Exhibit 10.2
Letter of Intent (Reynolds Metals Company, Inc.)
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REYNOLDS METALS COMPANY
P. O. BOX 27003 - RICHMOND, VIRGINIA 23261-7003
June 19, 1998
Mr. Maurice C. Mitchell
President and Chief Operating Officer
Avalon-Borden Companies, Inc.
777 South Lawrence Street, Suite 100
Montgomery, Alabama 36104
Dear Mr. Mitchell:
With reference to your letter dated March 18, 1998 to the undersigned, we
are pleased to confirm the intention of Reynolds Metals Company ("Reynolds") to
sell to Avalon-Borden Companies, Inc. or to one of its affiliates acceptable to
Reynolds (in either case, "Buyer") Reynolds' Alloys rolling mill and its Alabama
and Southern Reclamation facilities and Sheffield coil coating facility (the
rolling mill and such other facilities being referred to collectively as the
"Facilities") and the operations conducted (or in the case of the Southern
Reclamation facility, formerly conducted) at the Facilities (the "Business") on
the following terms and conditions (the "Transaction"):
1. PURCHASED ASSETS.
(a) Reynolds will sell to Buyer substantially all of the assets used
or held for use exclusively in the Business and at the Facilities (except
as noted below), including real estate owned by Reynolds upon which the
Facilities are situated; furniture; fixtures; equipment; construction in
progress; repair parts and spares; Reynolds' rights under contract and
commitments of the Business (including contracts and commitments between
Reynolds and its affiliates and between Reynolds' Mill Products Division
and Reynolds' other divisions); accounts receivable (including internal
receivables); prepaid expenses; and inventory (collectively, the "Purchased
Assets"), free and clear of any and all liens, claims, charges, exceptions
or encumbrances except for (x) the Liabilities and (y) certain permitted
liens as agreed by the parties (e.g., liens related to the industrial
development bond financings referred to in the next sentence and statutory
liens for taxes not yet due and liens of carriers, warehousemen and the
like for sums not yet due). (Buyer acknowledges that the real property
underlying certain of the Facilities is leased by Reynolds, as lessee,
under industrial development
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bond financings that, at Buyer's option, will be paid off by Reynolds
before Closing or assumed by Buyer at Closing (as herein defined)).
(b) Notwithstanding the preceding subparagraph (a), and for avoidance
of doubt, the Purchased Assets will not include (i) cash; (ii) accounts
receivable that are past due ("Past Due Receivables") as of the Closing
Date (as herein defined); (iii) the site of Reynolds' former Listerhill
reduction plant; (iv) retention ponds no longer in use; (v) surplus real
estate; (vi) the Manufacturing Technology Laboratory facilities; (vii)
assets located at Reynolds' headquarters in Richmond, Virginia; (viii) the
trademarks REYNOLDS and Knight, Horse and Dragon Design; or the names
"Reynolds", "Reynolds Metals Company", "Reynolds Aluminum" or any variation
thereof; or any trademark containing REY, REYNO or REYNOLDS or a Knight,
Horse and Dragon design (collectively, the "Reynolds Marks"); or (ix)
assets held in or for any pension, health care or other employee benefit
plan.
2. LIABILITIES. Buyer will assume the following liabilities of Reynolds
with respect to the Business (collectively, the "Liabilities"):
(a) all current liabilities (consisting of trade payables, internal
payables and other accruals) shown on the Alloys Complex Statement of
Assets and Liabilities attached as Exhibit A, as adjusted for transactions
in the ordinary course through the Closing Date;
(b) post-Closing liabilities under Reynolds' collective bargaining
agreements (the "CBA's") covering employees of the Business; provided, that
Buyer will provide, under plans or contracts of Buyer, post-retirement
medical benefits, pension benefits and all other employee benefits required
under the CBA's substantially identical to those currently provided by
Reynolds; and further provided, that Reynolds shall retain liability for
post-retirement medical benefits payable under Reynolds' retiree medical
plans only for those employees of the Business eligible as of the Closing
Date (as herein defined) for such coverage under Reynolds' retiree medical
plans, as well as all pension benefits accrued prior to the Closing Date.
In the event the Closing Date falls within a Calendar Quarter, as such
terms is used in Reynolds' pension plans, Reynolds acknowledges that the
accrued pension benefits for active participants will be equal to the
benefits that would have been payable to such participants if they had
worked for Reynolds through the end of such Calendar Quarter;
(c) post-Closing obligations under executory contracts (including
without limitation supply agreements, purchase and sale commitments and
equipment leases), or applicable portions thereof, relating exclusively to
the Business; and
(d) post-Closing obligations under environmental and other permits
transferred to Buyer and covering the Facilities and/or the Business.
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3. CLOSING; PURCHASE PRICE; POST-CLOSING ADJUSTMENT; INTERNAL RECEIVABLES
AND PAYABLES; OTHER RECEIVABLES.
(a) We anticipate that we will sign the Agreement (as herein defined)
on or before August 31, 1998 and that closing of the Transaction (the
"Closing") will take place on September 30, 1998. The date on which the
Closing occurs is referred to in this letter as the "Closing Date".
(b) Buyer will pay to Reynolds in cash for the Purchased Assets the
sum (the "Purchase Price") of (i) $92,160,000 plus (ii) the value, as of
the Closing Date, of Net Working Capital. "Net Working Capital" means the
difference between (x) current assets included in the Purchased Assets and
(y) current liabilities included in the Liabilities. The parties
acknowledge that working capital for the Business as of March 31, 1998 is
$226,818,000, and that Net Working Capital as of March 31, 1998 is
$211,452,000 (i.e., $226,818,000 minus $15,366,000 in Past Due
Receivables). Buyer will pay the Purchase Price at Closing, with the amount
payable at Closing attributable to Net Working Capital to be based on a
statement of Net Working Capital prepared by Reynolds as of the most recent
month-end for which such financial information is available.
(c) The Purchase Price will be subject to post-Closing adjustment (the
"Post-Closing Adjustment") for changes through the Closing Date in the
value of Net Working Capital, such changes to be determined from a
statement of Net Working Capital as of the Closing Date (the "Closing
Statement") prepared by Reynolds and subject to approval by Buyer. The
value of inventory reflected in the Closing Statement will be based on a
physical inventory taken by Reynolds and observed by Buyer, if desired, as
of the Closing Date. For purposes of valuing inventory, the costs to be
used by Reynolds will be based on Reynolds' standard costs on a FIFO basis
as of the Closing Date, which costs shall have been derived from Reynolds'
books and records and compiled consistent with Reynolds' past practices and
accounting policies; provided, that work-in-process and finished goods
metal that has been held more than 90 days and is not saleable in the
ordinary course of business will be written down to scrap value. The party
required to pay the Post-Closing Adjustment will pay it to the other party
in cash, together with interest computed from the Closing Date to the date
of such payment at The Bank of New York's prime rate of interest as in
effect on the Closing Date.
(d) Internal receivables included in the Purchased Assets and internal
payables included in the Liabilities will be netted and discharged no later
than 30 days after Closing.
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(e) For a period of 90 days following the closing (the "Collection
Period"), Buyer will use commercially reasonable efforts to collect
receivables (other than internal receivables) included in the Purchased
Assets. Buyer may, at its option, tender back to Reynolds any receivables
that remain uncollected at the end of the Collection Period within 10 days
following the expiration of the Collection Period for the face amount
thereof (less any reserve transferred to Buyer).
4. REYNOLDS MARKS AGREEMENT. Reynolds will grant to Buyer, for a period of
one year from the Closing, the non-transferable right to use the Reynolds Marks
solely for use in the conduct of the Business on equipment, signage, materials,
supplies and other Purchased Assets on hand as of the Closing and bearing any of
the Reynolds Marks.
5. TECHNOLOGY AND SOFTWARE.
(a) Reynolds will grant Buyer a perpetual, royalty-free, fully paid up
license under Reynolds-owned patents, copyrights and technology ("Licensed
Technology") that cover processes, methods, practices, techniques and
systems currently used and/or products currently produced at the
Facilities. The license will be freely transferable to a buyer of the
Facilities. The license will, among other things, include the right to
change and further develop the Licensed Technology. The license will grant
worldwide nonexclusive rights to sell products produced at the Facilities.
The license will grant the exclusive right in North America (subject to the
next sentence) to make products using Licensed Technology used solely at
the Facilities and the nonexclusive right to make products in North America
using technology used at other facilities now or previously owned by
Reynolds. The exclusive license referred to in the preceding sentence will
remain exclusive until the end of the five-year term of the covenant not to
compete referred to in paragraph 10 or until such earlier date that Buyer
determines not to produce a particular product to which the Licensed
Technology relates, and thereafter will be nonexclusive. For avoidance of
doubt, the "exclusive" license will permit Reynolds to use Licensed
Technology, subject to the noncompetition covenant provisions.
(b) Reynolds will transfer to Buyer as part of the Purchased Assets
software owned by Reynolds that is used exclusively in the Business
("Exclusive Business Software"). Reynolds will continue, until the Closing,
ongoing efforts with respect to programming changes in Exclusive Business
Software needed to resolve Year 2000 issues. However, Exclusive Business
Software will be transferred to Buyer at Closing on an "as is" basis,
without warranty as to Year 2000 compliance.
(c) Under a Data Processing Services Agreement, Reynolds will grant
Buyer perpetual, royalty-free, fully paid up licenses to use certain
software owned or developed by Reynolds, which is currently used, but not
exclusively, in
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the Facilities ("Licensed Software"). Under such licenses, Buyer would have
the right to change and further develop the Licensed Software, including
all source and object codes. Licensed Software will be provided on an "as
is" basis.
6. TRANSITION SERVICES. At the Closing, Buyer and Reynolds will enter into
one or more transition service agreements (including the Data Processing
Services Agreement referred to above) pursuant to which Reynolds will provide
certain data processing, accounting and other corporate administrative services
as may be agreed by us currently being provided to the Business for up to one
year from the Closing. Reynolds will provide such transition services on
mutually agreeable terms and conditions.
7. CAN SHEET SUPPLY AGREEMENT.
(a) Buyer acknowledges that Reynolds has negotiated with Ball
Corporation and its affiliate Ball Metal Beverage Container Corp.
(individually and together, "Ball") an agreement (the "Reynolds Can Sheet
Supply Agreement") under which Reynolds would, effective upon the closing
of the sale of Reynolds' Global Can Division to Ball (the "Can Division
Sale"), supply can sheet to Ball. Promptly upon Buyer's execution of this
letter, Reynolds will seek to obtain Ball's consent to Reynolds' (i)
disclosure of the Reynolds Can Sheet Supply Agreement to Buyer and (ii)
assignment of the Reynolds Can Sheet Supply Agreement to Buyer. Buyer will
cooperate with Reynolds in providing such information as may be necessary
to obtain Ball's consent as described in the preceding sentence. For a
period of fifteen days following its initial receipt of the Reynolds Can
Sheet Supply Agreement from Reynolds, Buyer shall have the right (upon
written notice delivered by fax or otherwise to Reynolds within such
fifteen-day period) to terminate its obligation to consummate the
Transaction if the terms of the Reynolds Can Sheet Supply Agreement are not
acceptable to Buyer.
(b) If Ball consents to Reynolds' assignment of the Reynolds Can Sheet
Supply Agreement to Buyer and Buyer does not exercise the termination right
referred to in the preceding subparagraph, then:
(i) if the closing of the Can Division Sale precedes the Closing,
at Closing Reynolds (in its capacity as supplier) will assign the
Reynolds Can Sheet Supply Agreement to Buyer and Buyer will assume
Reynolds' rights and obligations as supplier under the Reynolds Can
Sheet Supply Agreement;
OR
(ii) if the Closing precedes the closing of the Can Division
Sale, Reynolds and Buyer will, at Closing, enter into an agreement
substantially
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identical to the Reynolds Can Sheet Supply Agreement, with only
such changes therein as are described in the next sentence (with such
changes, the "Borden Can Sheet Supply Agreement"). At the closing of
the Can Division Sale, Reynolds (in its capacity as purchaser) shall
assign the Borden Can Sheet Supply Agreement to Ball and Ball will
assume Reynolds' rights and obligations as purchaser under the Borden
Can Sheet Supply Agreement. The preceding portions of this clause (y)
notwithstanding, the pricing mechanisms currently in effect under the
commitment of Reynolds' Mill Products Division to supply can sheet to
Reynolds' Global Can Division will apply under the Borden Can Sheet
Supply Agreement until the earlier of (i) the closing of the Can
Division Sale or (ii) December 31, 1998.
(c) Either Reynolds or Buyer may terminate its obligation to
consummate the Transaction if Ball does not consent before the Closing date
to Reynolds' assignment of the Reynolds Can Sheet Supply Agreement to
Buyer.
8. CERTAIN OTHER AGREEMENTS.
(a) Without limiting the generality of paragraphs 1 and 2(c), Reynolds
will assign to Buyer at Closing the UBC Supply Agreement dated as of
February 27, 1998 between Reynolds and Wise Recycling, LLC.
(b) At closing, Reynolds will enter into an agreement (the "Metal
Supply Agreement") to supply P1020 unalloyed aluminum ingot ("P1020 Ingot")
and alloyed sheet ingot ("Sheet Ingot") to Buyer. Under the Metal Supply
Agreement, Reynolds will sell P1020 Ingot and Sheet Ingot to Buyer at
market prices. The Metal Supply Agreement will contain other mutually
acceptable terms and conditions.
9. EMPLOYEES.
(a) Buyer will offer employment to all bargaining unit Business
employees (including without limitation those on lay-off, disability, lease
of absence or workers' compensation at Closing) and all or a portion of the
salaried Business employees. Bargaining unit Business employees who accept
Buyer's offer of employment will be Buyer's employees effective as of the
Closing, but the status of such bargaining unit Business employees with
respect to their active employment, lay-off, disability, leave of absence
or workers' compensation shall not change as a result of the Closing.
Salaried Business employees on disability, leave of absence or workers'
compensation at Closing shall remain Reynolds' employees until such time as
they are employed by Buyer. As between Reynolds and Buyer, Reynolds shall
be solely responsible for all matters relating to any Business employees
who do not accept Buyer's offer of employment.
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(b) Subject to the provisions of paragraph 2(b), in the case of
bargaining unit Business employees, Buyer will assume the post-Closing
obligations of Reynolds under the CBA's, including without limitation
obligations with respect to post-retirement medical benefits and pension
benefits. Reynolds will reimburse Buyer for any costs incurred by Buyer
with respect to bargaining unit Business employees that are on lay-off,
disability, leave of absence or workers' compensation at Closing until the
time such employees return to work for Buyer. Bargaining unit Business
employees hired by Buyer will receive credit for service with Reynolds for
all purposes under Buyer's employee benefit plans and programs.
(c) Reynolds has been engaged and will continue with due diligence to
engage in negotiations with the unions representing certain bargaining unit
Business employees regarding changes in work rules. Reynolds will keep
Buyer apprised of developments in these continuing negotiations. To the
extent possible, Buyer intends to continue Reynolds' terms and conditions
of employment for bargaining unit Business employees. Therefore, the
parties intend that the Transaction not be construed as a "permanent
shutdown" for purposes of Section III of Reynolds' pension plans for hourly
employees or Reynolds' supplemental unemployment benefit plans.
(d) Buyer will provide salaries Business employees hired by Buyer
competitive salaries and benefits. Salaried Business employees hired by
Buyer will receive credit for service with Reynolds for all purposes under
Buyer's employee benefit plans and programs except for benefit accruals
under a defined benefit pension plan. Reynolds shall retain liability for
post-retirement medical benefits payable under Reynolds' retiree medical
plans only for those salaried Business employees hired by Buyer eligible as
of the Closing Date for such coverage under Reynolds' retiree medical
plans. For avoidance of doubt, Reynolds shall have no liability for
post-retirement medical benefits, if any, payable by Buyer under Buyer's
plans to salaried Business employees.
(e) In the case of salaried Business employees who are employed by
Buyer and thereafter terminated by Buyer ("Terminated Salaried Employees")
other than for cause on or before the first anniversary of the Closing
Date, Buyer will make severance payments ("Severance") to each such
terminated employee in an amount equal to the amount such employee would
have received under Reynolds' Salaried Employee Enhanced Termination
Package, and Buyer will provide continued health care and life insurance
coverage ("Continued Benefits") for each such employee for the same period
of time such employee would have received such coverage under Reynolds'
Termination Allowance Policy, in each case based on such employee's
combined service with Reynolds and Buyer. The preceding sentence
notwithstanding, Reynolds shall reimburse Buyer for the costs of Severance
and Continued Benefits paid by Buyer to up to
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15 Terminated Salaried Employees terminated by Buyer within six months
after the Closing Date.
10. COVENANT NOT TO COMPETE. Reynolds will agree not to compete with Buyer
in North America for five years after Closing (the "Restricted Period") in the
manufacture and sale of aluminum can sheet, rigid container sheet, trailer roof
coil, brazing sheet and fin stock ("Alloys Products"). This covenant will not
apply in the case of (i) activities currently conducted by Reynolds or its
affiliates other than through the Business (including existing sales, marketing,
technology transfer and technical assistance arrangements with Samara
Metallurgical Company); (ii) operations of any aluminum company which may
acquire Reynolds; (iii) operations being conducted at the time of acquisition by
any aluminum company which may be acquired in whole or in part by Reynolds; and
(iv) activities conducted by Reycan S.E.C./Reycan L.P. The covenant may contain
such other exceptions as are mutually acceptable to the parties. For avoidance
of doubt with respect to clause (i) above, Reynolds will agree not to enter into
any additional arrangements during the Restricted Period with respect to the
sale or marketing of Alloys Products in North America.
11. OPERATION OF THE BUSINESS. From the execution of this letter until the
Closing, Reynolds will conduct the Business in the ordinary course in a manner
consistent with past practices. Buyer acknowledges that, the preceding sentence
notwithstanding, (i) Reynolds will continue to pursue the sale of its Global Can
Division pursuant to a definitive agreement it has entered into with Ball and
that, if such sale is concluded before the Closing, Reynolds will enter into the
Reynolds Can Sheet Supply Agreement in connection with the sale and (ii)
Reynolds will make a good faith effort to make further manpower reductions at
the Facilities.
12. DEFINITIVE AGREEMENT. Promptly upon your execution of this letter,
Reynolds will instruct its counsel to prepare a draft of a definitive purchase
agreement (the "Agreement"). The Agreement will contain the terms and conditions
set forth in this letter and representations, warranties, covenants and
indemnities that are customary in transactions of this nature and mutually
acceptable to the parties. Among other things, the Agreement will (i) provide
that Buyer shall not be entitled to indemnification for environmental matters
unless the claim for indemnification is asserted on or before the fifth
anniversary of the Closing Date (except for off-site disposal liabilities, with
respect to which Reynolds' indemnification obligations shall continue
indefinitely) and (ii) contain environmental remediation provisions
substantially in the form set forth on Exhibit B. Each party will negotiate in
good faith to arrive at a mutually acceptable Agreement.
13. DUE DILIGENCE. Reynolds acknowledges that Buyer will, at Buyer's sole
cost and expense, conduct a customary due diligence review of the Facilities,
the Purchased Assets and the Business. Reynolds will provide Buyer with full
access (during regular business hours and subject to reasonable constraints to
protect health and safety and minimize business disruption) to its assets,
properties, books and
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records, and other pertinent information as Buyer may reasonably request to
conduct its due diligence.
14. CERTAIN CONDITIONS.
(a) Execution of the Agreement will be subject to the completion by
Buyer of its due diligence review.
(b) Closing will be subject to the following conditions: (i)
negotiation and execution of the Agreement; (ii) filing of the necessary
premerger notification notices and receipt of termination notices with
respect to, or expiration of, the waiting period as required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"); (iii)
receipt of any other governmental, environmental, regulatory or material
third party consents and approvals required in connection with the purchase
and sale of the Purchased Assets; (iv) approval of the Transaction by the
Board of Directors of Reynolds and Buyer; (v) Buyer's right under paragraph
7(a) to terminate its obligation to consummate the Transaction; and (vi)
the right of Reynolds or Buyer under paragraph 7(c) to terminate its
obligation to consummate the Transaction.
15. EXCLUSIVITY. In consideration of the expenditure of time, effort and
expense to be undertaken by Buyer in connection with the negotiation of the
Agreement, from the date both parties execute this letter through August 31,
1998, as long as Buyer is proceeding diligently and in good faith, Reynolds will
not negotiate with any other entity or person concerning a sale of the Business
(other than sales in the ordinary course of business). Provided that the
Agreement is executed by the parties on or before August 31, 1998, the Agreement
shall provide for a further period of exclusivity through September 30, 1998.
16. CONFIDENTIALITY. Reynolds has entered into a Confidentiality Agreement
dated as of January 9, 1998 with Avalon Investment and Securities Group (the
"Confidentiality Agreement"). Buyer agrees to be bound by the Confidentiality
Agreement as though it were a party thereto, and the parties acknowledge and
agree that the Confidentiality Agreement will remain in full force and effect
following execution of this letter and hereby ratify and confirm their
respective obligations thereunder.
17. EXPENSES. Each of Reynolds and Buyer will pay its own costs and
expenses, including the fees of attorneys, accountants, brokers and other
advisors and all filing fees under the HSR Act, incurred at any time in
connection with the Transaction.
18. PUBLICITY. Except as may be required by law or applicable stock
exchange rules, no public announcement of our negotiations or the signing of
this letter will be made by either party without the prior consent of the other.
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19. BINDING OBLIGATIONS. We intend this letter to be an expression of
intent only, except that the last sentence of paragraph 12, the second sentence
of paragraph 13, paragraphs 15 through 22 and paragraph 24 create binding and
enforceable obligations. No party may reasonably rely on any promises
inconsistent with this paragraph.
20. TERMINATION. This letter will expire (i) at the end of the day on
August 31, 1998 or (ii) at any earlier time upon our written mutual agreement.
The provisions of paragraphs 16, 17, 18, 21 and 22 will survive any termination
of this letter.
21. EQUITABLE REMEDIES. The parties acknowledge that upon any breach of any
of the binding obligations under this letter, a non-breaching party will be
entitled to the right of specific performance and temporary and permanent
injunctive relief.
22. GOVERNING LAW. This letter and the Agreement will be construed and
enforced in accordance with the laws of the Commonwealth of Virginia, other than
its rules with respect to choice of laws.
23. COUNTERPARTS. This letter may be signed in any number of counterparts,
each of which will be deemed an original, and all such counterparts will
constitute but one instrument.
24. ASSIGNMENT. Buyer may not assign its rights or obligations under this
letter without the prior written consent of Reynolds.
[SIGNATURE PAGE FOLLOWS]
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If you agree with the foregoing, please sign a copy of this letter and
return it to the attention of the undersigned. We look forward to hearing from
you.
Very truly yours,
REYNOLDS METALS COMPANY
By: /s/ John B. Kelzer
-----------------------------
John B. Kelzer
Vice President
AGREED AND ACCEPTED:
AVALON-BORDEN COMPANIES, INC.
By: /s/ Maurice C. Mitchell
------------------------------------
Name: Maurice C. Mitchell
Title: President and Chief Operating Officer
Date: June 22, 1998
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EXHIBIT A
ALLOYS COMPLEX
STATEMENT OF ASSETS AND LIABILITIES*
(in thousands)
March 31, 1998
Receivables - Customer $ 20,384
Receivables - Unconsolidated Subsidiaries 35,125
Receivables - Internal (Can Division) 41,883
Receivables - Internal (Other) 1,083
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Total Receivables $ 98,475
Total Inventories 171,360
Prepaid Expenses 8
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Total Current Assets $269,843
Less: Current Liabilities
Trade Payables $ 20,196
Internal Payables 13,759
Other Accruals 9,070
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Total Current Liabilities $ 43,025
Working Capital $226,818
Book Value PP&E $443,270
Construction in Progress 8,466
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Total PP&E $451,736
Repair parts and spares 25,405
Other Non Current Assets 337
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Total Facilities $477,478
Total Facilities and Working Capital $704,296
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* This Statement of Assets and Liabilities does not include corporate reserves
or liabilities such as environmental, restructuring, tax, or provision for
postretirement benefits, PP&E includes all of Alloys, ARP and SRC.
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EXHIBIT B
ENVIRONMENTAL REMEDIATION PROVISIONS
1. Remediation Activity. Buyer will complete its Phase I and Phase II
environmental audit before Closing. If, as a result of such Phase I or
Phase II environmental audits or otherwise, Buyer determines that
remediation activity is required in order to assure compliance with
environmental laws, Buyer shall give written notice thereof to Reynolds
identifying the condition or situation that Buyer reasonably believes
requires remediation activity by Reynolds and the factual basis for
such belief. Reynolds will use its best efforts to respond to such
notice from Buyer as promptly as is reasonably practicable and, to the
extent feasible, within thirty (30) days will set forth in writing in
such response Reynolds' proposed schedule for development of a plan for
conducting and completing such remediation activity as Reynolds
reasonably believes is required (i) to complete the full
characterization and determination of the extent of any environmental
contamination and (ii) to remediate any environmental contamination
that existed as of the Closing (including any post-Closing migrations)
to the extent required. Reynolds will at Reynolds' sole cost and
expense conduct and complete such remediation activity property and as
promptly as is reasonably practicable and utilizing such consultants
and contractors as Reynolds shall select with the approval of Buyer
(such approval not to be unreasonably withheld). Without limiting the
generality of the foregoing, Reynolds shall determine the plan for and
shall control and be responsible for the prompt planning, conducting
and completion of all such remediation activity, utilizing such
consultants and contractors as Reynolds shall select with the approval
of Buyer (such approval not to be unreasonably withheld). However,
Reynolds will, in making all such plans and conducting all such
remediation activity, allow a reasonable opportunity for Buyer's
designated environmental personnel, consultants and contractors to
consider and comment upon all material matters, and any dispute or
disagreement between the parties regarding any aspect of such
remediation activity, including any such determination by Reynolds,
shall be subject to the dispute resolution provisions of Section 3;
provided, however, that if such dispute involves environmental
contamination that has been reported to state or federal authorities
the determination of the applicable remediation activity will be
determined as provided in subsection (a) below. Reynolds shall provide
to Buyer copies of any final reports and final laboratory reports
prepared by or for Reynolds in connection with remediation activity.
Reynolds shall, and shall cause its personnel, consultants and
contractors to, safeguard Buyer's assets, operations and personnel and
shall indemnify Buyer for any loss, damage or injury arising out of any
remediation activity except to the extent such loss, damage or injury
resulted from the negligent or willful act of Buyer or its agents or
contractors. The following subsections of this Section 1 set forth
certain express agreements of the parties regarding remediation
activity,
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and the foregoing general provisions of this Section 1 shall be
construed and interpreted in a manner consistent with these express
agreements:
(a) With respect to any remediation activity relating to any
environmental contamination and related release, Reynolds may
seek to conduct such remediation activity under applicable
environmental regulatory programs in the State of Alabama (as
determined by Reynolds and approved by the appropriate Alabama
authority), and, subject to the further provisions of this
subsection, any remediation activity so conducted under
applicable environmental regulatory programs in the State of
Alabama will be considered completed when the applicable
Alabama authority issues a written confirmation that no
further remediation activity is required in order to comply
with applicable environmental laws. If an applicable authority
does not require any immediate remediation activity with
respect to environmental contamination that exists at or
before the Closing, Reynolds shall not be required under the
definitive agreement to undertake immediate remediation
activity (although it may elect to do so as provided
hereunder), but in that event, Reynolds shall retain liability
for compliance with environmental laws in effect as of the
Closing and for such environmental contamination including
post-Closing migrations. However, notwithstanding the
foregoing, it is expressly agreed that: (i) no such plan for
remediation activity or written confirmation of compliance
with environmental laws may be based upon any requirement that
Buyer agree to limit its use of the Facilities or encumber its
title to the real property with any restrictive covenant that
would, in either case, restrict the use of the Facilities for
industrial purposes as of Closing as permitted under the
existing zoning and land use restrictions applicable thereto;
and (ii) in the event that, notwithstanding the receipt of
such written confirmation of compliance from the applicable
Alabama authority as contemplated above, such Alabama
authority or any other authority determines at any time that
any further remediation activity is required with respect to
the same environmental contamination that was the subject of
the remediation activity addressed by such written
confirmation of compliance, then Reynolds shall be and remain
responsible to conduct and complete such further remediation
activity with regard to such environmental contamination as so
required.
Reynolds shall to the greatest extent feasible conduct and
complete all remediation activity so as to avoid any material
interference with Buyer's use and enjoyment of the purchased
assets or conduct of the business at the Facilities. In the
event any such material interference is nevertheless
necessary, Reynolds shall conduct such remediation activity in
accordance with Buyer's reasonable requirements as to
scheduling and other matters in order to minimize such
interference.
(b) Any other provisions hereof to the contrary notwithstanding,
it is expressly agreed that Buyer may take any action on the
real property that Buyer
2
<PAGE>
reasonably believes is required in order to comply with any
applicable environmental laws. To the extent Buyer believes
such action is required to be taken by Reynolds hereunder,
Buyer shall request that Reynolds take such action. However,
if Reynolds does not take such action promptly, Buyer may do
so. In the event Reynolds does not take the requested action
but it is ultimately determined Reynolds was required to do so
hereunder, Reynolds shall indemnify Buyer for all costs
reasonably incurred in taking such action.
(c) Any other provisions hereof to the contrary notwithstanding,
it is expressly agreed that Reynolds may undertake any
remediation activity that Reynolds reasonably believes is
necessary in order to reduce its liability for environmental
contamination it is liable for hereunder. Such remediation
activity shall be performed in accordance with the
requirements described in this Exhibit B (including Section 1)
and may be undertaken whether or not the parties are in any
pre-arbitration or arbitration process described in the
definitive agreement.
Reynolds' obligations under this Section 1 shall apply only to
environmental contamination that existed as of Closing (including
post-Closing migrations) the existence of which is reasonably
identified in a notice to Reynolds from Buyer given on or before the
fifth anniversary of the Closing Date. Any such notice shall also state
in reasonable detail the basis for Buyer's claim that such
contamination existed as of Closing.
2. Communications with Authorities.
Each of Buyer and Reynolds shall be fully authorized and entitled to
communicate at any time and in any manner with any authorities
regarding any environmental matters if such communication is reasonably
believed by such party to be required to (i) satisfy any legal
requirement, (ii) obtain any permit or (iii) respond to any inquiry
from, or provide information requested by, any authority. In addition,
Reynolds and Buyer shall each keep the other party reasonably informed
and provide the other party copies of all correspondence and other
written communications, and a reasonable opportunity to participate in
all material oral communications and meetings, with authorities
concerning remediation activity. Except to the extent otherwise
required or permitted by the foregoing, Buyer agrees that Reynolds'
right to determine the plan for and to control remediation activity
includes Reynolds' right to determine the approach to be taken in
communicating with authorities about such proposed or ongoing
remediation activity, and Buyer will not communicate with such
authorities in any manner intended to cause such authority not to
accept Reynolds' proposed or ongoing plans for such remediation
activity.
3
<PAGE>
3. Dispute Resolution.
(a) If any dispute or disagreement exists with regard to any
matter under or pertinent to any provisions of this Exhibit B
after Closing, either of the parties may require the other to
submit the reasons for its position, in writing, and then to
enter into good faith negotiations to attempt to resolve the
disagreement before invoking any other dispute resolution
mechanisms set forth in the definitive agreement.
(b) Either party shall have the right, at any time, to request
review of such matter by an appropriate senior executive
officer of each party ("Executive Review"). A party shall
exercise its right to request Executive Review by providing a
written notice to the other party. The senior executive
officers of each party shall meet within thirty (30) days of
the date such notice is delivered to the other party, and
shall engage in good faith efforts to resolve the disagreement
for a period of up to thirty (30) days following such initial
meeting.
(c) If any dispute or disagreement has not been resolved by
Executive Review within such thirty (30) day period, such
unresolved dispute or disagreement shall be finally settled
under the Commercial Arbitration Rules of the American
Arbitration Association and in accordance with the following:
(i) The arbitrators shall have no authority, power or
right to alter, change, amend, modify, add to or
subtract from any of the provisions of the definitive
agreement or any related agreements, or to render an
award that by its terms has the effect of altering or
modifying any express condition or provision of such
agreements.
(ii) Each arbitration hearing shall be conducted in
Richmond, Virginia unless the parties otherwise
mutually agree. Each party will bear full
responsibility for its own expenses attendant to the
arbitration proceeding, and each party will share
equally in the payment of all other costs of
arbitration.
(iii) Each dispute will be submitted to a panel of three
(3) arbitrators of whom one (1) will be selected by
each party and the third by such other two (2)
arbitrators from one or more panels of qualified
environmental arbitrators named by the American
Arbitration Association, unless the parties otherwise
mutually agree. If the third arbitrator has not been
selected within thirty (30) days after the first
party arbitrator is named, such third arbitrator will
be named by the American Arbitration Association.
(iv) Each award will be made in writing and will contain
findings of fact and conclusions of law and will be
final and binding upon the parties to the
4
<PAGE>
extent permitted by law. Judgment may be entered on
the award in any court having jurisdiction.
(v) The arbitrators will have no authority to award
punitive damages or any other damages not measured by
the prevailing party's actual damages.
(vi) During pendency of the resolution of a dispute or
disagreement or if a dispute or disagreement has not
been resolved, either party may continue to perform
remediation activity work, or take action to prevent
or ameliorate environmental losses, but shall not be
obligated to do so.
(d) The foregoing provisions of this Section 3 shall not apply to
disputes which require immediate judicial assistance, such as
a restraining order.
5
<PAGE>
REYNOLDS METALS COMPANY
6601 BROAD STREET o RICHMOND, VIRGINIA 22230-1701
MAILING ADDRESS: P.O. BOX 27001 o RICHMOND, VIRGINIA 22230-1701
September 30, 1988
SECRETARY AND Tel
ASSISTANT GENERAL COUNSEL Telecopy
Mr. Maurice C. Mitchell
President and Chief Operating Officer
Avalon-Borden Companies. Inc.
777 South Lawrence Street, Suite 100
Montgomery, Alabama 36104
Re: Amendment No. 2 to Letter of Intent
Dear Mr. Mitchell:
Please refer to the letter agreement dated June 19, 1998 between
Reynolds Metals Company ("Reynolds") and Avalon-Borden Companies. Inc,
("Avalon-Borden"), as amended by the letter agreement between Reynolds and
Avalon-Borden dated August 27, 1998 (as amended, the "Letter of Intent"). This
will confirm that Reynolds and Avalon-Borden have agreed to change the date
referred to in the first sentence of paragraph 15 and in paragraph 20 of the
Letter of Intent from "September 30, 1998" to "October 9, 1998". Except as
amended by the preceding sentence, the Letter of Intent shall remain in full
force and effect. If you agree with the foregoing, please sign a copy of this
letter and return it to the attention of the undersigned.
Very truly yours.
REYNOLDS METALS COMPANY
By: /s/ Donna C. Dabnoy
-------------------
Donna C. Dabnoy
AGREED:
AVALON-BORDEN COMPANIES. INC.
By: /s/ Maurice C. Mitchell
-----------------------------------------
Maurice C. Mitchell
President ant Chief Operating Officer
<PAGE>
REYNOLDS METALS COMPANY
P.O. BOX 27003 o RICHMOND, VIRGINIA 23261-7003
October 8, 1998
Mr. Maurice C. Mitchell
President and Chief Operating Officer
Avalon-Borden Companies, Inc.
777 South Lawrence Street, Suite 100
Montgomery, Alabama 36104
Re: Amendment No. 3 to Letter of Intent
Dear Mr. Mitchell:
Please refer to the letter agreement dated June 19, 1996 between
Reynolds Metals Company ("Reynolds") and Avalon-Borden Companies, Inc.
("Avalon-Borden"), as amended by the letter agreements between Reynolds and
Avalon-Borden dated August 27, 1998 and September 30, 1998 (as amended, the
"Letter of Intent"). This will confirm that Reynolds and Avalon-Borden have
agreed to change the date referred to in the first sentence of paragraph 15 and
in paragraph 20 of the Letter of Intent from "October 9, 1998" to "October 20,
1998." Except as amended by the preceding sentence, the Letter of Intent shall
remain in full force and effect. If you agree with the foregoing, please sign a
copy of this fetter and return it to the attention of the undersigned.
Very truly yours.
REYNOLDS METALS COMPANY
By: /s/ John B. Keizer
----------------------
John B. Keizer
Vice President
AGREED:
AVALON-BORDEN COMPANIES. INC.
By: /s/Maurice C. Mitchell
Maurice C. Mitchell
President ant Chief Operating Officer
<PAGE>
REYNOLDS METALS COMPANY
RICHMOND, VIRGINIA 23261-7003
November 5, 1998
VICE PRESIDENT AND GENERAL MANAGER
MILL PRODUCTS DIVISION
Mr. Maurice C. Mitchell
President and Chief Operating Officer
Avalon-Borden Companies. Inc.
777 South Lawrence Street, Suite 100
Montgomery, Alabama 36104
Re: Amendment No. 2 to October 28, 1998 Letter of Intent
Dear Mr. Mitchell:
Please refer to the letter agreement dated October 28, 1998 between
Reynolds Metals Company ("Reynolds") and Avalon-Borden Companies, Inc.
("Avalon-Borden"), as amended by the letter agreement between Reynolds and
Avalon-Borden dated November 2, 1998 (as amended, the "Letter of Intent"). This
will confirm that Reynolds and Avalon-Borden have agreed to change the dates
referred to in paragraph 15 and in clauses (iii) and (iv) of paragraph 20 of the
Letter of Intent to "December 10, 1998". Except as amended by the preceding
sentence, the Letter of Intent shall remain in full force and effect. If you
agree with the foregoing, please sign a copy of this letter and return it to the
attention of the undersigned
Very truly yours.
REYNOLDS METALS COMPANY
By: /s/ John B. Keizer
------------------
John B. Keizer
Vice President
AGREED:
AVALON-BORDEN COMPANIES. INC.
By: /s/ Maurice C. Mitchell
------------------------------------------
Maurice C. Mitchell
President ant Chief Operating Officer
