Ardagh Glass Finance plc - Irish Stock Exchange

Liability Company as General Partner). Consequently, the grant of guarantees by these companies is
subject to certain provisions of the GmbH-Gesetz (Limited Liability Company Act).
Sections 30 and 31 of the GmbH-Gesetz (‘‘Sections 30 and 31’’) prohibit a GmbH from disbursing
its assets to its shareholders to the extent that the amount of the GmbH’s net assets (i.e., assets minus
liabilities and liability reserves) is or would fall below the amount of its stated share capital. Guarantees
issued by a GmbH (and under certain conditions by a GmbH & Co. KG) in order to guarantee
liabilities of a direct or indirect parent or sister company are considered disbursements under
Sections 30 and 31. Therefore, in order to enable German subsidiaries to guarantee liabilities of a
direct or indirect parent or sister company without the risk of violating Sections 30 and 31, it is
standard market practice for guarantees to contain so-called ‘‘limitation language’’ in relation to
subsidiaries in the legal form of a GmbH or a GmbH & Co. KG incorporated or established in
Germany. Pursuant to such limitation language, the beneficiaries of the guarantees agree to enforce the
guarantees against the German subsidiary only to the extent that such enforcement does not result in
the subsidiary’s net assets falling below its stated share capital or, in case of a GmbH & Co. KG, the
stated share capital of its general partner. Accordingly, the documentation in relation to the
Guarantees, to the extent they concern the German Subsidiary Guarantors, contain such limitation
language and such Guarantees are limited in the manner described.
Hardening Periods and Fraudulent Transfer
In the event that insolvency proceedings with respect to a German Subsidiary Guarantor, which
would most likely be based on and governed by the insolvency laws of Germany, the Guarantee
provided by that entity could be subject to potential challenges by an insolvency administrator
(Insolvenzverwalter) under the rules of avoidance as set out in the German Insolvency Code
(Insolvenzordnung).
Based on these rules, an insolvency administrator may challenge transactions that are deemed
detrimental to insolvency creditors and were effected prior to the commencement of insolvency
proceedings. Such transactions can include the payment of any amounts to the holders of the Senior
Notes as well as granting them any security interest or guarantee. The administrator’s right to challenge
transactions can, depending on the circumstances, extend to transactions during the ten-year period
prior to the filing of the petition for commencement of insolvency proceedings. In the event such a
transaction is successfully avoided, the holders of the Senior Notes would be under an obligation to
repay the amounts received or to waive the Guarantee.
In particular, an act (Rechtshandlung) or a transaction (Rechtsgeschäft) (which term includes the
issuance of guarantees as well as the repayment of debt) may be avoided in the following cases:
• any act granting an insolvency creditor, or enabling an insolvency creditor to obtain, security or
satisfaction (i) if such act was performed during the last three months prior to the filing of the
petition for the commencement of the insolvency proceedings and the debtor was illiquid
(zahlungsunfähig) at the time when such act was taken and the creditor had knowledge of such
illiquidity at such time, or (ii) if such act was performed after the filing of the petition for the
commencement of the insolvency proceedings and the creditor had knowledge of the illiquidity
of the debtor or the filing of such petition;
• any act granting an insolvency creditor, or enabling an insolvency creditor to obtain, security or
satisfaction to which such creditor was not entitled or which was granted or obtained in a form
or at a time to which or at which such creditor was not entitled to such security or satisfaction if
(i) such act was performed during the last month prior to the filing of the petition for the
commencement of the insolvency proceedings or after such filing, (ii) such act was performed
during the second or third month prior to the filing of the petition and the debtor was illiquid at
such time, or (iii) such act was performed during the second or third month prior to the filing of
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