon understanding that the 
Commission has not yet determined whether the Acquisition will be 
challenged, and in consideration of the Commission's agreement that, 
unless the Commission determines to reject the Consent Order, it 
will not seek further relief from Devro International plc or Devro 
Inc. with respect to the Acquisition, except that the Commission may 
exercise any and all rights to enforce this Agreement, the Agreement 
to Hold Separate, and the Consent Order to which this Agreement is 
annexed and made a part thereof, as follows:
    1. The Acquisition by Devro International plc or Devro Inc. of 
Teepak is contingent upon shareholder approval.
    2. Devro International plc and Devro Inc. will not seek 
shareholder approval for the Acquisition without, at the same time, 
and as part of the same package, also seeking mutually contingent 
shareholder approval for (a) the Divestiture and (b) the Retroactive 
Indemnification.
    3. Unconditional shareholder approval will be sought, and if 
obtained, be fully authorized, no less than seven (7) days prior to 
the completion of the sixty (60) day public comment period during 
which the Agreement Containing Consent Order will have been placed 
on the public record.
    4. In no event will Devro International plc or Devro Inc. or any 
entity controlled by either acquire, directly or indirectly, Teepak 
or any of its assets without unconditional shareholder approvals 
having been obtained and fully authorized for (a) the Divestiture 
and (b) the Retroactive Indemnification.
    5. Unless and until unconditional shareholder approval is 
obtained for (a) the Acquisition, (b) the Divestiture, and (c) the 
Retroactive Indemnification, Devro International plc and Devro Inc., 
or any entity controlled by either, will not acquire, directly or 
indirectly, Teepak or any of its assets.
    6. At such time as the shareholders of Devro International may 
unconditionally approve (a) the Acquisition, (b) the Divestiture, 
and (c) the Retroactive Indemnification, Devro International and 
Devro Inc., by and through their authorized representatives, shall 
notify the Commission's Bureau of Competition, in writing, within 
twenty-four (24) hours, of the action taken.
    7. Devro International and Devro Inc., by and through their 
signatories, warrant that they are fully authorized to enter into 
the terms of this Agreement to Condition Acquisition and to bind 
Devro International plc and Devro Inc. to all of its terms and 
conditions.
    8. This Agreement shall be binding when approved by the 
Commission.

Appendix II

Agreement to Hold Separate

    This Agreement to Hold Separate (``Agreement'') is by and 
between Devro International plc, a corporation organized, existing, 
and doing business under and by virtue of the laws of Scotland, with 
its office and principal place of business at Moodiesburn, Chryston, 
Scotland; Devro Inc., a corporation organized, existing, and doing 
business under and by virtue of the laws of the State of Delaware 
with its office and principal place of business at Somerville, New 
Jersey; and the Federal Trade Commission (``Commission''), an 
independent agency of the United States Government, established 
under the Federal Trade Commission Act of 1914, 15 U.S.C. 41, et 
seq.
    Whereas Devro International plc entered into an agreement with 
Hillside Industries Incorporated for Devro International plc to 
acquire the outstanding voting securities of Teepak International, 
Inc. (``Teepak''), a Delaware corporation (hereinafter 
``Acquisition'');
    Whereas Devro International plc and Devro Inc. manufacture, 
finish, distribute, and sell collagen sausage casings, and DCI Devro 
Canada Inc. (``Devro Canada'') finishes, distributes, and sells 
collagen sausage casings;
    Whereas Teepak, with principal offices located at Westchester, 
Illinois, among other things, also manufactures, finishes, 
distributes, and sells collagen sausage casings;
    Whereas the Commission is investigating the Acquisition to 
determine whether it would violate any statute enforced by the 
Commission;
    Whereas if the Commission accepts the attached Agreement 
Containing Consent Order, which would require the divestiture of 
certain Assets To Be Divested, as defined in Part I of the Consent 
Order, which include the collagen sausage casings business of Devro 
Inc., Devro Canada, and assets of Devro International plc related 
thereto, the Commission is required to place the Consent Order on 
the public record for a period of at least sixty (60) days and may 
subsequently withdraw such acceptance pursuant to the provisions of 
Section 2.34 of the Commission's Rules of Practice and Procedure, 16 
C.F.R. 2.34;
    Whereas the Commission is concerned that if an understanding is 
not reached preserving the status quo ante of the Assets To Be 
Divested during the period prior to the acceptance of the final 
Consent Order by the Commission, after the 60-day notice period, 
divestiture resulting from any proceeding challenging the 
Acquisition might not be possible or might produce a less than 
effective remedy;
    Whereas the Commission is concerned that if the Acquisition is 
consummated, it will be necessary to preserve the Commission's 
ability to require the divestiture of the Assets To Be Divested and 
the continued viability and competitiveness of the Assets To Be 
Divested;
    Whereas the purpose of this Agreement and the Consent Order is 
to: 

[[Page 65335]]

    1. Preserve and maintain the Assets To Be Divested as a viable, 
competitive and independent business engaged in the manufacture, 
finishing, distribution and sale of collagen sausage casings pending 
divestiture;
    2. Limit the potential for interim competitive harm during the 
period between the Acquisition and the required divestiture; and
    3. Remedy any anticompetitive effects of the Acquisition;
    Whereas Devro International plc and Devro Inc.'s entering into 
this Agreement shall in no way be construed as an admission by them 
that the Acquisition is illegal;
    Whereas Devro International plc and Devro Inc. understand that 
no act or transaction contemplated by this Agreement shall be deemed 
immune or exempt from the provisions of the antitrust laws or the 
Federal Trade Commission Act by reason of anything contained in this 
Agreement;
    Now, therefore, the parties agree, upon understanding that the 
Commission has not yet determined whether the Acquisition will be 
challenged, and in consideration of the Commission's agreement that, 
unless the Commission determines to reject the Consent Order, it 
will not seek further relief from Devro International plc or Devro 
Inc. with respect to the Acquisition, except that the Commission may 
exercise any and all rights to enforce this Agreement, the Agreement 
to Condition Acquisition, and the Consent Order to which this 
Agreement is annexed and made a part thereof, as follows:
    1. Devro International plc and Devro Inc. agree to execute the 
Agreement Containing Consent Order and be bound by the Consent 
Order.
    2. Devro International plc and Devro Inc. agree to execute and 
be bound by the Agreement To Condition Acquisition.
    3. Devro International plc and Devro Inc. agree that until the 
earlier of the dates listed in subparagraphs 3(a) and 3(b) of this 
Paragraph, they will comply with the provisions of Paragraph 4 of 
this Agreement:
    (a) Three (3) business days after the Commission withdraws its 
acceptance of the Consent Order pursuant to the provisions of 
Commission Rule 2.34, 16 C.F.R. 2.34; or
    (b) The day after the divestiture required by the Consent Order 
has been completed.
    4. To ensure the complete independence and viability of Devro 
Inc., Devro Canada, and the Assets To Be Divested, and to further 
ensure that no competitive information is exchanged between Devro 
International plc and Devro Inc., Devro Canada, and the persons 
responsible for maintaining and operating the Assets To Be Divested, 
Devro International plc shall hold Devro Inc., Devro Canada, and the 
Assets To Be Divested, as defined in the Consent Order, separate and 
apart from all of its other operations, on the following terms and 
conditions:
    (a) Devro International plc will appoint three persons to manage 
and maintain the business and assets of Devro Inc., Devro Canada, 
and the Assets To Be Divested. These persons (``the Management 
Team'') shall agree to be bound by this Agreement and shall manage 
Devro Inc., Devro Canada, and the Assets To Be Divested independent 
of the management of Devro International plc's other business 
operations, including those of Teepak, after Devro International plc 
acquires Teepak. The persons on the Management Team shall not be 
involved in any way in the manufacture, finishing, distribution, or 
sale of sausage casings by Devro International plc or Teepak. The 
management team shall conduct the business operations of Devro Inc., 
Devro Canada, and the Assets To Be Divested.
    (b) The Management Team, in its capacity as such, shall report 
directly and exclusively to an independent auditor/manager, to be 
appointed by Devro International plc. The independent auditor/
manager, who shall not be an employee or agent of Devro 
International plc or a person likely to be an employee or agent of 
Devro International plc within two years of the divestiture, shall 
have expertise in the manufacture, finishing, distribution, or sale 
of collagen sausage casings. The independent auditor/manager shall 
agree to be bound by this Agreement and shall have exclusive control 
over the operations of Devro Inc., Devro Canada, and the Assets To 
Be Divested, with responsibility for their management and 
maintaining their independence. The independent auditor/manager 
shall not be involved in any way in the business of manufacturing, 
finishing, distribution, or sale of sausage casings by Devro 
International plc or Teepak.
    (c) Devro International plc shall not exercise direction or 
control over, or influence directly or indirectly, the independent 
auditor/manager, or the Management Team, or Devro Inc., Devro 
Canada, or the Assets To Be Divested, other than as may reasonably 
be necessary to assure compliance with this Agreement and with all 
applicable laws.
    (d) Devro International plc shall not change the composition of 
the Management Team without the consent of the independent auditor/
manager.
    (e) Devro International plc shall maintain the viability, 
competitiveness, and marketability of the Assets To Be Divested and 
shall neither cause nor permit the destruction, removal, wasting, 
deterioration, or impairment of the Assets To Be Divested, except as 
may occur in the ordinary course of business and except for ordinary 
wear and tear, and shall not sell, transfer, encumber (other than in 
the normal course of business), or otherwise impair their viability, 
competitiveness, or marketability.
    (f) Except for the Management Team, Devro International plc 
shall not permit any Devro International plc Board Member, officer, 
director, employee, or agent to be involved in the business 
operations of the Assets To Be Divested.
    (g) Except as required by law, and except to the extent that 
necessary information is exchanged in the course of evaluating the 
Acquisition, complying with requirements of the London Stock 
Exchange and independent auditors, defending investigations or 
defending or prosecuting litigation, negotiating agreements to 
divest assets, or complying with this Agreement or the Consent 
Order, Devro International plc shall not receive or have access to, 
or use or continue to use, any material confidential information 
about Devro Inc., Devro Canada, or the Assets To Be Divested, in 
connection with the operation of Devro International plc or its 
operation of the Teepak business. ``Material confidential 
information'' means competitively sensitive or proprietary 
information not in the public domain, including, but not limited to, 
customer lists, price lists, marketing methods, patent rights, 
knowhow, technologies, processes, process improvements or other 
trade secrets or confidential business information.
    (h) Devro International plc, Devro Inc. and Devro Canada shall 
circulate to all employees of Devro Inc. and Devro Canada, and 
display in a conspicuous place at Devro Inc. and Devro Canada 
manufacturing facilities, notice of this Agreement to Hold Separate 
and the proposed Consent Order in the form attached hereto as 
Attachment A.
    (i) Devro International plc shall give funds to the Management 
Team for all capital expenditures relating to Devro Inc. and Devro 
Canada previously planned or approved by Devro International plc to 
the extent Devro Inc. does not generate sufficient cash flow to fund 
such capital expenditures. The Management Team shall expend the 
funds for these previously planned capital expenditures.
    (j) The Management Team shall take all steps reasonably 
necessary to optimize the profitable operations and continued 
viability of Devro Inc., Devro Canada, and the Assets To Be 
Divested, including, but not limited to:
    (1) Paying all direct costs and indirect overheads relating to 
the business of Devro Inc., Devro Canada, and the Assets To Be 
Divested;
    (2) Making available funds for advertising and other marketing 
and promotional activities at no less than the level for the 
comparable period in the preceding calendar year;
    (3) Providing no less than the same level of sales commissions 
or incentives for sales personnel as were provided for the 
comparable period in the preceding calendar year;
    (4) Maintaining the same level of resources involved in sales 
and marketing as was the case in the normal course of business prior 
to the Acquisition; and
    (5) Expending funds sufficient to perform all reasonably 
necessary routine maintenance to, and replacements of, the Assets To 
Be Divested.
    In the event that Devro Inc., Devro Canada, and the Assets To Be 
Divested do not generate sufficient cash flow to fund the activities 
reasonably necessary to optimize the profitable operations and 
viability of Devro Inc., Devro Canada, and the Assets To Be 
Divested, Devro International plc shall advance such sums as are 
reasonably necessary to pay for same, to be repaid by the acquirer 
at no interest within two (2) years.
    (k) The compensation and expenses of the independent auditor/
manager shall be the responsibility of Devro International plc. 
Devro Inc., Devro Canada, and the Assets To Be Divested shall not be 
charged by Devro International plc with those costs and expenses.
    (l) Devro International plc shall indemnify the independent 
auditor/manager against any 

[[Page 65336]]
losses or claims of any kind that might arise out of his or her 
involvement under this Agreement, not to exceed $5 million, except 
to the extent that such losses or claims result from misfeasance, 
gross negligence, willful or wanton acts or bad faith; provided 
however, upon shareholder approval of the unlimited indemnification 
of the auditor/manager, retroactive as of the date of the 
appointment of the auditor/manager, the $5 million liability 
limitation shall become null and void, under the terms of the 
Agreement to Condition Acquisition.
    (m) If the independent auditor/manager fails to act, or ceases 
to act, diligently, a substitute auditor/manager shall be appointed 
by Devro International plc in the manner provided in Paragraph 4 (b) 
of this Agreement.
    (n) The independent auditor/manager shall have access to, and be 
informed about, the names of the companies who may inquire about, or 
seek or propose to buy, Devro Inc., Devro Canada, or the Assets To 
Be Divested. Devro International plc may require the independent 
auditor/manager to sign a confidentiality agreement prohibiting the 
auditor/manager from disclosing any material confidential 
information obtained as a result of his or her role as independent 
auditor/manager, to anyone other than the Commission.
    (o) All material transactions other than those in the ordinary 
course of business, if not precluded by this Paragraph, shall be 
subject to a majority vote of the Management Team. In the event of a 
tie vote, the independent auditor/manager shall cast the deciding 
vote.
    5. Should the Federal Trade Commission seek in any proceeding to 
compel Devro International plc or Devro Inc. to divest any of the 
Assets To Be Divested, or any additional assets, as provided in the 
Consent Order, or to seek any other injunctive or equitable relief 
for any failure to comply with the Consent Order or this Agreement, 
as defined in the draft complaint attached to the Agreement 
Containing Consent Order, Devro International plc and Devro Inc. 
shall not raise any objection based upon the expiration of the 
applicable Hart-Scott-Rodino Antitrust Improvements Act waiting 
period or the fact that the Commission permitted the Acquisition. 
Devro International plc and Devro Inc. also waive all their rights 
to contest the validity of this Agreement.
    6. To the extent that this Agreement requires Devro 
International plc or Devro Inc. to take, or prohibits them from 
taking, certain actions that otherwise may be required or prohibited 
by contract, Devro International plc and Devro Inc. shall abide by 
the terms of this Agreement and the Consent Order and shall not 
assert as a defense such contract requirements in a civil penalty 
action brought by the Commission to enforce the terms of this 
Agreement or Consent Order.
    7. For the purpose of determining or securing compliance with 
this Agreement, subject to any legally recognized privilege, and 
upon written request with reasonable notice to counsel, Devro 
International plc and Devro Inc. shall permit any duly authorized 
representative or representatives of the Commission:
    (a) Access during the office hours of Devro International plc 
and Devro Inc., and in the presence of counsel, to inspect and copy 
all books, ledgers, accounts, correspondence, memoranda, and other 
records and documents in their possession or under their control 
relating to compliance with this Agreement; and
    (b) Upon five (5) days' notice to counsel, and without restraint 
or interference from counsel, to interview officers or employees of 
Devro International plc and Devro Inc., who may have counsel 
present, regarding any such matters.
    8. This Agreement shall not be binding until approved by the 
Commission. Devro International plc and Devro Inc. acknowledge that 
from the date they sign this Agreement until such time as the 
Commission may approve this Agreement, they will undertake to 
maintain the Assets To Be Divested in a viable condition.
    9. Subsequent to acceptance for public comment of the Agreement 
Containing Consent Order by the Commission and after the 
unconditional approval by the shareholders of Devro International 
obtained not less than seven (7) days prior to the end of the 60-day 
public comment period, of (a) the Acquisition, (b) the divestiture 
of the Assets To Be Divested under the terms of the Agreement 
Containing Consent Order, and (c) the retroactive indemnification, 
under the definitions and terms of the Agreement To Condition 
Acquisition and this Agreement to Hold Separate, with written notice 
having been given to the Commission's Bureau of Competition, in 
writing, within twenty-four (24) hours, of the unconditional 
approval by the shareholders, Devro International plc may consummate 
the Acquisition.
    10. This Agreement shall be binding when approved by the 
Commission.
    11. Devro International plc and Devro Inc., by and through their 
signatories, warrant that they are fully authorized to enter into 
the terms of this Agreement to Hold Separate and to bind Devro 
International plc and Devro Inc. to all of its terms and conditions.

Attachment A

Important Notice

    As you know, Devro International plc has entered into an agreement 
with the Federal Trade Commission (FTC) in connection with the proposed 
acquisition of Teepak International, Inc. Under the terms of the 
agreement with the FTC, Devro International must sell Devro Inc. and 
DCI Devro Canada Inc. to a third party that is acceptable to the FTC. 
We anticipate that this will occur within the next several months.
    The agreement with the FTC also requires that, until Devro Inc. and 
Devro Canada are sold, Devro International must preserve and maintain 
them as competitive and independent businesses separate from Devro 
International.
    To ensure that Devro Inc. and Devro Canada are kept separate from 
Devro International, a three-person management team, composed of 
________________, ________________, and ________________, will assume 
the management of Devro Inc. and Devro Canada. This management team, 
which will operate totally independently of Devro International, will 
report directly and exclusively to ________________, an independent 
auditor/manager.
    The effect of Devro International's agreement with the FTC is that, 
for all intents and purposes, Devro International will no longer be 
playing any role in the management and operation of Devro Inc. and 
Devro Canada. Until such time as the future owners of Devro Inc. and 
Devro Canada are determined, it is the responsibility of every employee 
of Devro Inc. and Devro Canada to cooperate with the new management 
team and to help to preserve Devro Inc. and Devro Canada as competitive 
and independent businesses.

Analysis to Aid Public Comment on the Provisionally Accepted 
Consent Order

    The Federal Trade Commission has accepted for public comment from 
Devro International plc and its United States subsidiary, Devro Inc. 
(collectively referred to as ``Devro'') an Agreement Containing Consent 
Order. This agreement has been placed on the public record for sixty 
(60) days for receipt of comments from interested persons.
    Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the consent order in the 
agreement.
    According to the draft of complaint that the Commission intends to 
issue, Devro and Teepak International, Inc. (``Teepak'') are 
competitors, nationwide and worldwide, in the manufacture of collagen 
sausage casings. Sausage casings are the skins into which various 
sausage-meat products are stuffed before being cooked or smoked. Among 
the sausage products using collagen sausage casings are beef jerkys, 
small sausages, and frankfurters. Unlike other types of synthetic 
sausage casings, such as fibrous sausage casings, used principally to 
make salamis and hams, and cellulose sausage casings, used principally 
to make skinless frankfurters, most collagen sausage casings are 
edible. Edible sausage casings produce a ``bite'' to a sausage when 
eaten.
    The Commission's draft of complaint states that Devro entered into 
an agreement with Hillside Industries, Inc., 

[[Page 65337]]
the current owners of Teepak, for Devro to acquire all of Teepak for 
approximately $135 million. The Commission is concerned that the 
proposed merger would eliminate substantial competition between Devro 
and Teepak, increase concentration in the highly concentrated collagen 
sausage casings markets, and lead to higher prices and fewer customer 
services. The Commission stated it has reason to believe that the 
proposed acquisition would have anticompetitive effects and be in 
violation of Section 7 of the Clayton Act and Section 5 of the Federal 
Trade Commission Act.
    According to the Commission's draft complaint, the anticompetitive 
effects of the proposed acquisition will be felt in an all-collagen 
sausage casings product market as well as in an edible collagen sausage 
casings product market, in both the United States and the world as a 
whole. In the United States all-collagen sausage casings and edible 
sausage casings markets, only four firms sell collagen sausage casings, 
and Devro and Teepak are the nation's top two producers. The proposed 
acquisition would increase the Herfindahl-Hirschman Index (``HHI''), 
the customary measure of industry concentration, by a substantial 
amount. For example, in the United States all-collagen sausage casings 
market, the HHI will increase by approximately 2000 points and produce 
an industry concentration of approximately 4700 points. In the United 
States edible collagen sausage casings market, the HHI would increase 
by approximately 3300 points and produce an industry concentration of 
approximately 6800 points. In the world all-collagen and edible sausage 
casings markets, the proposed acquisition would affect concentration as 
measured by four-firm concentration and the HHI by very similar orders 
of magnitude.
    The Agreement Containing Consent Order, if finally issued by the 
Commission, would settle all of the charges alleged in the Commission's 
complaint. Under the terms of the proposed consent order, Devro will be 
required to divest all of its collagen sausage casings business assets 
in the United States and Canada (``Devro North America'') to an 
acquirer acceptable to the Commission. Devro North America consists 
primarily of a collagen sausage casings manufacturing plant in 
Somerville, New Jersey, and a collagen sausage casings finishing plant 
in Markham, Ontario, Canada. Because the Canadian and United States 
facilities constitute a single operation, Devro is required to divest 
the Canadian facility along with the United States plant. This will 
insure that the divested assets will continue to operate as a viable, 
competitive business. Devro will also be required to make available to 
the acquirer of these assets, on a non-exclusive basis, any new 
technology that Devro may develop related to collagen sausage casings 
for a period of two (2) years following the final entry of the order.
    Devro will be required to complete the required divestiture within 
three (3) months of the Commission's final issuance of the consent 
order. In the event Devro does not divest Devro North America to an 
acquirer acceptable to the Commission in the requisite time, procedures 
for the appointment of a trustee to sell the assets have been agreed to 
and will be triggered.
    An additional feature of the consent order accepted for public 
comment is that it limits to some extent the class of potential 
acquirers for Teepak that would be acceptable to the Commission. Firms 
already producing collagen sausage casings for sale in the United 
States are excluded as prospective acquirers of Devro North America. 
The purpose of this exclusion is to preclude Devro from attempting to 
divest Devro North America to a competitor where there are likely to be 
further anticompetitive effects.
    Accompanying the Agreement Containing Consent Order are two 
ancillary agreements. The first is an Agreement to Condition 
Acquisition and the second is an Agreement to Hold Separate.
    The Agreement to Condition Acquisition requires that Devro may not 
acquire Teepak until Devro is authorized by its shareholders to divest 
Devro North America and related assets. The purpose of this agreement 
is to ensure that the Commission, through the appointed trustee, will 
have an enforceable divestiture remedy available should Devro acquire 
Teepak and not divest Devro North America. For reasons related to 
United Kingdom procedure and practice, Devro believes it cannot seek 
shareholder approval for the proposed acquisition of Teepak, or for the 
proposed divestiture of Devro North America, unless and until the 
Commission accepts the Agreement Containing Consent Order for public 
comment. Under the terms of the Agreement to Condition Acquisition, 
Devro is required to seek shareholder approval of the divestiture at 
the same time that it seeks shareholder approval of the acquisition, 
and these approvals must be obtained unconditionally and at least 7 
days before the end of the 60-day public comment period. Devro will not 
be permitted to acquire Teepak unless it has shareholder approval to 
divest Devro North America. Also, when the Commission decides whether 
to issue the final order, the Commission will know whether the 
conditions have been satisfied. If the Devro shareholders reject the 
proposed resolution that, if passed, would authorize Devro to acquire 
Teepak and divest Devro North America, no anticompetitive acquisition 
will occur and the Commission will not issue the final consent order.
    The Agreement to Hold Separate requires that Devro preserve Devro 
North America's assets and operate Devro North America as a separate, 
ongoing business apart from Devro and Teepak. The purpose of this 
agreement is to help insure that the competitive value of Devro North 
America will be maintained after Devro acquires Teepak but before the 
assets are actually divested.
    By accepting the consent order subject to final approval, the 
Commission anticipates that the competitive problems alleged in the 
complaint will be resolved. The purpose of this analysis is to invite 
and facilitate public comment concerning the consent order. It is not 
intended to constitute an official interpretation of the agreement and 
proposed order or in any way to modify their terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
Concurring Statement of Commissioner Mary L. Azcuenaga in Devro 
International PLC

[File No. 951-0072]

    Although I have voted to accept the proposed consent order 
requiring divestiture for public comment, I have reservations about the 
provision of the order that excludes some incumbent firms from 
eligibility to acquire the assets to be divested.1 According to 
the Notice to Aid Public Comment, the ``purpose of this exclusion is to 
preclude Devro from attempting to divest Devro North American to a 
competitor where there are likely to be further anticompetitive 
effects.'' Since any proposed divestiture under the order must be 
approved by the Commission,2 an attempt by Devro to make an 
anticompetitive divestiture likely would be fruitless. In addition, 
Devro would risk appointment under the order of a trustee to accomplish 


[[Page 65338]]
divestiture and incurring civil penalties for failure to make a timely 
divestiture.

    \1\ Order Paragraph II.C of the proposed order states that the 
proposed acquirer of the assets to be divested ``shall not be a firm 
that has been engaged in the manufacture of collagen sausage casings 
for sale, other than to itself, in the United States.''
    \2\ Order Paragraph II.D.
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    Attempts to define in advance the field of eligible acquirers under 
a divestiture order are unnecessary, at best, potentially inefficient 
and possibly even anticompetitive. It is an inefficient use of 
resources to attempt to assess in advance the competitive effects of a 
transaction that Devro might or might not propose (especially if the 
exclusion covers more than one firm), even if the transaction-specific 
information necessary to our merger analysis were available. As a 
practical matter, any such exclusions will be based on something less 
than an adequate factual examination of the various possible proposed 
divestitures and will necessarily involve the risk of excluding firms 
that might have been acceptable and even procompetitive acquirers. That 
risk is unnecessary and should be unacceptable in view of the 
requirement to obtain the Commission's approval before any divestiture 
can take place and the availability of other sanctions for failing to 
make a timely divestiture.

[FR Doc. 95-30834 Filed 12-18-95; 8:45 am]
BILLING CODE 6750-01-P