SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-1430
REYNOLDS METALS COMPANY
A Delaware Corporation
(I.R.S. Employer Identification No. 54-0355135)
6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-7003
Telephone Number (804) 281-2000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
As of July 31, 1998, the Registrant had 72,094,090 shares of
Common Stock, no par value, outstanding and entitled to vote.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (millions, except per share amounts)
- ---------------------------------------------------------------------------------
<CAPTION>
Quarters ended Six months ended
June 30 June 30
- -----------------------------------------------------------------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $1,579 $1,786 $3,111 $3,410
COSTS AND EXPENSES
Cost of products sold 1,275 1,463 2,526 2,823
Selling, administrative and general expenses 96 107 189 209
Depreciation and amortization 66 92 136 185
Interest 33 37 67 76
Operational restructuring effects 304 7 304 (31)
- ------------------------------------------------------------------------------------
1,774 1,706 3,222 3,262
- ------------------------------------------------------------------------------------
EARNINGS
Income (loss) before income taxes, extraordinary
loss and cumulative effect of accounting change (195) 80 (111) 148
Taxes on income (credit) (72) 25 (46) 50
- ------------------------------------------------------------------------------------
Income (loss) before extraordinary loss and
cumulative effect of accounting change (123) 55 (65) 98
Extraordinary loss (3) - (3) -
Cumulative effect of accounting change - - (23) -
- ------------------------------------------------------------------------------------
NET INCOME (LOSS) ($126) $ 55 ($91) $ 98
====================================================================================
EARNINGS PER SHARE
Basic:
Average shares outstanding 72 73 73 73
Income (loss) before extraordinary loss and
cumulative effect of accounting change ($1.70) $0.76 ($0.89) $1.35
Extraordinary loss (.04) - (.04) -
Cumulative effect of accounting change - - (.32) -
- -----------------------------------------------------------------------------------
Net income (loss) ($1.74) $0.76 ($1.25) $1.35
===================================================================================
Diluted:
Average shares outstanding 72 74 73 74
Income (loss) before extraordinary loss and
cumulative effect of accounting change ($1.70) $0.75 ($0.89) $1.34
Extraordinary loss (.04) - (.04) -
Cumulative effect of accounting change - - (.32) -
- ------------------------------------------------------------------------------------
Net income (loss) ($1.74) $0.75 ($1.25) $1.34
====================================================================================
CASH DIVIDENDS PER COMMON SHARE $0.35 $0.35 $0.70 $0.70
====================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE> 3
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (millions)
- --------------------------------------------------------------------------------
<CAPTION>
June 30 December 31
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 200 $ 70
Receivables, less allowances of $14 (1997 - $16) 895 1,015
Inventories 551 744
Prepaid expenses and other 167 165
- --------------------------------------------------------------------------------
Total current assets 1,813 1,994
Unincorporated joint ventures and associated companies 1,390 1,381
Property, plant and equipment 5,873 6,533
Less allowances for depreciation and amortization 3,366 3,579
- --------------------------------------------------------------------------------
2,507 2,954
Deferred taxes and other assets 1,023 897
- --------------------------------------------------------------------------------
Total assets $6,733 $7,226
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities $ 897 $1,074
Short-term borrowings 61 67
Long-term debt 223 142
- --------------------------------------------------------------------------------
Total current liabilities 1,181 1,283
Long-term debt 1,465 1,501
Postretirement benefits 1,022 1,043
Environmental, deferred taxes and other liabilities 597 660
Stockholders' equity:
Common stock 1,533 1,521
Retained earnings 1,111 1,253
Treasury stock, at cost (126) -
Accumulated other comprehensive income (50) (35)
- --------------------------------------------------------------------------------
Total stockholders' equity 2,468 2,739
- --------------------------------------------------------------------------------
Contingent liabilities (Note 9)
Total liabilities and stockholders' equity $6,733 $7,226
================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE> 4
<TABLE>
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) (millions)
- ------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
Six months ended June 30 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(91) $ 98
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Depreciation and amortization 136 185
Operational restructuring effects 304 (31)
Deferred taxes and other (104) 27
Extraordinary item 3 -
Cumulative effect of accounting change 23 -
Changes in operating assets and liabilities net of
effects of dispositions:
Accounts payable, accrued and other liabilities (149) 2
Receivables (15) (234)
Inventories 82 (123)
Other (70) (33)
- ------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 119 (109)
INVESTING ACTIVITIES
Capital investments:
Operational (57) (65)
Strategic (72) (65)
Sales of assets - operational restructuring 273 288
Other (3) (2)
- ------------------------------------------------------------------------------
Net cash provided by investing activities 141 156
FINANCING ACTIVITIES
Decrease in short-term borrowings (4) (51)
Proceeds from long-term debt 100 -
Reduction of long-term debt (60) -
Cash dividends paid (51) (48)
Repurchase of common stock (126) -
Stock options exercised 11 36
- ------------------------------------------------------------------------------
Net cash used in financing activities (130) (63)
CASH AND CASH EQUIVALENTS
Net increase (decrease) 130 (16)
At beginning of period 70 38
- --------------------------------------------------------------------------------
At end of period $ 200 $ 22
==============================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<CAPTION>
Six months ended June 30 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
SHARES (thousands):
Common stock
Balance at January 1 73,909 72,719
Issued under employee benefit plans 194 665
- -------------------------------------------------------------------------
Balance at June 30 74,103 73,384
=========================================================================
Treasury stock
Balance at January 1 - -
Purchased and held as Treasury stock (2,009) -
- -------------------------------------------------------------------------
Balance at June 30 (2,009) -
- -------------------------------------------------------------------------
Net common shares outstanding 72,094 73,384
=========================================================================
DOLLARS (millions):
Common stock
Balance at January 1 $1,521 $1,451
Issued under employee benefit plans 12 38
- -------------------------------------------------------------------------
Balance at June 30 $1,533 $1,489
=========================================================================
Retained earnings
Balance at January 1 $1,253 $1,220
Net income (loss) (91) 98
Cash dividends declared for common stock (51) (51)
- -------------------------------------------------------------------------
Balance at June 30 $1,111 $1,267
=========================================================================
Treasury stock
Balance at January 1 $ - $ -
Purchased and held as Treasury stock (126) -
- -------------------------------------------------------------------------
Balance at June 30 $ (126) $ -
=========================================================================
Accumulated other comprehensive income (loss)
Balance at January 1 $ (35) $ (37)
Foreign currency translation adjustments (9) (34)
Income taxes (6) 2
-----------------------
Other comprehensive income (loss) (15) (32)
- ------------------------------------------------------------------------
Balance at June 30 $ (50) $ (69)
========================================================================
Total stockholders' equity $2,468 $2,687
========================================================================
COMPREHENSIVE INCOME (millions):
Net income (loss) $ (91) $ 98
Other comprehensive income (loss) (15) (32)
- ------------------------------------------------------------------------
Comprehensive income (loss) $ (106) $ 66
========================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE> 6
REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the interim periods of
1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1997. Certain amounts have
been reclassified to conform to the 1998 presentation. In the
tables, dollars are in millions, except share and per share
amounts, and shipments are in thousands of metric tons. A metric
ton is equivalent to 2,205 pounds.
2. ACCOUNTING POLICIES
COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted the Financial
Accounting Standards Board's (FASB) Statement No. 130, "Reporting
Comprehensive Income." Statement No. 130 establishes new rules
for the reporting and display of comprehensive income and its
components; however, the adoption of the Statement had no impact
on the Company's net income or stockholders' equity. Statement
No. 130 requires the Company's foreign currency translation
adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive
income. Prior year financial statements have been reclassified
to conform to the requirements of Statement No. 130. The
presentation of comprehensive income is included in the
Consolidated Statement of Changes in Stockholders' Equity.
REPORTING ON THE COSTS OF START-UP ACTIVITIES
In the second quarter of 1998, the Accounting Standards Executive
Committee (AcSEC) of the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-5, "Reporting
on the Costs of Start-Up Activities." The SOP requires costs of
start-up activities and organization costs to be expensed as
incurred. It is effective for 1999; however, early application
is encouraged. The Company adopted the SOP in the second quarter
of 1998 and applied it retroactively to January 1, 1998 as
required. The Company recognized a charge for the cumulative
effect of accounting change of $23 million in the restated
financial statements for the first quarter of 1998. The effect
on "income before cumulative effect of accounting change" in the
Consolidated Statement of Income for the 1998 and 1997 interim
periods was not material.
ACCOUNTING FOR THE COSTS OF DEVELOPING OR OBTAINING INTERNAL-USE
SOFTWARE
In the first quarter of 1998, the AcSEC issued SOP 98-1,
"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The SOP requires qualifying computer
software costs incurred in connection with obtaining or
developing software for internal use to be capitalized. The
Company currently capitalizes the costs of purchased software and
expenses the costs of internally developed software. The Company
plans to adopt the SOP in 1999 on a prospective basis when it
becomes effective.
<PAGE> 7
2. ACCOUNTING POLICIES -- continued
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In the second quarter of 1998, the FASB issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
This statement establishes new accounting and reporting standards
for derivative instruments and hedging activities. The Company
must adopt this statement by January 1, 2000. The Company has
not determined the impact this statement will have on its
financial position or results of operations.
3. OPERATIONAL RESTRUCTURING
In the first half of 1998, the Company sold the following:
= U.S. recycling operations
= Canadian extrusion facilities
= European rolling mill operations
= an Illinois sheet and plate plant
The Company has signed an asset purchase agreement for the sale
of its North American aluminum beverage can operations. The sale
includes 14 can plants, two end plants and a headquarters
building. The Company expects to realize proceeds from the
transaction of approximately $746 million and an after-tax gain
of approximately $200 million. The sale will not include the
Company's can machinery operations, its 27.5% interest in United
Arab Can Manufacturing Company, Ltd. or its 34.9% interest in
Latasa de Aluminio S.A. (Latasa), a Latin American beverage can
manufacturer.
The Company has signed a letter of intent to sell its Alabama can
stock complex. The sale will include a rolling mill, two nearby
reclamation plants that provide input metal to the mill, and a
coil coating facility. The Company recorded a pre-tax charge of
$304 million ($196 million after taxes) in the second quarter of
1998 for this transaction.
The Company has also signed a letter of intent to sell its can
machinery operations. The Company expects to realize a small
gain on this transaction.
All of the transactions are subject to one or more of the following:
regulatory approvals, transaction financing by the purchaser,
negotiation and execution of definitive agreements, and/or other
customary closing conditions.
The carrying amount for assets to be sold was approximately $1.1
billion at June 30, 1998. The operating income related to the
assets to be sold was $36 million for the second quarter of 1998
and $57 million for the six-month period of 1998. These amounts
include $14 million in the second quarter and $29 million in the
six-month period relating to the ceasing of depreciation of the
assets held for sale as required by current accounting rules.
The Company is using the proceeds from completed divestitures
for debt repayments and repurchases of common stock (see Notes 4
and 7). The Company plans to use the proceeds from expected
asset sales for the same purpose.
<PAGE> 8
3. OPERATIONAL RESTRUCTURING -- continued
In the first quarter of 1997, the Company sold its U.S.
residential construction products operations. In the second
quarter of 1997, the Company sold the following:
= an aluminum reclamation plant in Virginia
= aluminum extrusion plants in Virginia and Texas
= coal properties in Kentucky
The Company recognized pre-tax gains of $38 million in the first
quarter of 1997 and $18 million in the second quarter of 1997
related to these sales. Proceeds from these sales were used to
reduce debt and to temporarily support operating requirements.
Also in the second quarter of 1997, the Company recorded a pre-
tax charge of $25 million for termination benefits applicable to
approximately 500 corporate headquarters employees. Cash
requirements relating to the termination benefits have been paid.
4. EXTRAORDINARY LOSS
In the second quarter of 1998, the Company had an extraordinary
loss of $3 million (net of income tax benefit of $1 million)
resulting from debt extinguishments. The debt consisted of $30
million of medium-term notes with an average interest rate of
8.8% and original maturities ranging from 2002 to 2008. The debt
was extinguished with proceeds from asset sales.
The Company expects to extinguish approximately $470 million of
debt with part of the proceeds from the sale of its North American
aluminum beverage can operations. This debt extinguishment would
be expected to result in an extraordinary loss of approximately
$42 million (net of income tax benefit of $26 million).
5. EARNINGS PER SHARE
The following is a reconciliation of income and average shares
for the basic and diluted earnings per share computations for
"Income (loss) before extraordinary loss and cumulative effect of
accounting change."
<TABLE>
<CAPTION>
Quarters ended June 30
-------------------------
1998 1997
-------------------------
<S> <C> <C>
Income (numerator):
Income (loss) before extraordinary loss and cumulative
effect of accounting change (Basic and Diluted) $(123) $55
Average shares (denominator):
Basic 72,056,000 73,122,000
Effect of dilutive securities:
Stock options - 675,000
-------------------------
Diluted 72,056,000 73,797,000
-------------------------
Per share amount for income (loss) before extraordinary
loss and cumulative effect of accounting change:
Basic earnings per share $(1.70) $0.76
Diluted earnings per share $(1.70) $0.75
Antidilutive securities excluded:
Stock options 5,411,000 150,000
</TABLE>
<PAGE> 9
5. EARNINGS PER SHARE -- continued
<TABLE>
<CAPTION>
Six Months ended June 30
------------------------------
1998 1997
------------------------------
<S> <C> <C>
Income (numerator):
Income (loss) before extraordinary loss and
cumulative effect of accounting change
(Basic and Diluted) $(65) $98
Average shares (denominator):
Basic 72,612,000 72,997,000
Effect of dilutive securities:
Stock options - 591,000
--------------------------
Diluted 72,612,000 73,588,000
--------------------------
Per share amount for income (loss) before extraordinary
loss and cumulative effect of accounting change:
Basic earnings per share $(0.89) $1.35
Diluted earnings per share $(0.89) $1.34
Antidilutive securities excluded:
Stock options 5,493,000 506,000
</TABLE>
6. FINANCING ARRANGEMENTS
In the first quarter of 1998, the Company borrowed $100 million
under its Canadian bank credit agreement. The borrowing bears interest
at a variable rate (6.0% at June 30, 1998) and requires repayment
in a lump sum in 2001.
In the second quarter of 1998, the Company extinguished $30 million of
medium term notes. See Note 4 for more information concerning
these transactions.
7. STOCKHOLDERS' EQUITY
In the first quarter of 1998, the Company repurchased two million
shares of its common stock at market prices. The cost of the
repurchases was $126 million.
Authority to repurchase up to 18 million shares of common stock
became effective in the second quarter of 1998 with the signing
of the definitive agreement for the sale of the Company's North
American aluminum beverage can operations. This repurchase
authorization includes the five million share repurchase program
announced in the first quarter of 1998 and it extends to December
31, 2000.
8. COMPANY OPERATIONS
In the second quarter of 1998, the Company signed a letter of
intent to sell its Alabama can stock complex (see Note 3).
As a result, the Company has moved this operation from the
"Other" category to the "Restructuring" category in its
segment disclosures. The comparative periods of 1997 have been
restated to reflect this change.
<PAGE> 10
8. COMPANY OPERATIONS -- continued
<TABLE>
<CAPTION>
Packaging Construction
Base and and
Second Quarter 1998 Materials Consumer Distribution
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Customer aluminum shipments 168 37 46
Internal aluminum shipments 82 - -
- ---------------------------------------------------------------------------
Total aluminum shipments 250 37 46
Customer revenues:
Aluminum $269 $205 $170
Nonaluminum 114 144 81
Intersegment revenues - aluminum 126 - -
- ---------------------------------------------------------------------------
Total revenues $509 $349 $251
===========================================================================
Operating income (loss) $ 95 $ 40 $ 8
Interest expense
- ---------------------------------------------------------------------------
Income before income taxes
===========================================================================
Second Quarter 1997
- ---------------------------------------------------------------------------
Customer aluminum shipments 121 36 42
Internal aluminum shipments 194 - -
- ----------------------------------------------------------------------------
Total aluminum shipments 315 36 42
Customer revenues:
Aluminum $220 $201 $155
Nonaluminum 87 145 85
Intersegment revenues - aluminum 342 - -
- ----------------------------------------------------------------------------
Total revenues $649 $346 $240
============================================================================
Operating income (loss) $ 76 $ 34 $ 14
Interest expense
- ---------------------------------------------------------------------------
Income before income taxes
============================================================================
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Recon-
Transpor- Restruc- ciling Consoli-
Second Quarter 1998 tation turing Other Items dated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Customer aluminum shipments 15 103 9 - 378
nternal aluminum shipments - 2 - (84) -
- ------------------------------------------------------------------------------
Total aluminum shipments 15 105 9 (84) 378
Customer revenues:
Aluminum $81 $460 $ 32 $ - $1,217
Nonaluminum - - 23 - 362
Intersegment revenues - aluminum - 5 - (131) -
- ------------------------------------------------------------------------------
Total revenues $81 $465 $ 55 $(131) $1,579
==============================================================================
Operating income (loss) $(7) $ 38 $(33) $(303) $ (162)
Interest expense (33)
- ------------------------------------------------------------------------------
Income before income taxes $ (195)
==============================================================================
Second Quarter 1997
- --------------------------------------------------------------------------------
Customer aluminum shipments 17 205 11 - 432
Internal aluminum shipments - 3 - (197) -
- ------------------------------------------------------------------------------
Total aluminum shipments 17 208 11 (197) 432
Customer revenues:
Aluminum $95 $728 $ 37 $ - $1,436
Nonaluminum - 17 16 - 350
Intersegment revenues - aluminum - 9 - (351) -
- ------------------------------------------------------------------------------
Total revenues $95 $754 $ 53 $(351) $1,786
==============================================================================
Operating income (loss) $ 7 $ 46 $(40) $ (20) $ 117
Interest expense (37)
- ------------------------------------------------------------------------------
Income before income taxes $ 80
==============================================================================
</TABLE>
<PAGE> 12
8. COMPANY OPERATIONS -- continued
<TABLE>
<CAPTION>
Packaging Construction
Base and and
Six Months of 1998 Materials Consumer Distribution
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Customer aluminum shipments 313 67 92
Internal aluminum shipments 181 - -
- -----------------------------------------------------------------------
Total aluminum shipments 494 67 92
Customer revenues:
Aluminum $ 516 $380 $335
Nonaluminum 229 280 163
Intersegment revenues - aluminum 289 - -
- -----------------------------------------------------------------------
Total revenues $1,034 $660 $498
=======================================================================
Operating income (loss) $ 174 $ 62 $ 16
Interest expense
- -----------------------------------------------------------------------
Income before income taxes
=======================================================================
Six Months of 1997
- -----------------------------------------------------------------------
Customer aluminum shipments 223 67 82
Internal aluminum shipments 379 - -
- -----------------------------------------------------------------------
Total aluminum shipments 602 67 82
Customer revenues:
Aluminum $ 399 $371 $299
Nonaluminum 199 279 168
Intersegment revenues - aluminum 653 - -
- -----------------------------------------------------------------------
Total revenues $1,251 $650 $467
=======================================================================
Operating income (loss) $ 142 $ 55 $ 22
Interest expense
- -----------------------------------------------------------------------
Income before income taxes
=======================================================================
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
Recon-
Transpor- Restruc- ciling Consoli-
Six Months of 1998 tation turing Other Items dated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Customer aluminum shipments 31 219 18 - 740
Internal aluminum shipments - 4 - (185) -
- ------------------------------------------------------------------------------
Total aluminum shipments 31 223 18 (185) 740
Customer revenues:
Aluminum $168 $ 937 $ 61 $ 0 $2,397
Nonaluminum - 5 37 0 714
Intersegment revenues - aluminum - 12 - (301) -
- ------------------------------------------------------------------------------
Total revenues $168 $ 954 $ 98 $(301) $3,111
==============================================================================
Operating income (loss) $ (7) $ 79 $(68) $(300) $ (44)
Interest expense (67)
- ------------------------------------------------------------------------------
Income before income taxes $ (111)
==============================================================================
Six Months of 1997
- ------------------------------------------------------------------------------
Customer aluminum shipments 34 398 18 - 822
Internal aluminum shipments - 5 - (384) -
- ------------------------------------------------------------------------------
Total aluminum shipments 34 403 18 (384) 822
Customer revenues:
Aluminum $184 $1,378 $ 64 $ - $2,695
Nonaluminum - 41 28 - 715
Intersegment revenues - aluminum - 17 - (670) -
- ------------------------------------------------------------------------------
Total revenues $184 $1,436 $ 92 $(670) $3,410
==============================================================================
Operating income (loss) $ 11 $ 54 $(72) $ 12 $ 224
Interest expense (76)
- ------------------------------------------------------------------------------
Income before income taxes $ 148
==============================================================================
</TABLE>
<TABLE>
RECONCILING ITEMS
Reconciling items consist of the following:
<CAPTION>
Quarters ended June 30
------------------------
1998 1997
------------------------
<S> <C> <C>
Operating income (loss):
Inventory accounting adjustments $ 1 $(13)
Operational restructuring effects - net (304) (7)
------------------------
$(303) $(20)
========================
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30
--------------------------
1998 1997
--------------------------
<S> <C> <C>
Operating income (loss):
Inventory accounting adjustments $ 4 $(19)
Operational restructuring effects - net (304) 31
--------------------------
$(300) $ 12
==========================
</TABLE>
Inventory accounting adjustments are the elimination of
unrealized profits and losses on sales between global business
units. Operational restructuring effects are explained in Note
3.
<PAGE> 14
9. CONTINGENT LIABILITIES
As previously disclosed in the Company's 1997 Form 10-K, the
Company is involved in various worldwide environmental
improvement activities resulting from past operations, including
designation as a potentially responsible party (PRP), with
others, at various Environmental Protection Agency-designated
Superfund sites. The Company has recorded amounts (on an
undiscounted basis) which, in management's best estimate, will be
sufficient to satisfy anticipated costs of known remediation
requirements.
Estimated costs for future environmental compliance and
remediation are necessarily imprecise because of factors such as:
= continuing evolution of environmental laws and regulatory
requirements
= availability and application of technology
= identification of presently unknown remediation requirements
= cost allocations among PRPs
Further, it is not possible to predict the amount or timing of
future costs of environmental remediation that may subsequently
be determined. Based on information presently available, such
future costs are not expected to have a material adverse effect
on the Company's competitive or financial position or its ongoing
results of operations. However, such costs could be material to
results of operations in a future interim or annual reporting
period.
10. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM
COMPANY OF CANADA, LTD.
Financial statements and financial statement schedules for
Canadian Reynolds Metals Company, Ltd. and Reynolds Aluminum
Company of Canada, Ltd. have been omitted because certain
securities registered under the Securities Act of 1933, of which
these entities are obligors (thus subjecting them to reporting
requirements under Section 13 or 15(d) of the Securities Exchange
Act of 1934), are fully and unconditionally guaranteed by
Reynolds Metals Company. Financial information relating to these
companies is presented herein in accordance with Staff Accounting
Bulletin 53 as an addition to the footnotes to the financial
statements of Reynolds Metals Company. Summarized financial
information is as follows:
<PAGE> 15
10. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM
COMPANY OF CANADA, LTD. - continued
Canadian Reynolds Metals Company, Ltd.
<TABLE>
<CAPTION>
Quarters Ended June 30 Six Months Ended June 30
---------------------- ------------------------
1998 1997 1998 1997
---------------------- ------------------------
<S> <C> <C> <C> <C>
Net Sales:
Customers $ 90 $ 55 $183 $ 99
Parent and related companies 118 170 249 360
---------------------- ------------------------
$208 $225 $432 $459
Cost of products sold 176 174 361 362
Net income $ 21 $ 26 $ 49 $ 55
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
--------------------------
<S> <C> <C>
Current assets $ 321 $ 179
Noncurrent assets 1,184 1,206
Current liabilities (107) (148)
Noncurrent liabilities (514) (415)
</TABLE>
<TABLE>
<CAPTION>
Reynolds Aluminum Company of Canada, Ltd.
Quarters Ended June 30 Six Months Ended June 30
---------------------- ------------------------
1998 1997 1998 1997
--------------------- ------------------------
<S> <C> <C> <C> <C>
Net Sales:
Customers $112 $139 $231 $258
Parent and related companies 114 159 239 335
------------------ -----------------------
$226 $298 $470 $593
Cost of products sold 194 237 395 481
Net income $ 18 $ 30 $ 47 $ 57
</TABLE>
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
-----------------------------
<S> <C> <C>
Current assets $ 298 $ 208
Noncurrent assets 1,256 1,276
Current liabilities (112) (111)
Noncurrent liabilities (544) (445)
</TABLE>
<PAGE> 16
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements and related footnotes included
in the Company's 1997 Form 10-K along with the consolidated
financial statements and related footnotes included in and
referred to in this report. In the tables, dollars are in
millions, except per share amounts, and shipments are in
thousands of metric tons. A metric ton is equivalent to
2,205 pounds.
Management's Discussion and Analysis contains forecasts,
projections, estimates, statements of management's plans and
objectives for the Company and other forward-looking statements.
Please refer to the "Risk Factors" section beginning on page 22,
where we have summarized factors that could cause actual results
to differ materially from those projected in a forward-looking
statement or affect the extent to which a particular projection
is realized.
RESULTS OF OPERATIONS
We more than offset the negative impact of lower primary aluminum
prices with improved sales volume in several of our ongoing
businesses; significant cost reduction in our base materials
operations; lower selling, administrative and general expenses;
and lower interest expense. For information concerning the
special items in the following table, see the notes to the
consolidated financial statements.
<TABLE>
<CAPTION>
Second Quarter Six Months
--------------- ------------
1998 1997 1998 1997
--------------- ------------
<S> <C> <C> <C> <C>
Results
Income before special items $ 73 $ 59 $ 131 $ 79
Operational restructuring effects (see Note 3) (196) (4) (196) 19
Extraordinary loss (see Note 4) (3) - (3) -
Cumulative effect of accounting change (see Note 2) - - (23) -
----------------------------
Net income (loss) $ (126) $ 55 $ (91) $ 98
============================
Earnings per share - basic
Income before special items $ 1.02 $0.81 $ 1.81 $1.08
Operational restructuring effects - net (2.72) (0.05) (2.70) 0.27
Extraordinary loss (.04) - (.04) -
Cumulative effect of accounting change - - (.32) -
-----------------------------
Net income (loss) $(1.74) $0.76 $(1.25) $1.35
=============================
</TABLE>
<PAGE> 17
RESULTS OF OPERATIONS - continued
GLOBAL BUSINESS UNITS
<TABLE>
Base Materials
<CAPTION>
Second Quarter Six Months
--------------- ----------------
1998 1997 1998 1997
--------------- ----------------
<S> <C> <C> <C> <C>
Aluminum shipments:
Customer 168 121 313 223
Internal 82 194 181 379
--------------- ----------------
Total 250 315 494 602
=============== ================
Revenues:
Customer - aluminum $269 $220 $ 516 $ 399
- nonaluminum 114 87 229 199
Internal - aluminu 126 342 289 653
--------------- -----------------
Total $509 $649 $1,034 $1,251
=============== =================
Operating income $ 95 $ 76 $ 174 $ 142
=============== =================
</TABLE>
The increase in customer aluminum shipments in the 1998 periods
reflected continuing strong demand for our rod, foundry and
billet products. Our available supply to meet customer needs
increased because we no longer need to supply downstream
fabricating operations that have been sold. Our available supply
also increased because of restarting idle capacity (as discussed
below). The sale of certain of our operations resulted in lower
internal requirements for primary aluminum, which caused our
internal shipments to decline.
In addition to reflecting the changes in shipping volume,
aluminum revenues were adversely affected in the 1998 periods by
lower prices for primary aluminum. Average realized prices for
customer shipments were $0.73 in the second quarter of 1998
compared to $0.83 in the second quarter of 1997. Average
realized prices for customer shipments were $0.75 in the six-
month period of 1998 compared to $0.82 in the six month period of
1997. We believe prices were lower mainly because of the
continuing economic uncertainty in Asia.
Higher sales of alumina led to the increase in nonaluminum
revenues in both 1998 periods. The additional supply was made
possible by significant improvements in production and capacity
utilization at our Sherwin, Texas alumina plant.
Operating income improved in the second quarter and six months of
1998 because of:
= higher customer shipments
= significant cost reductions
= improved capacity utilization in alumina operations
= lower costs for certain raw materials
These benefits were partially offset by:
= lower internal shipments
= lower prices for primary aluminum
= restart costs at our primary aluminum plants
= lower technical services income
<PAGE> 18
RESULTS OF OPERATIONS - continued
GLOBAL BUSINESS UNITS - continued
Base Materials - continued
Results in both years were negatively impacted by temporarily
curtailed capacity at our U.S. primary aluminum plants. In the
first quarter of 1998, we began the process of restarting some of
this idle capacity. The restart of 47,000 metric tons of
capacity at our Longview, Washington plant was essentially
completed in July 1998. The announced restarts of 41,000 metric
tons of capacity at our Massena, New York plant and 74,000 metric
tons at our Troutdale, Oregon plant should be completed by the
end of September 1998. We plan to monitor market conditions
before finalizing the schedule to restart the remaining 47,000
metric tons at the Troutdale plant.
We decided to restart our idled primary aluminum capacity because
of our outlook for continued strong demand in the aluminum
market. Volume outlook for our primary metals business is strong
for billet, rod and sheet ingot. We are projecting aluminum
consumption growth of 1.0%-1.5% in 1998 and 2.5%-3.0% in 1999.
Packaging and Consumer
<TABLE>
<CAPTION>
Second Quarter Six Months
--------------- ---------------
1998 1997 1998 1997
--------------- ---------------
<S> <C> <C> <C> <C>
Customer aluminum shipments 37 36 67 67
Revenues:
Customer - aluminum $205 $201 $380 $371
- nonaluminum 144 145 280 279
--------------- ---------------
Total $349 $346 $660 $650
=============== ===============
Operating income $ 40 $ 34 $ 62 $ 55
=============== ===============
</TABLE>
Total shipments and revenues for packaging and consumer products
were essentially flat in the 1998 periods as compared to the same
periods in 1997. Shipments of packaging products were slightly
lower because of strong competition. Shipments of consumer
products were higher due to strong demand for Reynolds Wrap
aluminum foil and the recently introduced product, Hot Bags
aluminum foil pouches.
Operating income benefited from higher shipments of consumer
products and lower costs. Higher development and
marketing costs for new consumer products introduced in 1998
partially offset these benefits. The new consumer products
include Hot Bags aluminum foil pouches and Wrappers aluminum
foil sheets. Shipments of both products began in the second
quarter of 1998.
<PAGE> 19
RESULTS OF OPERATIONS - continued
GLOBAL BUSINESS UNITS - continued
Construction and Distribution
<TABLE>
<CAPTION>
Second Quarter Six Months
--------------- ---------------
1998 1997 1998 1997
--------------- ---------------
<S> <C> <C> <C> <C>
Customer aluminum shipments 46 42 92 82
Revenues:
Customer - aluminum $170 $155 $335 $299
- nonaluminum 81 85 163 168
--------------- ---------------
Total $251 $240 $498 $467
=============== ===============
Operating income $ 8 $ 14 $ 16 $ 22
=============== ===============
</TABLE>
Shipments and revenues increased in both 1998 periods. These
improvements were due principally to higher shipments for all of
our major aluminum distribution products (plate, sheet and
extrusions) resulting from strong demand and market share growth
in our major domestic markets. Shipments of aluminum
construction products were slightly higher, reflecting steady
demand for these high value products. Growth in construction
products shipments in Europe and North America was somewhat
offset by a decline in shipments to all Asian markets except
China.
Nonaluminum revenues decreased slightly despite significant
increases in stainless steel shipments. Demand was strong for all
of our major product groups (plate, sheet and shapes). The effect
of the higher shipping volume was offset by lower prices for
stainless steel products. Prices for these products continue to
be under pressure due to high imports and strong competition.
The decline in operating income in both 1998 periods primarily
resulted from lower capacity utilization at one of our construction
products plants following the scheduled expiration of a steel
composite tolling contract in 1997. That tolling customer now
has its own production facility and pays us design and
production royalties. We also incurred higher marketing costs as
we introduced new products into the European construction markets
and expanded into new European markets. These effects were
somewhat offset by the higher shipping volume. The effect of
lower prices for stainless steel products was mostly offset by
lower costs for purchases of stainless steel.
<TABLE>
Transportation
<CAPTION>
Second Quarter Six Months
--------------- ---------------
1998 1997 1998 1997
--------------- ---------------
<S> <C> <C> <C> <C>
Customer aluminum shipments 15 17 31 34
Customer revenues $81 $95 $168 $184
Operating income (7) 7 (7) 11
=============== ===============
</TABLE>
Lower shipments and revenues in both 1998 periods resulted from
volume declines in wheels and bumpers. Wheel shipments were
lower because of decreased demand and a strike at a
customer. The decline in bumper shipments resulted from the
completion of a contract in 1997 that we expect to replace in
1999.
<PAGE> 20
RESULTS OF OPERATIONS - continued
GLOBAL BUSINESS UNITS - continued
Transportation - continued
Operating income declined in both 1998 periods because of the
lower shipping volume and its adverse effect on capacity
utilization. Start-up costs in our wheel operations also
contributed to the declines.
We are implementing sales and cost reduction programs in an
effort to improve performance of our Transportation operations.
Restructuring
The decline in shipments, revenues and operating income in both
1998 periods was due to sold operations. Operating income
includes $17 million in the second quarter of 1998 and $37
million in the six-month period of 1998 relating to the ceasing
of depreciation of assets held for sale as required by current
accounting rules.
For additional information concerning the global business units,
see Note 8 to the consolidated financial statements.
INTEREST EXPENSE
Interest expense decreased in both 1998 periods because of lower
amounts of debt outstanding.
TAXES ON INCOME
The effective tax rates reflected in the income statement differ
from the U.S. federal statutory rate principally because of the
effects of foreign taxes in 1997 and 1998 and percentage depletion
allowances in 1997.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
--------- -------------
<S> <C> <C>
Working capital $632 $711
Ratio of current assets to current liabilities 1.5/1 1.6/1
</TABLE>
OPERATING ACTIVITIES
We used the net cash provided by operating activities in the
first half of 1998 to fund capital investments.
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES - continued
INVESTING ACTIVITIES
Capital investments totaled $129 million in the first half of
1998. This amount includes $57 million for operating
requirements (replacement equipment, environmental control
projects, etc.). The remainder was for strategic projects
(performance improvements, investments, etc.) principally carried
forward from 1997, including:
= the expansion of the Worsley Alumina Refinery in Australia
= the modernization of our U.S. foil plants
= the modification of our Indiana automotive components plant to
produce engine cradles
In addition, we are expanding our forged wheel plant in Virginia.
The expansion will cost approximately $32 million, and we expect
it to be substantially completed in late 1998.
We expect capital investments in 1998 to total $350 million.
Approximately 43% of this amount will be used for operating
requirements. We plan to use the remainder for those strategic
projects already underway. We expect to fund our capital
investments in 1998 with cash generated from operations.
We used part of the cash from asset sales to repurchase common
stock and to repay debt. We are temporarily investing the
remainder pending additional debt repayments.
FINANCING ACTIVITIES
The significant financing activities in the first half of 1998
were:
= borrowing of $100 million under our Canadian bank credit agreement
(see Note 6)
= the repurchase of common stock (see Note 7)
= the extinguishment of $30 million of medium-term notes (see Note
4)
PORTFOLIO REVIEW
We have completed a number of divestitures and have reached an
agreement for the sale of our North American can operations. We
have also signed letters of intent to sell our can machinery
operations and our Alabama can stock complex. For additional
information concerning these transactions, see Note 3 to the
consolidated financial statements.
We have received $640 million in proceeds from divestitures. We
have reduced debt by $350 million and repurchased 2 million
shares of common stock. The remainder of our proceeds is in
cash.
We also plan to sell the following:
= our 27.5% interest in United Arab Manufacturing Company, Ltd.,
a Saudi Arabian aluminum beverage can manufacturer
= our aluminum extrusion operation in Spain
= our aluminum recycling plant in Italy
We are working with the other stockholders of Latasa, a Latin
American aluminum beverage can manufacturer, to agree upon and
implement a process that will permit the sale of our 34.9%
interest in Latasa in the near future.
<PAGE> 22
RISK FACTORS
This section should be read in conjunction with Part I, Items 1
(Business), 3 (Legal Proceedings) and 7 (Management's Discussion
and Analysis of Financial Condition and Results of Operations) of
the Company's 1997 Form 10-K; Part II, Item 1 (Legal Proceedings)
of this report; and the preceding portions of this Item.
This report contains (and oral communications made by or on
behalf of the Company may contain) forecasts, projections,
estimates, statements of management's plans and objectives for
the Company and other forward-looking statements<FN1>. The
Company's expectations for the future and related forward-looking
statements are based on a number of assumptions and forecasts as
to world economic growth and other economic indicators (including
rates of inflation, industrial production, housing starts and
light vehicle sales), trends in the Company's key markets, global
aluminum supply and demand conditions, and aluminum ingot prices,
among other items. By their nature, forward-looking statements
involve risk and uncertainty, and various factors could cause the
Company's actual results to differ materially from those
projected in a forward-looking statement or affect the extent to
which a particular projection is realized.
The Company expects favorable conditions in aluminum industry
supply/demand fundamentals to continue for the next several years.
Consensus expectations for 1998 indicate global economic growth
of 2.5-3%. The Company is forecasting an increase in global
aluminum consumption for 1998 of approximately 1-1.5% and for
1999 of 2.5-3%. The Company's long-term outlook for growth in
aluminum consumption is between 2.5 and 4% per year.
Economic and/or market conditions other than those forecasted
by the Company in the preceding paragraph, particularly in the
U.S., Asia and Western Europe, could cause the Company's actual
results to differ materially from those projected in a
forward-looking statement or affect the extent to which a
particular projection is realized. The Company's outlook for
1998 and beyond could be jeopardized by repercussions stemming
from recent economic problems in Asia, particularly Japan.
The following factors also could affect the Company's results:
= Primary aluminum is an internationally traded commodity. The
price of primary aluminum is subject to worldwide market
forces of supply and demand and other influences. Prices can
be volatile. The Company's use of contractual arrangements,
including fixed-price sales contracts, fixed-price supply
contracts, and forward, futures and option contracts, reduces
its exposure to this volatility but does not eliminate it.
= The markets for most aluminum products are highly
competitive. Certain of the Company's competitors are larger
than the Company in terms of total assets and operations and
have greater financial resources. Certain foreign
governments are involved in the operation and/or ownership of
certain competitors and may be motivated by political as well
as economic considerations. In addition, aluminum competes
with other materials, such as steel, vinyl, plastics and
glass, among others, for various applications in the
Company's key markets. Plastic products compete with
products made of glass, aluminum, steel, paper, wood and
ceramics, among others. Unanticipated actions or developments
by or affecting the Company's competitors and/or the
willingness of customers to accept substitutions for the
products sold by the Company could affect results.
[FN]
- ---------------
<FN1>
Forward-looking statements can be identified generally as those
containing words such as "should," "hope," "forecast," "outlook,"
"project," "estimate," "expect," "anticipate," or "plan" and words of
similar effect.
</FN>
<PAGE> 23
RISK FACTORS -- continued
= The Company spends substantial capital and operating amounts
relating to ongoing compliance with environmental laws. In
addition, the Company is involved in remedial investigations
and actions in connection with past disposal of wastes.
Estimating future environmental compliance and remediation
costs is imprecise due to the continuing evolution of
environmental laws and regulatory requirements and
uncertainties about their application to the Company's
operations, the availability and application of technology,
the identification of currently unknown remediation sites,
and the allocation of costs among potentially responsible
parties.
= Unanticipated material legal proceedings or investigations,
or the disposition of those currently pending against the
Company other than as anticipated by management and counsel,
could affect the Company's results.
= Changes in the costs of power, resins, caustic soda, green
coke and other raw materials can affect results. The
Company's contract with the Bonneville Power Administration
for the period October 1996 to September 2001 provides fixed
rates for electrical power provided to the Company's
Washington and Oregon primary aluminum plants. These rates
have been approved by federal regulatory authorities but have
been appealed in court by a third party. If the appeal is
successful, it is possible that higher electricity costs
might result.
= A number of the Company's businesses are cyclical and can be
influenced by economic conditions.
= A strike at a customer facility or a significant downturn in
the business of a key customer supplied by the Company could
affect the Company's results.
= Since late 1996, the Company has been conducting a Portfolio
Review of all its operations. The Company has announced the
signing of letters of intent for the sale of its can machinery
business and its can stock complex in North Alabama, which
consists of a rolling mill, two reclamation plants and a coil
coating facility. It has also reached an agreement to
sell substantially all the assets of its North American can
operations. These transactions are subject to certain
conditions, including obtaining regulatory approvals,
completion of purchaser financing, completion of definitive
agreements and/or other customary closing conditions. As a
result, these transactions may or may not be completed as
contemplated. The Company is also planning to sell its
interest in United Arab Manufacturing Company, Ltd., its
aluminum extrusion operation in Spain and its aluminum recycling
plant in Italy and is working with the other stockholders of
Latasa to agree upon and implement a process that will permit
the sale of the Company's interest in Latasa in the near future.
However, at this time, the Company has not entered into any
letter of intent or agreement for the sale of these assets.
In addition to the factors referred to above, the Company
is exposed to general financial, political, economic and business
risks in connection with its worldwide operations. The Company
continues to evaluate and manage its operations in a manner to
mitigate the effects from exposure to such risks. In general,
the Company's expectations for the future are based on the
assumption that conditions relating to costs, currency values,
competition and the legal, regulatory, financial, political and
business environments in the worldwide economies and markets in
which the Company operates will not change significantly overall.
<PAGE> 24
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Forward, futures, option and swap contracts are designated to
manage market risks resulting from fluctuations in the aluminum,
natural gas, foreign currency and debt markets. Contracts used
to manage risks in these markets are not material.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported in the Registrant's 1997 Form 10-K, a
private antitrust lawsuit styled Hammons v. Alcan Aluminum
Corp. et al., was filed in the Superior Court of California for
the County of Los Angeles on March 5, 1996 against the Registrant
and other aluminum producers. The lawsuit alleged a conspiracy
to reduce worldwide and U.S. aluminum production. Estimated
damages of approximately $26 billion were sought in the lawsuit,
which claimed class action status. Defendants removed the case
to the U.S. District Court for the Central District of California
(the "District Court"). The District Court granted summary
judgment for defendants. On December 11, 1997, the U.S. Court of
Appeals for the Ninth Circuit sustained the District Court's
dismissal of the case. The plaintiff filed a motion seeking
review of the decision by all the judges of the Ninth Circuit.
The motion was denied on May 14, 1998. Plantiff's counsel has
stated he will petition the U.S. Supreme Court to review the
case.
Item 2. CHANGES IN SECURITIES
(a) Recent Sales of Unregistered Securities
Under the Registrant's Stock Plan for Outside Directors (the
"Plan"), 87 phantom shares, in the aggregate, were granted
to the Registrant's nine outside Directors on April 1, 1998,
based on an average price of $61.0625 per share. These
phantom shares represent dividend equivalents paid on
phantom shares previously granted under the Plan. 506
phantom shares, in the aggregate, were granted to the nine
outside Directors on June 30, 1998, based on an average
price of $55.6563 share. These phantom shares represent a
quarterly installment of each outside Director's annual
grant under the Plan.
To the extent that these grants constitute sales of equity
securities, the Registrant issued these phantom shares in
reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended, taking into account the
nature of the Plan, the number of outside Directors
participating in the Plan, the sophistication of the outside
Directors and their access to the kind of information that a
registration statement would provide.
A description of the Plan is contained in the Registrant's
Form 10-K for the year ended December 31, 1997 in Part II,
Item 5 under the caption "Sale of Unregistered Securities".
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Registrant was held on
May 14, 1998. The stockholders (i) elected the eleven nominees
named in the Registrant's proxy statement to serve as Directors,
(ii) ratified the selection of Ernst & Young LLP as independent
auditors of the Registrant for 1998, and (iii) defeated a
stockholder proposal requesting endorsement of the CERES
Principles, which provide standards for environmental performance
and reporting. The number of votes cast for, against or
withheld, and the number of abstentions, and the number of
broker no-votes, as applicable, with respect to each matter
were as set forth below. No other matters were voted upon at
the meeting.
<PAGE> 25
(i) Election of Directors
<TABLE>
<CAPTION>
Name Number Of Votes Number Of Votes
Cast "For" Withheld
<S> <C> <C>
Patricia C. Barron 65,261,986 1,262,368
John R. Hall 65,253,649 1,270,705
Robert L. Hintz 65,259,711 1,264,643
William H. Joyce 65,269,240 1,255,114
Mylle Bell Mangum 65,252,009 1,272,345
D. Larry Moore 65,257,030 1,267,234
Randolph N. Reynolds 65,222,712 1,301,642
James M. Ringler 65,260,700 1,263,654
Samuel C. Scott, III 65,266,736 1,257,618
Jeremiah J. Sheehan 65,139,410 1,384,953
Joe B. Wyatt 65,264,158 1,260,196
</TABLE>
(ii) Ratification of Selection of Ernst & Young LLP as
Independent Auditors
Number of Votes Cast "For" 66,232,893
Number of Votes Cast "Against" 146,222
Number of Abstentions 145,239
(iii) Stockholder Proposal Requesting Ratification of CERES
Principles
Number of Votes Cast "Against" 49,804,810
Number of Votes Cast "For" 6,001,605
Number of Abstentions 6,167,128
Number of Broker Non-Votes 4,550,812
Item 5. Other Information
Stockholder Proposals for 1999 Annual Meeting of Stockholders
The 1999 Annual Meeting of Stockholders of the Registrant is
scheduled to be held on May 20, 1999. In order for stockholder
proposals to be included in the Registrant's proxy statement and
form of proxy for the 1999 Annual Meeting, such proposals must be
received by the Registrant no later than November 18, 1998,
addressed to: Reynolds Metals Company, 6601 West Broad Street,
P. O. Box 27003, Richmond, Virginia 23261-7003, Attention:
Secretary.
In addition, under the advance notice provisions of the
Registrant's By-Laws, any stockholder desiring to introduce any
business at the 1999 Annual Meeting which is not included in the
Registrant's proxy materials or is not brought before the 1999
Annual Meeting by or at the direction of the Board of Directors
or the officer presiding over the meeting must provide the
Registrant with written notice of such business no later than
February 19, 1999, addressed to the Registrant at the address
specified above. Should any matters requiring the vote of
stockholders arise at the 1999 Annual Meeting of which the
Registrant has not received timely notice, the Registrant intends
that shares represented by proxies will be voted in accordance
with the discretion of the person or persons holding the proxy.
Additional information regarding these requirements is set forth
in the Registrant's Proxy Statement dated March 18, 1998 under
the heading "Stockholders' Proposals and Nominations".
<PAGE> 26
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
During the second quarter of 1998, the Registrant filed
two Current Reports on Form 8-K with the Commission. The
Registrant reported on a Form 8-K dated April 23, 1998
that it had reached a definitive agreement on the sale of
substantially all of its global can operations to Ball
Corporation. The Registrant reported on a Form 8-K dated
June 23, 1998 that it had signed a letter of intent to sell
its Alabama can stock complex, consisting of a rolling mill,
two reclamation plants and a coil coating facility, to
Avalon-Borden Companies, Inc.
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
REYNOLDS METALS COMPANY
By /s/ Allen M. Earehart
---------------------------------
Allen M. Earehart
Senior Vice President, Controller
(Chief Accounting Officer)
DATE: August 6, 1998
<PAGE>
INDEX TO EXHIBITS
EXHIBIT 2 - Asset Purchase Agreement by and among
Ball Corporation, Ball Metal Beverage
Container Corp. and Reynolds Metals
Company dated as of April 22, 1998.
The Registrant agrees to furnish to
the Commission upon request a copy of
the disclosure schedules supplemental
to the Asset Purchase Agreement.
<F1> EXHIBIT 3.1 - Restated Certificate of Incorporation,
as amended. (File No. 1-1430, 1997 Form
10-K Report, EXHIBIT 3.1)
EXHIBIT 3.2 - By-laws, as amended.
EXHIBIT 4.1 - Restated Certificate of Incorporation.
See EXHIBIT 3.1.
EXHIBIT 4.2 - By-Laws. See EXHIBIT 3.2.
<F1> EXHIBIT 4.3 - Indenture dated as of April 1, 1989 (the
"Indenture") between Reynolds Metals
Company and The Bank of New York, as
Trustee, relating to Debt Securities.
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended March 31, 1989,
EXHIBIT 4(c))
<F1> EXHIBIT 4.4 - Amendment No. 1 dated as of November 1,
1991 to the Indenture. (File No. 1-
1430, 1991 Form 10-K Report, EXHIBIT
4.4)
<F1> EXHIBIT 4.5 - Rights Agreement dated as of December 1,
1997 (the "Rights Agreement") between
Reynolds Metals Company and The Chase
Manhattan Bank, N.A. (File No. 1-1430,
Registration Statement on Form 8-A dated
December 1, 1997, pertaining to
Preferred Stock Purchase Rights, EXHIBIT 1)
<F1> EXHIBIT 4.6 - Form of 9-3/8% Debenture due June 15, 1999.
(File No. 1-1430, Form 8-K Report dated
June 6, 1989, EXHIBIT 4)
<F1> EXHIBIT 4.7 - Form of Fixed Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.3)
<F1> EXHIBIT 4.8 - Form of Floating Rate Medium-Term Note.
(Registration Statement No. 33-30882 on
Form S-3, dated August 31, 1989, EXHIBIT
4.4)
<F1> EXHIBIT 4.9 - Form of Book-Entry Fixed Rate Medium-Term
Note. (File No. 1-1430, 1991 Form 10-K
Report, EXHIBIT 4.15)
<F1> EXHIBIT 4.10 - Form of Book-Entry Floating Rate Medium-Term
Note. (File No. 1-1430, 1991 Form 10-K
Report, EXHIBIT 4.16)
<F1> EXHIBIT 4.11 - Form of 9% Debenture due August 15, 2003.
(File No. 1-1430, Form 8-K Report dated
August 16, 1991, Exhibit 4(a))
<F1> EXHIBIT 4.12 - Articles of Continuance of Societe
d'Aluminium Reynolds du Canada,
Ltee/Reynolds Aluminum Company of
Canada, Ltd. (formerly known as Canadian
Reynolds Metals Company, Limited --
Societe Canadienne de Metaux Reynolds,
Limitee) ("RACC"), as amended. (File
No. 1-1430, 1995 Form 10-K Report,
EXHIBIT 4.13)
[FN]
______________________
<F1> Incorporated by reference.
</FN>
<PAGE>
<F1> EXHIBIT 4.13 - By-Laws of RACC, as amended. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended March 31, 1997, EXHIBIT 4.14)
<F1> EXHIBIT 4.14 - Articles of Incorporation of Societe
Canadienne de Metaux Reynolds,
Ltee/Canadian Reynolds Metals Company,
Ltd. ("CRM"), as amended. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended September 30, 1997, EXHIBIT 4.15)
<F1> EXHIBIT 4.15 - By-Laws of CRM, as amended. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended September 30, 1997, EXHIBIT 4.16)
<F1> EXHIBIT 4.16 - Indenture dated as of April 1, 1993
among RACC, Reynolds Metals Company and
The Bank of New York, as Trustee. (File
No. 1-1430, Form 8-K Report dated July
14, 1993, EXHIBIT 4(a))
<F1> EXHIBIT 4.17 - First Supplemental Indenture, dated as of
December 18, 1995 among RACC, Reynolds
Metals Company, CRM and The Bank of New
York, as Trustee. (File No. 1-1430,
1995 Form 10-K Report, EXHIBIT 4.18)
<F1> EXHIBIT 4.18 - Form of 6-5/8% Guaranteed Amortizing Note due
July 15, 2002. (File No. 1-1430, Form 8-
K Report dated July 14, 1993, EXHIBIT
4(d))
<F1><F2> EXHIBIT 10.1 - Reynolds Metals Company 1987
Nonqualified Stock Option Plan.
(Registration Statement No. 33-13822 on
Form S-8, dated April 28, 1987, EXHIBIT
28.1)
<F1><F2> EXHIBIT 10.2 - Reynolds Metals Company 1992
Nonqualified Stock Option Plan.
(Registration Statement No. 33-44400 on
Form S-8, dated December 9, 1991,
EXHIBIT 28.1)
<F1><F2> EXHIBIT 10.3 - Reynolds Metals Company Performance
Incentive Plan, as amended and restated
effective January 1, 1996. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended March 31, 1995, EXHIBIT 10.4)
<F1><F2> EXHIBIT 10.4 - Agreement dated December 9, 1987 between
Reynolds Metals Company and Jeremiah J.
Sheehan. (File No. 1-1430, 1987 Form 10-
K Report, EXHIBIT 10.9)
<F1><F2> EXHIBIT 10.5 - Supplemental Death Benefit Plan for
Officers. (File No. 1-1430, 1986 Form
10-K Report, EXHIBIT 10.8)
<F1><F2> EXHIBIT 10.6 - Financial Counseling Assistance Plan for
Officers. (File No. 1-1430, 1987 Form
10-K Report, EXHIBIT 10.11)
<F1><F2> EXHIBIT 10.7 - Management Incentive Deferral Plan.
(File No. 1-1430, 1987 Form 10-K Report,
EXHIBIT 10.12)
[FN]
_______________________
<F1> Incorporated by reference.
<F2> Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 601 of
Regulation S-K.
</FN>
<PAGE>
<F1><F2> EXHIBIT 10.8 - Deferred Compensation Plan for Outside
Directors as Amended and Restated
Effective December 1, 1993. (File No. 1-
1430, 1993 Form 10-K Report, EXHIBIT
10.12)
<F1><F2> EXHIBIT 10.9 - Form of Indemnification Agreement for
Directors and Officers. (File No. 1-
1430, Form 8-K Report dated April 29,
1987, EXHIBIT 28.3)
<F1><F2> EXHIBIT 10.10 - Form of Executive Severance Agreement as
amended between Reynolds Metals Company
and key executive personnel, including
each of the individuals listed in Item
4A of the 1997 Form 10-K Report. (File
No. 1-1430, 1997 Form 10-K Report,
EXHIBIT 10.10)
<F1><F2> EXHIBIT 10.11 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective May 20, 1988. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended June 30, 1988, EXHIBIT 19(a))
<F1><F2> EXHIBIT 10.12 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective October 21, 1988. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended September 30, 1988, EXHIBIT 19(a))
<F1><F2> EXHIBIT 10.13 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective January 1, 1987. (File No. 1-
1430, 1988 Form 10-K Report, EXHIBIT
10.22)
<F1><F2> EXHIBIT 10.14 - Form of Stock Option and Stock Appreciation
Right Agreement, as approved February
16, 1990 by the Compensation Committee
of the Company's Board of Directors.
(File No. 1-1430, 1989 Form 10-K Report,
EXHIBIT 10.24)
<F1><F2> EXHIBIT 10.15 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective January 18, 1991. (File No. 1-
1430, 1990 Form 10-K Report, EXHIBIT
10.26)
<F1><F2> EXHIBIT 10.16 - Form of Stock Option Agreement, as approved
April 22, 1992 by the Compensation
Committee of the Company's Board of
Directors. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended March 31,
1992, EXHIBIT 28(a))
<F1><F2> EXHIBIT 10.17 - Reynolds Metals Company Restricted Stock
Plan for Outside Directors.
(Registration Statement No. 33-53851 on
Form S-8, dated May 27, 1994, EXHIBIT
4.6)
<F1><F2> EXHIBIT 10.18 - Reynolds Metals Company New Management
Incentive Deferral Plan. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended June 30, 1994, EXHIBIT 10.30)
[FN]
_______________________
<F1> Incorporated by reference.
<F2> Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 601 of
Regulation S-K.
</FN>
<PAGE>
<F1><F2> EXHIBIT 10.19 - Reynolds Metals Company Salary Deferral
Plan for Executives. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
June 30, 1994, EXHIBIT 10.31)
<F1><F2> EXHIBIT 10.20 - Reynolds Metals Company Supplemental
Long Term Disability Plan for
Executives. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1994, EXHIBIT 10.32)
<F1><F2> EXHIBIT 10.21 - Amendment to Reynolds Metals Company
1987 Nonqualified Stock Option Plan
effective August 19, 1994. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended September 30, 1994, EXHIBIT 10.34)
<F1><F2> EXHIBIT 10.22 - Amendment to Reynolds Metals Company
1992 Nonqualified Stock Option Plan
effective August 19, 1994. (File No. 1-
1430, Form 10-Q Report for the Quarter
Ended September 30, 1994, EXHIBIT 10.35)
<F1><F2> EXHIBIT 10.23 - Amendment to Reynolds Metals Company New
Management Incentive Deferral Plan
effective January 1, 1995. (File No. 1-
1430, 1994 Form 10-K Report, EXHIBIT
10.36)
<F1><F2> EXHIBIT 10.24 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Trustee Pays Premiums).
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1995, EXHIBIT
10.34)
<F1><F2> EXHIBIT 10.25 - Form of Split Dollar Life Insurance Agreement
(Trustee Owner, Employee Pays Premium).
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1995, EXHIBIT
10.35)
<F1><F2> EXHIBIT 10.26 - Form of Split Dollar Life Insurance Agreement
(Employee Owner, Employee Pays Premium).
(File No. 1-1430, Form 10-Q Report for
the Quarter Ended June 30, 1995, EXHIBIT
10.36)
<F1><F2> EXHIBIT 10.27 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Third Party Pays
Premiums). (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1995, EXHIBIT 10.37)
<F1><F2> EXHIBIT 10.28 - Form of Split Dollar Life Insurance Agreement
(Third Party Owner, Employee Pays
Premiums). (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1995, EXHIBIT 10.38)
<F1><F2> EXHIBIT 10.29 - Reynolds Metals Company 1996
Nonqualified Stock Option Plan.
(Registration Statement No. 333-03947 on
Form S-8, dated May 17, 1996, EXHIBIT
4.6)
<F1><F2> EXHIBIT 10.30 - Amendment to Reynolds Metals Company
1992 Nonqualified Stock Option Plan
effective January 1, 1993.
(Registration Statement No. 333-03947 on
Form S-8, dated May 17, 1996, EXHIBIT
99)
[FN]
____________________________
<F1> Incorporated by reference.
<F2> Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
</FN>
<PAGE>
<F1><F2> EXHIBIT 10.31 - Form of Stock Option Agreement, as approved
May 17, 1996 by the Compensation
Committee of the Company's Board of
Directors. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended June 30,
1996, EXHIBIT 10.41)
<F1><F2> EXHIBIT 10.32 - Form of Three Party Stock Option Agreement,
as approved May 17, 1996 by the
Compensation Committee of the Company's
Board of Directors. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
June 30, 1996, EXHIBIT 10.42)
<F1><F2> EXHIBIT 10.33 - Stock Option Agreement dated August 30, 1996
between Reynolds Metals Company and
Jeremiah J. Sheehan. (File No. 1-1430,
Form 10-Q Report for the Quarter Ended
September 30, 1996, EXHIBIT 10.43)
<F1><F2> EXHIBIT 10.34 - Amendment to Deferred Compensation Plan
for Outside Directors effective August
15, 1996. (File No. 1-1430, Form 10-Q
Report for the Quarter Ended September
30, 1996, EXHIBIT 10.44)
<F1><F2> EXHIBIT 10.35 - Amendment to Reynolds Metals Company New
Management Incentive Deferral Plan
effective January 1, 1996. (File No. 1-
1430, 1996 Form 10-K Report, EXHIBIT
10.38)
<F1><F2> EXHIBIT 10.36 - Amendment to Reynolds Metals Company
Performance Incentive Plan effective
January 1, 1996. (File No. 1-1430, 1996
Form 10-K Report, EXHIBIT 10.39)
<F1><F2> EXHIBIT 10.37 - Reynolds Metals Company Supplemental
Incentive Plan. (File No. 1-1430, 1996
Form 10-K Report, EXHIBIT 10.40)
<F1><F2> EXHIBIT 10.38 - Reynolds Metals Company Stock Plan for
Outside Directors. (File No. 1-1430,
1996 Form 10-K Report, EXHIBIT 10.41)
<F1><F2> EXHIBIT 10.39 - Special Executive Severance Package for
Certain Employees who Terminate
Employment between January 1, 1997 and
June 30, 1999 (or, if earlier, the date
of completion of employment related
actions related to the Company's portfolio
review process, as designated by the Company's
Chief Executive Officer), approved
by the Compensation Committee of the Company's
Board of Directors on January 17, 1997 and
extended on May 15, 1998. (File No. 1-1430,
1996 Form 10-K Report, EXHIBIT 10.42)
<F1><F2> EXHIBIT 10.40 - Special Award Program for Certain
Executives or Key Employees, as approved
by the Compensation Committee of the
Company's Board of Directors on January
17, 1997. (File No. 1-1430, 1996 Form
10-K Report, EXHIBIT 10.43)
<F1><F2> EXHIBIT 10.41 - Amendment to Reynolds Metals Company
1996 Nonqualified Stock Option Plan
effective December 1, 1997. (File No. 1-
1430, 1997 Form 10-K Report, EXHIBIT
10.41)
[FN]
____________________________
<F1> Incorporated by reference.
<F2> Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 601 of Regulation S-K.
</FN>
<PAGE>
<F1><F2> EXHIBIT 10.42 - Amendment to Reynolds Metals Company
Restricted Stock Plan for Outside
Directors effective December 1, 1997.
(File No. 1-1430, 1997 Form 10-K Report,
EXHIBIT 10.42)
<F2> EXHIBIT 10.43 - Reynolds Metals Company Long-Term
Performance Share Plan
EXHIBIT 10.44 - Asset Purchase Agreement by and among Ball
Corporation, Ball Metal Beverage
Container Corp. and Reynolds Metals
Company dated as of April 22, 1998.
See EXHIBIT 2.
EXHIBIT 11 - Omitted; see Part I, Item 1 for
computation of earnings per share.
EXHIBIT 15 - None
EXHIBIT 18 - None
EXHIBIT 19 - None
EXHIBIT 22 - None
EXHIBIT 23 - None
EXHIBIT 24 - None
EXHIBIT 27.1 - Financial Data Schedule as of June 30, 1998
EXHIBIT 27.2 - Restated Financial Data Schedule as of
March 31, 1998
<F1> EXHIBIT 99 - Description of Reynolds Metals Company
Capital Stock. (File No. 1-1430, Form
10-Q Report for the Quarter Ended March
31, 1998, EXHIBIT 99)
Pursuant to Item 601 of Regulation S-K, certain instruments
with respect to long-term debt of Reynolds Metals Company (the
"Registrant") and its consolidated subsidiaries are omitted
because such debt does not exceed 10 percent of the total assets
of the Registrant and its subsidiaries on a consolidated basis.
The Registrant agrees to furnish a copy of any such instrument to
the Commission upon request.
[FN]
_______________________
<F1> Incorporated by reference.
<F2> Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 601 of
Regulation S-K.
</FN>
EXHIBIT 2
ASSET PURCHASE AGREEMENT
by and among
Ball Corporation,
Ball Metal Beverage Container Corp.
and
Reynolds Metals Company
dated as of April 22, 1998
<PAGE> i
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets............................2
Section 1.2 Excluded Assets........................................6
Section 1.3 Assumption of Liabilities..............................9
Section 1.4 Purchase Price........................................11
Section 1.5 Cash Purchase Price Adjustment........................12
Section 1.6 Adjustment for Periodic Items.........................14
Section 1.7 Closing...............................................15
Section 1.8 Further Assurances....................................18
Section 1.9 Allocation of Purchase Price..........................18
Section 1.10 Torrance, California Site............................19
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 2.1 Disclosure Schedule...................................23
Section 2.2 Corporate Organization................................24
Section 2.3 Operation of the Business.............................24
Section 2.4 Authorization.........................................24
Section 2.5 No Violation..........................................25
Section 2.6 Consents and Approvals................................25
Section 2.7 Financial Statements..................................26
Section 2.8 Accounts Receivable...................................27
Section 2.9 Inventory and Working Capital.........................27
Section 2.10 Absence of Certain Changes...........................27
Section 2.11 Title to Properties; Encumbrances....................29
Section 2.12 Equipment............................................30
Section 2.13 Intellectual Property Rights.........................31
Section 2.14 Certain Contracts....................................32
Section 2.15 Orders and Commitments...............................33
Section 2.16 Taxes................................................34
Section 2.17 Litigation...........................................35
Section 2.18 Compliance with Law..................................35
<PAGE> ii
Page
Section 2.19 Environmental Protection.............................36
Section 2.20 Labor Relations......................................37
Section 2.21 Employee Benefit Matters.............................39
Section 2.22 Customers and Suppliers..............................41
Section 2.23 Brokers and Finders..................................41
Section 2.24 Investment...........................................41
Section 2.25 Capitalization of Subsidiaries.......................42
Section 2.26 Latasa Agreements....................................44
Section 2.27 Latasa Offering Statement............................44
Section 2.28 Latasa Financial Statements..........................45
Section 2.29 SVE Agreement........................................45
Section 2.30 Seller's Exposure Estimates..........................45
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BALL AND BUYER
Section 3.1 Corporate Organization, etc...........................45
Section 3.2 Authorization, etc....................................46
Section 3.3 No Violation..........................................46
Section 3.4 Litigation............................................47
Section 3.5 SEC Reports...........................................47
Section 3.6 Brokers and Finders...................................47
Section 3.7 Authorization of Shares...............................47
Section 3.8 Consents and Approvals................................48
Section 3.9 Financing.............................................48
ARTICLE IV
COVENANTS OF SELLER
Section 4.1 Conduct of the Business...............................49
Section 4.2 Access................................................51
Section 4.3 Consents..............................................51
Section 4.4 Title to Real Property................................52
Section 4.5 No Solicitation.......................................54
Section 4.6 Supplements to Disclosure Schedule....................55
Section 4.7 Bulk Sales Laws.......................................55
<PAGE> iii
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.1 Reasonable Efforts....................................55
Section 5.2 WARN Act..............................................56
Section 5.3 Regulatory and Other Authorizations; Consents.........56
Section 5.4 Employee Matters for Represented Employees............57
Section 5.5 General Employee Matters, Employee Matters for
Nonrepresented Employees and Welfare Benefit
Provisions for All Employees..........................70
Section 5.6 Special Employment and Transition Rules for
Salaried Employees....................................83
Section 5.7 Tax Matters...........................................87
Section 5.8 Non-Competition.......................................92
Section 5.9 Confidentiality.......................................94
Section 5.10 Materials Received After Closing.....................95
Section 5.11 Access to Books and Records..........................95
Section 5.12 Actions by Ball......................................97
Section 5.13 Delivery of Financial Statements.....................97
Section 5.14 Litigation Support...................................97
Section 5.15 Returns..............................................98
Section 5.16 Accounts Receivable..................................98
Section 5.17 Inadvertently Retained Information...................98
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
Section 6.1 Survival of Representations, Warranties
and Covenants.......................................99
Section 6.2 Indemnification by Ball and Buyer.....................99
Section 6.3 Indemnification by Seller............................100
Section 6.4 Claims for Indemnification...........................100
Section 6.5 Environmental Indemnification........................103
<PAGE> iv
Page
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATION
Section 7.1 Representations and Warranties True..................105
Section 7.2 Performance..........................................105
Section 7.3 No Injunction, Litigation, etc.......................105
Section 7.4 Stockholder's Agreement..............................105
Section 7.5 Legal Opinion........................................106
Section 7.6 HSR Act Waiting Periods..............................106
Section 7.7 Certificates.........................................106
Section 7.8 Consents.............................................106
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATION
Section 8.1 Representations and Warranties True..................106
Section 8.2 Performance..........................................107
Section 8.3 No Injunction, Litigation, etc.......................107
Section 8.4 Governmental Filings and Consents; Third
Party Consents.....................................107
Section 8.5 Stockholder's Agreement..............................107
Section 8.6 HSR Act Waiting Periods..............................107
Section 8.7 No Material Adverse Change...........................107
Section 8.8 Certificates.........................................108
Section 8.9 Financing Conditions.................................108
Section 8.10 Actions by Seller....................................108
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.1 Methods of Termination...............................108
Section 9.2 Procedure upon Termination...........................109
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Amendment and Modification..........................110
<PAGE> v
Page
Section 10.2 Waiver of Compliance................................110
Section 10.3 Expenses, etc.......................................110
Section 10.4 Notices.............................................110
Section 10.5 Assignment..........................................112
Section 10.6 Publicity...........................................112
Section 10.7 Governing Law.......................................112
Section 10.8 Counterparts........................................112
Section 10.9 Headings............................................112
Section 10.10 Entire Agreement...................................112
Section 10.11 Third Parties......................................113
Section 10.12 Dispute Resolution.................................113
<PAGE> vi
ANNEXES
A Defined Terms
1.1(a) Real Property
1.1(c) Intellectual Property Rights
1.1(e) Permits and Environmental Permits
1.1(q) Other Assets
1.1(aa) Seller's Equity Interests
1.2(f) Retained Contracts
1.2(g) Excluded Claims Against Third Parties
1.2(j) Headquarters Assets
1.2(m) Excluded Assets
1.2(s) Torrance Extrusion Plant
1.3(a)(vii) Other Assumed Liabilities
1.3(b)(iv) Other Excluded Liabilities
8.10 Actions by Seller
EXHIBITS
A Stockholder's Agreement
1.2(t) Data Processing Services Agreement
1.7(b)(ii) Bill of Sale
1.7(b)(ix) Assignment and Assumption of Leases
1.7(c)(ii) Assignment and Assumption Agreement
1.7(c)(viii) Agreement Regarding Performance of Technical Services
1.7(d)(ii) Transitional Trademark License Agreement
1.7(d)(iii) Supply Program Agreement
1.7(d)(iv) Incentive Loan Agreement
1.7(d)(v) Transition Services Agreement
1.7(d)(vi) Payroll Services Agreement
1.7(d)(vii) [intentionally omitted]
1.7(d)(viii) Trademark License Agreement
1.7(d)(ix) Cross-License Agreement
1.7(d)(x) Transportation Services Agreement
1.7(d)(xi) Human Resources Services Agreement
1.9 Allocation of Purchase Price
1.10(a) Subdivision
1.10(b) Lease of Torrance Can Plant
<PAGE> vii
4.4(b) Forms (Model Deed Certificate; Moultrie and Hayward
Easements)
5.4(f) Offset Procedure Examples
6.5 Environmental Indemnification Procedures
7.5 Opinion of Ball General Counsel
<PAGE> viii
DISCLOSURE SCHEDULE
2.3 Operation of Business
2.4 Authorization
2.5 Non-Contravention
2.6 Consents and Approvals
2.7 Financial Statements
2.8 Accounts Receivable
2.9 Inventory
2.10 Absence of Certain Changes
2.11 Title to Properties; Encumbrances
2.12 Equipment
2.13 Intellectual Property
2.13(e) Year 2000 Program
2.13(f) Excluded Trademarks
2.13(g) Non-Transferred Patents, Trademarks and Copyrights
2.14(a) Material Contracts
2.14(b) Other Material Contract Matters
2.15 Orders and Commitments
2.16 Taxes
2.17 Litigation
2.18 Non-Compliance with Laws
2.19 Environmental Matters
2.19(a) Environmental Permits
2.19(c) Final Environmental Studies
2.20 Labor Relations
2.20(a) Written Policies, Rules and Procedures
2.21(a) Employee Benefit Matters and Plans
2.22 Customers and Suppliers
2.25(a) Capitalization of Domestic Subsidiaries
2.25(b) Capitalization of RIB
2.25(c) Capitalization of Latasa and Latasa Subsidiaries
2.25(d) Other Subsidiary Issues
2.26(d) Latasa Agreements and Non-Contravention
2.27 Latasa Offering Statement
2.28 Latasa Financial Statements
2.30 Seller's Exposure Estimates
3.7 Ball Shares
3.8 Buyer and Ball Consents and Approvals
4.4(b) Title Commitments and Permitted Exceptions
<PAGE> ix
5.5(a) Employee Benefits Data
5.5(c)(2) List of Headquarter Employees
5.6(a)(1) Reimbursement for Seconded Employee Expenses
5.6(c) Retained Seller Employees
7.8 Consents and Approvals that are a Condition
to Seller's Obligation to Close
8.4 Consents and Approvals that are a Condition
to Buyer's and Ball's Obligation to Close
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of April 22, 1998 (the
"Agreement"), is by and among Ball Corporation, an Indiana corporation
("Ball"), Ball Metal Beverage Container Corp., a Colorado corporation and
an indirect wholly-owned subsidiary of Ball ("Buyer") and Reynolds Metals
Company, a Delaware corporation ("Seller"). Capitalized terms not otherwise
defined in the text of this Agreement are used as defined in Annex A
hereto.
W I T N E S S E T H:
WHEREAS, Seller and its majority-owned subsidiaries are engaged
on a global basis in the design, manufacture, distribution and sale of
aluminum beverage can bodies and ends (such business, as conducted
throughout the world directly by Seller and its majority-owned subsidiaries
(including licensing, directly or indirectly, of intellectual property and
know-how used in the manufacture and sale of aluminum can bodies and ends
but excluding (i) Seller's operations engaged in the manufacture and sale
of aluminum can, end and tab sheet, the recycling and reclamation of
aluminum cans and the design, manufacture and sale of printing cylinders,
printing plates and color separations that act as suppliers to, or
customers of, Seller's global can business, (ii) Seller's operations
engaged in the design, manufacture, distribution and sale of machinery,
equipment and components and parts therefor used in the manufacture of
metal beverage can bodies and ends and certain can filling operations (the
"Machinery Operations") and (iii) "parent company" finance and
administration activities conducted at Seller's corporate headquarters at
6601 West Broad Street, Richmond, Virginia) is hereinafter referred to as
the "Business"); and, in connection with the development of the Business on
a global basis, Seller and its majority-owned subsidiaries have acquired,
directly or indirectly, minority interests in, and entered into technical
services and/or management agreements with, Latas de Aluminio, S.A.-LATASA
("Latasa") and its subsidiaries, Superenvases Envalic C.A. ("SVE") and
United Arab Can Manufacturing Company, Limited ("UAC");
WHEREAS, Seller's interest in Latasa is held by two indirect
subsidiaries, Reynolds International do Brasil Participacoes, Ltda, a
Brazilian corporation ("RIB"), and Reynolds International Latin America
S.A., a Panamanian corporation ("RILA");
<PAGE> 2
WHEREAS, Seller has reached agreement with Ball and Buyer to
sell to them or their Designees the Business (including Seller's interest
in Seller's wholly-owned subsidiaries, Latas de Aluminio Reynolds, Inc., a
Delaware corporation ("LAR") and RCAL Cans, Inc., a Delaware corporation
("RCAL"), together with RCAL's wholly-owned subsidiary, RIND Cans, Inc., a
Delaware corporation ("RIND")) and Seller's interests in RIB and SVE and
the equity securities of Latasa held by RILA, all on the terms and
conditions set forth in this Agreement; and
WHEREAS, concurrently with the closing of the transactions
contemplated hereby, if Ball elects to issue Ball Shares to Seller pursuant
to the terms of this Agreement, Ball and Seller will enter into a
stockholder's agreement, substantially in the form of Exhibit A (the
"Stockholder's Agreement").
NOW, THEREFORE, in consideration of the mutual agreements and
the representations and warranties contained herein and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets. Subject to the terms
and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), Seller shall sell,
transfer, convey, assign and deliver, or cause to be sold, transferred,
conveyed, assigned and delivered, to Buyer, Ball or their Designees, as
provided below, and Buyer, Ball or their Designees shall purchase, acquire
and accept from Seller and its majority-owned subsidiaries, either directly
or indirectly through the acquisition of all of Seller's interests in LAR
and RCAL, all assets, rights and interests in assets, other than the
Excluded Assets, which are held or owned by Seller or its majority-owned
subsidiaries as of the Closing and which are used or held for use
exclusively or primarily in the conduct of the Business, including, without
limitation, the following (collectively, the "Business Assets"):
(a) Real Property: The owned real properties described in
Annex 1.1(a), together with the plants, buildings, fixtures and
improvements thereon and all tenements, hereditaments and appurtenances
thereto (the "Owned Real Property"), as well as Seller's leasehold
interests (or those of any Affiliate of Seller)
<PAGE> 3
as lessee under the real
property leases described in Annex 1.1(a) (the "Real Property Leases" and
the property covered thereby, together with Seller's (or such Affiliate's)
interests in all plants, buildings, fixtures and improvements thereon, the
"Leased Premises"). The Owned Real Property and the Leased Premises
together are sometimes referred to herein as the "Business Locations."
(b) Personal Property Other Than Inventory: The
furniture, fixtures, machinery, equipment, equipment subassemblies,
furnishings, vehicles, tools, dies, jigs, printing plates, physical
embodiments of label films and color standards, service, spare and
replacement parts, stores, packaging materials, pallets, slip sheets and
top frames, office and other supplies and other tangible personal property
(other than Inventory) that is either (i) located at the Business
Locations, (ii) reflected on the most recent balance sheet included in the
Audited Financial Statements (other than Excluded Assets and any assets
sold or disposed of in the ordinary course of business and consistent with
the terms of this Agreement since the date of such balance sheet) or (iii)
otherwise used or held for use exclusively or primarily in the Business,
whether or not such property is reflected as an asset on the books and
records of Seller (the "Equipment").
(c) Intellectual Property Rights: Except as otherwise
specifically identified as excluded in Annex 1.1(c), (i) the Patents,
Trademarks, and Copyrights listed or described in Annex 1.1(c), (ii)
Technology, and (iii) all agreements (whether or not with related parties)
under which Seller or its majority-owned subsidiaries have granted, or have
been granted, the right to use Technology or the Patents, Trademarks and
Copyrights listed or described in Annex 1.1(c) (the Business Assets
described in this Section 1.1(c), collectively, the "Intellectual Property
Rights").
(d) Business Information: All books and records (i)
customarily located at the Business Locations (other than those exclusively
related to Excluded Assets or Excluded Liabilities) or (ii) customarily
located at locations other than the Business Locations which are used
exclusively or primarily in the Business, including, without limitation,
files, computer disks and tapes, telephone directories, invoices, credit
and sales records, personnel records (subject to applicable law), customer
lists (including addresses and phone numbers), supplier lists, manuals
(including policy manuals), drawings, accounting books and records,
detailed fixed- asset ledgers and records, sales literature, current price
lists and discounts, promotional signs and literature, marketing and sales
programs, manufacturing and quality control records and procedures and
compliance policies and procedures; and access
<PAGE> 4
to and, if requested by Ball
or Buyer, copies of such other books and records to the extent relating to
the Business or Business Assets or Assumed Liabilities which are
customarily located at locations other than the Business Locations;
provided that Seller may retain and provide Buyer with copies of any
records necessary for Seller's ongoing business or tax purposes or for
performance of obligations retained by Seller hereunder (collectively,
"Business Information").
(e) Governmental Permits: To the extent assignable, (i)
the Permits and the Environmental Permits that relate exclusively to the
Business, as more particularly described in Annex 1.1(e) and (ii) any
Business-related portions of any Permits and Environmental Permits that are
used in the Business but do not relate exclusively to the Business (the
Permits described in this clause (ii), the "NonExclusive Permits").
(f) Leases and Contracts: The rights of Seller and its
Affiliates in, to and under (i) all contracts, leases of personal property,
agreements, licenses, commitments and warranties related exclusively or
primarily to the Business, (ii) sales orders, purchase orders and
quotations and bids generated by the Business, and (iii) all material
agreements to which Seller or any of its Affiliates is a party, and which
relate to the ownership, management, governance and financing of, as well
as technical assistance to, Latasa and its subsidiaries (the "Latasa
Agreements") and the contracts and agreements relating to ownership,
management and governance of, and provision of know-how and technical
assistance to SVE.
(g) Inventory: The inventories of raw materials,
work-in-process and finished products carried on the books of the Business
(including any such inventories that have been written off or written down
on the books of the Business), located at the Business Locations or related
exclusively or primarily to the Business (excluding the inventories
described in Section 1.1(m), the "Inventory").
(h) Accounts Receivable and Prepaid Expenses: All notes
and accounts receivable on the books of or generated by the Business as of
the Closing (the "Accounts Receivable"), including, without limitation, all
trade notes and trade accounts receivable and receivables from employees of
Seller who are Transferred Employees, and all deposits and prepaid rents,
license fees and other expenses to the extent related to the Business or
the Business Assets.
(i) Computer Software: All computer software related
exclusively to the Business, including all documentation and source codes
with
<PAGE> 5
respect to such software (to the extent Seller or
any Affiliate of Seller possesses such documents or source codes) and, to
the extent they relate exclusively to the Business and they are legally
assignable or transferable by Seller, licenses and leases of software.
(j) Non-Exclusive Contracts: Any Business-related
portions of any contract, claim, lease, sales/purchase order, quotation,
bid, agreement, license or contractual right to which Seller or any
Affiliate of Seller is a party with respect to operations or activities
beyond those exclusively or primarily related to the Business (each, a
"Non-Exclusive Contract"), to the extent that such portions are legally
assignable or transferable to Buyer.
(k) Single Location Plans: All assets of any Single
Location Plans that are transferred to, or assumed by, Buyer under Section
5.4.
(l) Petty Cash: All petty cash on hand at the Business
Locations.
(m) Consigned Inventories: Seller's rights to inventories
of supplies and raw materials at the Business Locations consigned as of the
Closing by (x) third parties or (y) other businesses of Seller or any
Affiliate of Seller that act as suppliers to the Business (to the extent
such inventories have not been included on the Closing Statement); provided
that (i) Seller is not hereby conveying to Buyer an ownership interest in
such inventories, (ii) such inventories shall not be deemed a part of the
Inventory for purposes of Section 1.5 or otherwise and (iii) the rights
conveyed under clause (y) are only Seller's rights as owner of the Business
and not as owner of such business acting as supplier.
(n) Restrictions on Competition and Confidentiality: To
the extent assignable, all rights of Seller or any Affiliate of Seller to
enforce restrictions on competition and obligations regarding
confidentiality or limited use of information imposed on third parties and
present and former officers, executives and employees of Seller and its
Affiliates to the extent such restrictions and obligations relate to the
Business; provided, however, that Seller shall retain the right to seek
relief on behalf of itself and its majority-owned subsidiaries for any
damages suffered by any of them as a result of any breach of any such
restriction or obligation.
<PAGE> 6
(o) Claims: All claims, causes of action, choses in
action, rights of recovery and rights of setoff of any kind (including,
without limitation, warranty rights against suppliers to the Business),
known or unknown, liquidated or unliquidated, to the extent they relate to
or arise out of the Business Assets, or the condition of the Business
Assets, existing at the Closing Date or the conduct of the Business prior
to the Closing; provided that any of the foregoing that arise from acts,
omissions or conditions that gave rise, or shall give rise, to an Excluded
Liability shall, to the extent arising from the Excluded Liability and
Seller discharges such Excluded Liability, accrue to the benefit of Seller.
(p) Goodwill and Associated Assets: Any and all goodwill,
customer lists, going concern value and similar assets related exclusively
or primarily to, or used exclusively or primarily in, the Business.
(q) Other Assets: Such other assets as are specifically
identified in Annex 1.1(q).
In addition to the Business Assets, subject to the terms and
conditions of this Agreement, at Closing, Seller and its Affiliates shall
sell, transfer, convey, assign and deliver, or cause to be sold,
transferred, conveyed, assigned and delivered, to Buyer, Ball or its
Designees, and Buyer, Ball or its Designees shall purchase, acquire and
accept from Seller and its Affiliates, Seller's and its Affiliates' rights,
title and interest in (x) any equity securities of or other equity
interests in SVE and RIB and (y) the equity securities of Latasa held by
RILA, all as listed in Annex 1.1(aa). Such equity securities, together with
the equity securities of LAR and RCAL being transferred to Ball, Buyer or
their Designees pursuant hereto, are sometimes referred to herein as the
"Shares."
The parties agree that the Business Assets and Shares shall be
purchased by Ball, Buyer or their Designees as directed by Buyer in writing
at least five days prior to the Closing.
Section 1.2 Excluded Assets. Notwithstanding the provisions of
Section 1.1, the following properties, assets and rights used in, or
related to, Seller's operation of the Business are excluded from the
Business Assets (the "Excluded Assets"):
(a) The name "Reynolds" and all variations thereof;
<PAGE> 7
(b) Except as provided in Section 1.1(h) and (l), cash,
financial instruments and marketable securities on hand and in banks, cash
deposits with respect to workers' compensation and insurance, cash
equivalents, and investments;
(c) Accounts Receivable owed to Seller from any of its
employees who are not Transferred Employees;
(d) Aluminum can sheet inventory that is, consistent with
past practice and the terms of existing supply agreements, carried on the
books of Seller's Mill Products Division and not included on the Closing
Statement, whether or not located at a Business Location; provided that
Buyer will receive Seller's rights as a consignee of any such inventory
that is located at a Business Location as if Seller's Mill Products
Division were a third party supplier to the Business;
(e) Seller's checkbooks and canceled checks;
(f) Subject to Sections 1.1(j) and 1.7(e), all
Non-Exclusive Contracts and any agreements specifically identified in Annex
1.2(f) (the "Retained Contracts");
(g) All claims and litigation against third parties (and
benefits to the extent they arise therefrom) to the extent that such claims
and litigation relate in whole or in part to Excluded Liabilities or
Excluded Assets or are set forth in Annex 1.2(g);
(h) Seller's insurance policies and rights in connection
therewith;
(i) Rights arising from any refunds due with respect to
insurance premium payments and deposits;
(j) Except for any assets specifically enumerated in
Annex 1.2(j), any and all tangible assets located at Seller's corporate
headquarters at 6601 West Broad Street in Henrico County, Virginia;
(k) All of Seller's right, title and interest in, to and
under trademarks and trademark rights, trade names and trade name rights,
service marks and service mark rights, service names and service name
rights, brand names,
<PAGE> 8
copyright rights, trade dress, business and product
names, logos, slogans, and all pending applications for and registrations
of trademarks and service marks, which (i) are neither used exclusively in
the Business nor applicable exclusively to the Business or (ii) include one
or more of the following marks: the trademarks REYNOLDS; Knight, Horse and
Dragon Design or the names "Reynolds," "Reynolds Metals Company," "Reynolds
Aluminum" or any variation thereof or any trademark containing REYNOLDS,
REY, REYNO, or a Knight Horse and Dragon design (the trademarks described
in this clause (ii) are referred to herein as the "Reynolds Marks");
(l) Except for assets in Single Location Plans assumed by
Buyer under Section 5.4, all assets held in or for the Plans;
(m) Any assets identified in Annex 1.2(m);
(n) Books and records exclusively relating to Excluded
Assets and Excluded Liabilities;
(o) Any Tax refunds, credits or rights arising therefrom,
for all periods or portions of periods ending before the Closing Date;
provided that none of Ball, Buyer or their Affiliates has incurred or will
incur an increased Tax burden as a result of such refund;
(p) Except for those assets identified in Annex 1.1(q),
Seller's former Houston, Texas, and Fulton, New York, can plants;
(q) Seller's or its Affiliates' interests in, and
contracts relating to, UAC;
(r) Seller's rights under this Agreement and under any
agreement, instrument or document delivered in connection herewith;
(s) The portion of the Owned Real Property located in
Torrance, California which constitutes Seller's extrusion plant as more
specifically described in Annex 1.2(s) subject to minor adjustment of the
boundary lines thereof in accordance with Section 1.10; and
(t) Except as specifically provided in Section 1.1 (a),
(e), (i), and (o), and subject to Section 1.7(e) and the data processing
services agreement
<PAGE> 9
substantially in the form of Exhibit 1.2(t) (the "Data
Processing Services Agreement"), any owned or leased premises, Permits,
Environmental Permits, computer software, claims, causes of action, choses
in action, rights of recovery and rights of setoff.
Section 1.3 Assumption of Liabilities.
(a) On the Closing Date, except as otherwise specifically
provided in this Agreement or in any agreement, instrument or document
delivered in connection herewith, subject to the terms and conditions of
this Agreement, Buyer shall assume the following liabilities (the "Assumed
Liabilities") and no others:
(i) Liabilities relating to Transferred Employees
and employee benefits to the extent set forth in Sections 5.4, 5.5
and 5.6, including, without limitation, all liabilities and
obligations related to the Single Location Plans assumed by Buyer
under Section 5.4 and under Collective Bargaining Agreements in
accordance with Sections 5.4 and 5.5;
(ii) All trade accounts payable of the Business
(including trade payables to other divisions of Seller for aluminum
can sheet) to the extent set forth on the Closing Statement and other
current liabilities of the Business to the extent set forth on the
Closing Statement;
(iii) All liabilities and obligations of Seller and
its majority-owned subsidiaries to deliver goods or services to
customers of the Business arising from orders placed in the normal
course of business of the Business which are assigned to Buyer
pursuant hereto;
(iv) All obligations of Seller or any of its
majority-owned subsidiaries to be performed from and after the
Closing Date under any contract, lease, commitment, license, permit,
approval, authorization or other agreement or arrangement
constituting part of the Business Assets to the extent assigned to
Buyer pursuant hereto;
<PAGE> 10
(v) Subject to Ball's and Buyer's right to
indemnification from Seller set forth in Article VI, liabilities and
obligations under Environmental Laws with respect to Environmental
Conditions;
(vi) All liabilities that constitute matters of
record relating to Seller's ownership of the Owned Real Property to
the extent specifically disclosed in Section 4.4(b) of the Disclosure
Schedule and subject to the limitations set forth therein or accepted
by Ball or Buyer under Section 4.4; and
(vii) All other liabilities to the extent set forth in
or specifically reserved against on the Closing Statement or to the
extent specifically described in Annex 1.3(a)(vii).
(b) Except as expressly provided in Section 1.3(a), Buyer
will not assume or be liable for the following liabilities and obligations
(the "Excluded Liabilities"):
(i) Except as otherwise provided in this Agreement
(including, without limitation, in Section 1.6, which shall control
to the extent of any conflict with this Section 1.3(b)), (x) any
federal, state, local or foreign taxes including, without limitation,
any net income, alternative or add-on minimum tax, gross income,
gross receipts, excise, sales, use, ad valorem, franchise, capital,
paid-up capital, profits, greenmail, license, withholding, payroll,
environmental, windfall profits tax or other tax or any custom or
duty, or any other charges, fees, levies, penalties or other
assessments imposed by any Taxing Authority, including, in each case,
any interest, penalties or additions thereto ("Taxes"), that are
attributable to any period or portion thereof ending on or before the
Closing Date imposed on Seller or its Affiliates or related to the
Business or the Shares and (y) any liability for Taxes of any other
person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise;
(ii) All liabilities and obligations relating to any
employee or any employee benefits which are not to be assumed by
Buyer under Section 1.3(a)(i) or Sections 5.4, 5.5 and 5.6;
<PAGE> 11
(iii) All liabilities or obligations to the extent
relating to the acquisition, ownership or use of any of the Excluded
Assets (including the Retained Contracts);
(iv) Any liabilities listed in Annex 1.3(b)(iv);
(v) All liabilities or obligations arising under
Environmental Laws other than those expressly assumed by Buyer
pursuant to Section 1.3(a)(v), including, without limitation, all
liabilities or obligations arising under Environmental Laws in
connection with facts, events, conditions, actions or omissions
existing or occurring before Closing at any location other than the
Business Locations ("Offsite Obligations");
(vi) Except as otherwise provided in Section
1.3(a)(vii), any liability or claim for injury to person or property
or warranty claim which arises out of the operation of the Business
or the sale of any product before the Closing Date; and
(vii) Any other liabilities, debts, commitments or
obligations, known or unknown, contingent or otherwise, of Seller or
its Affiliates other than those specified in Section 1.3(a).
Section 1.4 Purchase Price. Subject to the terms and conditions
of this Agreement, in reliance on the representations, warranties and
agreements contained herein, and in consideration of the sale, assignment,
transfer and delivery of the Business Assets and the Shares referred to in
Section 1.1 and Seller's other obligations set forth herein (including in
Section 5.8), Ball and Buyer agree to pay or cause to be paid to Seller at
the Closing, and Seller agrees to accept the sum of $820 million (the
"Purchase Price") payable as follows: (i) shares of common stock, no par
value, of Ball having an aggregate Designated Value, determined as set
forth below, of up to $100 million (the "Ball Shares") plus (ii) an amount
in cash equal to the Purchase Price minus the aggregate Designated Value of
the Ball Shares (the "Cash Price"), plus or minus the adjustment set forth
in Section 1.5. Not later than the close of business on the fourth day
prior to the Closing Date, Ball shall notify Seller whether it intends to
pay a portion of the Purchase Price in Ball Shares and the number of Ball
Shares and the per Share and aggregate Designated Value of the Ball Shares
to be so issued. If Ball elects to pay a portion of the Purchase Price in
Ball
<PAGE> 12
Shares, the shares so issued shall have an aggregate Designated Value
of no less than $25 million and no more than $100 million. The per Share
"Designated Value" of Ball Shares shall mean the average of the daily
volume weighted average trading price of Ball Shares as reported in the
Bloomberg Financial Markets for the 20 consecutive trading days ending five
days prior to the Closing Date; provided that in no event shall the per
Share Designated Value of Ball Shares used to determine the number of Ball
Shares to be issued in payment of a portion of the Purchase Price exceed
$42 or be less than $25.25.
Section 1.5 Cash Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than 60
days following the Closing Date, Seller shall prepare and deliver to Buyer
a working capital statement of the Business as of 12:01 a.m. on the Closing
Date (the "Closing Statement"), setting forth the current assets included
in the Business Assets less the current liabilities included in the Assumed
Liabilities (such difference being referred to herein as the "Working
Capital") in conformity with United States Generally Accepted Accounting
Principles ("GAAP") determined on a basis consistent with the balance sheet
included in the Audited Financial Statements (the "Audited Balance Sheet")
except that a current liability of (i) $250,000 shall be recorded as a
reserve on the Closing Statement for title insurance payments and (ii)
$250,000 shall be recorded as a reserve for SUB liability in accordance
with Section 5.4(c). For greater certainty, the parties acknowledge and
agree that both the Closing Statement and the Audited Balance Sheet exclude
spare or replacement parts from current assets.
(b) After receipt of the Closing Statement, Buyer shall
have 30 days to review it. Buyer and its authorized representatives shall
have reasonable access to all relevant books and records and employees of
Seller and Seller's accountants to the extent required to complete their
review of the Closing Statement, including, without limitation, the
accountants' work papers used in preparation thereof. Unless Buyer delivers
written notice to Seller on or prior to the 30th day after receipt of the
Closing Statement specifying in reasonable detail its objections to the
Closing Statement on the grounds that the Closing Statement was not
prepared in accordance with GAAP, consistently applied with the Audited
Balance Sheet or with respect to any arithmetic errors, the parties shall
be deemed to have accepted and agreed to the Closing Statement. If Buyer so
notifies Seller of such an objection to the Closing Statement, the parties
shall within 30 days following the date of such notice (the "Resolution
Period") attempt to resolve their differences. Any resolution by them as to
any disputed amount shall be final, binding, conclusive and
<PAGE> 13
nonappealable, provided, however, that agreement by Seller and Buyer as to
the Final Closing Statement or a determination pursuant to Section 1.5(c)
shall not prevent either party from making any claims under Article VI hereof.
The term "Final Closing Statement" shall mean the definitive Closing Statement
agreed to by Seller and Buyer in accordance with this Section 1.5(b) or the
definitive Closing Statement resulting from the determination made by the
Neutral Auditor in accordance with Section 1.5(c) (in addition to those
items theretofore agreed to by Seller and Buyer).
(c) If at the conclusion of the Resolution Period, the
parties have not resolved the disputes, then all amounts remaining in
dispute shall, at the election of either party, be submitted to an auditor
who shall be selected by Ball and Seller (the "Neutral Auditor"). The
Neutral Auditor shall be engaged no later than three business days after an
election by either party to submit its objections to the Neutral Auditor,
and each party agrees to execute, if requested by the Neutral Auditor, a
reasonable engagement letter. The Neutral Auditor shall be a nationally
recognized certified public accounting firm that is not rendering (and
during the preceding two-year period has not rendered) audit services to
either Seller or Ball in North America. If the parties are unable to agree
on such Neutral Auditor, then the respective accounting firms of each of
Ball and Seller shall choose the Neutral Auditor. All fees and expenses of
the Neutral Auditor shall be borne equally by Seller and Buyer. The Neutral
Auditor shall act as an arbitrator to determine, based solely on the
presentations by Seller and Buyer, and not by independent review, only
those issues still in dispute. The Neutral Auditor's determination shall be
made within 30 days of its engagement or as soon thereafter as possible,
shall be set forth in a written statement delivered to Seller and Buyer and
shall be final, binding, conclusive and nonappealable.
(d) All Inventory reflected on the Closing Statement
shall be based upon a physical count of the Inventory taken by Seller (with
Buyer and its independent auditors being permitted to observe such count
and take additional test counts as Buyer reasonably deems appropriate) as
of 12:01 a.m. on the Closing Date. Such physical inventory shall be
conducted in accordance with procedures to be mutually agreed and shall be
taken immediately prior to the Closing Date. The physical inventory shall
include all products of Seller and list the type and quantity of the
inventory as of the date the physical count was taken. For purposes of the
Closing Statement, the Inventory shall include only finished goods,
work-in-process and raw materials (which are either currently used in
production of products or are products currently offered for sale by
Seller). In connection with the physical
<PAGE> 14
inventory, no later than 90 days
after the Closing Date, Buyer shall prepare, with assistance from Seller, a
listing of Inventory deemed to be potentially obsolete and the book value
thereof as reflected on the Closing Statement (the "Inventory Carrying
Value"). If any Inventory so identified is not sold by Buyer within twelve
months after the Closing Date, then Seller shall promptly pay to Buyer an
amount equal to the Inventory Carrying Value of such Inventory less the
scrap value thereof, provided that such payment, in the aggregate, shall
not exceed $1,000,000. Notwithstanding any other provision hereof to the
contrary, no other reserve for obsolete and slow-moving inventory shall be
included in the Closing Statement.
(e) The Purchase Price shall be (i) increased
dollar-for-dollar to the extent the Working Capital as reflected on the
Final Closing Statement is greater than $78 million and (ii) decreased
dollar-for-dollar to the extent the Working Capital as reflected on the
Final Closing Statement is less than $78 million. The amount of any such
change in the Purchase Price pursuant to this Section 1.5(e) shall be paid
by Buyer to Seller, in the case of an increase, or by Seller to Buyer, in
the case of a decrease, in each case in cash plus interest on such amount
from the Closing Date through the date of payment at the Prime Rate within
five business days after the Final Closing Statement is agreed to by Seller
and Buyer or is determined by the Neutral Auditor. The "Prime Rate" means
the prime lending rate as announced by First Chicago-NBD, or its successor,
as in effect on the Closing Date.
Section 1.6 Adjustment for Periodic Items.
(a) Any sales, transfer, stamp or use Tax or fee
applicable to the sale of the Business Assets or Shares to Buyer, Ball or
their Designees pursuant to this Agreement shall be borne as follows. Buyer
shall bear the first $150,000 of the aggregate of such Taxes and fees and
the remainder of such Taxes and fees shall be borne equally by Buyer and
Seller. Any such Taxes or fees applicable to the sale of the Business
Assets pursuant to this Agreement shall initially be paid by the party
legally liable under the laws applicable to each taxing jurisdiction, and
the parties shall from time to time remit payments to one another to effect
the sharing arrangements provided in the first sentence of this Section
1.6(a). Under no circumstances shall this article be construed to include,
nor shall Ball, Buyer or their Affiliates be liable for, any income,
franchise, gross income, gross receipts or excise Tax or any other similar
liability of Seller related to the sale of the Business Assets. Buyer shall
provide Seller with resale exemption certificates or similar documents, as
appropriate. Buyer and Seller shall cooperate in using reasonable efforts
of legal means to
<PAGE> 15
minimize, to the extent permitted by law, the aggregate amount of Taxes,
fees and other charges imposed on the transactions contemplated in this
Agreement.
(b) On the Closing Date or as promptly thereafter as
practicable, the parties shall adjust the other annualized or periodic
items related to the Business (to the extent not reserved or accrued for in
the Final Closing Statement) as of the Closing Date, with Seller
responsible for matters up to and including the Closing Date and Buyer
responsible for matters from and after the Closing Date. Such adjustable
items shall include, without limitation, electric, gas, telephone and
utility charges of the operations of Seller related to the Business
Locations, either paid or accrued, and amounts paid under leases and loans;
provided, however, that nothing in this Section 1.6 shall increase the
liabilities and obligations of Seller assumed by Buyer pursuant to this
Agreement. Such adjustable items shall also include customer volume rebates
and vendor volume rebates and incentives, which will be attributed to
Seller to the extent such rebates and incentives relate to items purchased
prior to the Closing and to Buyer to the extent such rebates and incentives
relate to items purchased on or after the Closing.
Section 1.7 Closing.
(a) The Closing will take place at the offices of
Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker Drive,
Chicago, Illinois 60606, within seven days after all conditions set forth
in Articles VII and VIII (other than those requiring only performance by
the parties at Closing) have been satisfied or waived or such other time
and place as the parties may agree upon but in no event earlier than 7 days
after the expiration or termination of the waiting period under the HSR Act
(the "Closing Date") and shall be effective as of 12:01 a.m. on the Closing
Date.
(b) At the Closing, Seller will deliver to Ball, Buyer or
their Designees (i) if any Ball Shares are issued pursuant hereto, an
executed copy of the Stockholder's Agreement, (ii) all documents of title
necessary to transfer ownership to Buyer of the Business Assets other than
the Real Property, including a duly executed bill of sale substantially in
the form of Exhibit 1.7(b)(ii) (the "Bill of Sale"), (iii) executed copies
of the consents referred to in Section 2.6 hereof, (iv) certificates
representing the Shares, accompanied by appropriate stock powers or other
transfer instruments duly executed in blank or such other evidence of
ownership and instruments of transfer as are appropriate in the applicable
jurisdiction, (v) with respect to Patents, Trademarks and Copyrights
included in the Business Assets (the "Filed
<PAGE> 16
Intellectual Property"), (A)
one "global assignment" of the Filed Intellectual Property containing a
schedule of all applications therefor and registrations thereof and (B)
individual assignments of Filed Intellectual Property, applications
therefor and registrations thereof, in recordable form for each
jurisdiction in which such Filed Intellectual Property is subsisting, (vi)
all assignments of Permits and Environmental Permits to be acquired by
Buyer pursuant hereto, (vii) duly executed and acknowledged special
warranty deeds conveying title to the Owned Real Property, subject only to
the Permitted Exceptions, (viii) any documents required of Seller by the
title company to issue the title insurance policies and endorsements in
accordance with the provisions of Section 4.4(b) of this Agreement, (ix)
duly executed assignment and assumption agreements with respect to the Real
Property Leases substantially in the form of Exhibit 1.7(b)(ix) (the
"Assignment and Assumption of Leases"), (x) if subdivision of the Torrance,
California, parcel of Owned Real Property has not been completed prior to
the Closing, a lease and license of the can plant portion of such parcel as
provided in Section 1.10, (xi) all such other deeds, consents,
endorsements, assignments and other instruments as are necessary to vest in
Buyer, Ball or their Designees title to the Business Assets and the Shares
to be transferred to Buyer, Ball or their Designees and (xii) all other
previously undelivered documents required to be delivered by Seller to
Ball, Buyer or their Designees at or prior to the Closing in connection
with the transactions contemplated by this Agreement.
(c) At the Closing, Ball and Buyer will deliver to Seller
(i) cash in the amount specified in Section 1.4 by wire transfer of
immediately available funds to an account designated in writing by Seller,
(ii) a duly executed assignment and assumption agreement substantially in
the form of Exhibit 1.7(c)(ii) (the "Assignment and Assumption Agreement")
for all Assumed Liabilities, (iii) a duly executed Assignment and
Assumption of Leases for the Real Property Leases, (iv) if any Ball Shares
are issued pursuant hereto, a duly executed Stockholder's Agreement; (v) if
any Ball Shares are issued pursuant hereto, certificates representing the
Ball Shares in accordance with Section 1.4, such certificates bearing a
legend to the effect set forth in the Stockholder's Agreement, (vi) if
requested by Seller, the agreement regarding performance of technical
services with respect to UAC in substantially the form of Exhibit
1.7(c)(iii) (the "Agreement Regarding Performance of Technical Services")
and (vi) all previously undelivered documents required to be delivered by
Ball or Buyer to Seller at or prior to the Closing.
(d) At the Closing, Seller, Ball and Buyer shall, or
shall cause their respective Affiliates to, execute and deliver (i) the
Data Processing Services Agreement, (ii) the transitional trademark license
agreement in substantially the form
<PAGE> 17
of Exhibit 1.7(d)(ii) (the
"Transitional Trademark License Agreement"), (iii) the supply program
agreement in substantially the form of Exhibit 1.7(d)(iii) (the "Supply
Program Agreement"), (iv) an incentive loan agreement in substantially the
form of Exhibit 1.7(d)(iv) (the "Incentive Loan Agreement"), (v) the
transition service agreement in substantially the form of Exhibit 1.7(d)(v)
(the "Transition Services Agreement"), (vi) the payroll services agreement
in substantially the form of Exhibit 1.7(d)(vi) (the "Payroll Services
Agreement"), (vii) [intentionally omitted], (viii) the trademark license
agreement in substantially the form of Exhibit 1.7(d)(viii) (the "Trademark
License Agreement"), (ix) the cross-license agreement in substantially the
form of Exhibit 1.7(d)(ix)(the "Cross-License Agreement"), (x) the
transportation services agreement in substantially the form of Exhibit
1.7(d)(x)(the "Transportation Services Agreement") and (xi) the human
resources services agreement in substantially the form of Exhibit
1.7(d)(xi)(the "Human Resources Services Agreement") and, together with the
Stockholder's Agreement (if executed), the Data Processing Services
Agreement, the Transitional Trademark License Agreement, the Transition
Services Agreement, the Payroll Services Agreement, the Agreement Regarding
Performance of Technical Services (if executed), the Trademark License
Agreement, the Cross-License Agreement, and the Supply Program Agreement,
the "Ancillary Agreements").
(e) To the extent that the sale, conveyance, transfer or
assignment of any agreement, lease, contract or other document or
instrument (including, but not limited to, the Business related portion of
any Non-Exclusive Contract or Non-Exclusive Permit) requires the consent of
any person other than Buyer, Ball or Seller, this Agreement shall not
constitute an agreement to effect such sale, conveyance, transfer or
assignment if such action would constitute a breach thereof unless and
until such consent or waiver of such person has been obtained; provided
that the foregoing shall not limit or affect Seller's representations and
warranties in this Agreement or the condition set forth in Section 8.4
hereof. To the extent that any such consent or waiver is not obtained by
Seller, Seller shall (i) use all reasonable efforts to provide or cause to
be provided to Buyer (or Ball, as the case may be) the benefits of any such
agreement, lease, contract or other document or instrument for which
consent or waiver has not been obtained, (ii) cooperate in any arrangement,
reasonable and lawful as to both Seller and Ball, Buyer or their Designees
designed to provide such benefits to Buyer, Ball or their Designees (in the
case of Business Assets and Shares transferred to such party pursuant to
Section 1.1) after the Closing and (iii) enforce for the account of Buyer,
Ball or their Designees (in the case of Business Assets and Shares
transferred to such party pursuant to Section 1.1 (at Ball's or Buyer's
expense, as the case may be)), any rights of Seller
<PAGE> 18
arising from such
agreement, lease, contract or other document or instrument for which
consent or waiver has not been obtained against the other party, including,
without limitation, the right to elect to terminate in accordance with the
terms thereof on the advice of Buyer. Subject to Section 6.4(b), Seller
shall hold Ball and Buyer harmless from any Loss suffered by Ball or Buyer
as a result of any failure of Seller to obtain such consent or waiver.
Buyer, Ball or their Designees (in the case of Business Assets and Shares
transferred to such party pursuant to Section 1.1) shall use all reasonable
efforts to perform the obligations of Seller arising under such agreement,
lease, contract or other document or instrument for which consent or waiver
has not been obtained, to the extent that by reason of the transactions
consummated pursuant to this Agreement, Buyer, Ball or their Designees (in
the case of Business Assets and Shares transferred to such party pursuant
to Section 1.1) has control over the resources necessary to perform such
obligations.
Section 1.8 Further Assurances. After the Closing, each party
shall, from time to time, at the request of the other party and without
further cost or expense to the other party, execute and deliver such other
instruments of conveyance, assignment, transfer and assumption and take
such other actions as the other party may reasonably request, to consummate
more effectively the transactions contemplated hereby and to vest in Ball,
Buyer and their Designees title to the Business Assets and the Shares as
contemplated by this Agreement, or to cause Buyer to assume the Assumed
Liabilities, as the case may be. As to any of such licenses, registrations
and permits which are transferable to Ball, Buyer or their Designees,
Seller shall cooperate with Ball, Buyer or their Designees, to effect the
transfer of such licenses, registrations and permits. Notwithstanding the
foregoing, no party shall be required under this Section 1.8 to make any
payment or to incur any economic burden other than customary costs and
expenses arising from the performance of such party's obligations under
this Section 1.8.
Section 1.9 Allocation of Purchase Price. The Purchase Price
(plus Assumed Liabilities to the extent properly taken into account under
section 1060 of the Code) shall be allocated among the Business Assets, the
Shares and the covenant not to compete in Section 5.8 hereof in accordance
with Exhibit 1.9. Buyer, Ball and Seller shall use their best efforts to
agree, as soon as practical after the Closing, but in no event later than
30 days after the determination of the Cash Purchase Price Adjustment in
Section 1.5, on the allocation of the Purchase Price, including any
adjustment pursuant to Section 1.5 (or such time as is mutually agreed by
Seller and Buyer), among the Business Assets, the Shares, and the covenant
not to compete, and prepare and attach a completed Exhibit 1.9 accordingly.
Each of Buyer and Seller
<PAGE> 19
shall prepare and timely file Internal Revenue
Service Form 8594, reasonably cooperate with the other party in the
preparation of such forms and furnish the other party with copies of such
forms prepared in draft form within a reasonable period before the filing
due date. Any disputes resulting from disagreement upon the allocation of
the Purchase Price shall be resolved by the Neutral Auditor in accordance
with procedures outlined in Section 1.5(c). Buyer, Ball and Seller agree to
(i) be bound by the allocation in Exhibit 1.9, (ii) act in accordance with
such allocation in filing of all Tax Returns (including, without
limitation, filing Form 8594 with its federal income Tax Return for the
year that includes the Closing Date) and in the course of any Tax audit,
Tax review, or Tax litigation relating thereto and (iii) take no position,
and cause all Affiliates not to take a position, that is inconsistent with
such allocation for federal or state income Tax purposes.
Section 1.10 Torrance, California Site.
(a) Seller's can plant in the City of Torrance,
California is currently a part of an unsubdivided parcel of real estate
(the "Parcel") on which Seller's extrusion plant (which is not part of the
Business Assets) (the "Extrusion Land") is also located. Seller, at its
sole cost and expense, shall use its best efforts to subdivide the Parcel
such that the can plant portion of the site, together with the improvements
located thereon depicted as such on Exhibit 1.10(a) (the "Plant Land"), is
a separate legally subdivided lot (the "Subdivision"). Seller anticipates
that such Subdivision may not be completed until after the Closing Date.
Accordingly, if the Subdivision has not been completed by the Closing Date,
Seller and Buyer shall, at the Closing Date, enter into a lease and license
substantially in the form of Exhibit 1.10(b) (the "Torrance Lease"). Upon
completion of the Subdivision process, Seller shall deliver to Buyer, and
Buyer shall accept, a special warranty deed to the Plant Land in compliance
with the title and survey requirements set forth in Section 4.4. Seller
will pay any and all costs associated with the Subdivision, including,
without limitation, costs associated with satisfying the conditions of the
Subdivision, the separation of utilities and new utility hook-ups, and
required site modifications such as drainage, fire protection and access.
Buyer shall cooperate with Seller at no out-of-pocket cost to Buyer or Ball
(other than such internal and administrative costs as appearing at
hearings, providing information and executing documents, such as any
declaration of easements, covenants and restrictions required in connection
with such Subdivision and Buyer's and Ball's attorneys' fees). Seller shall
provide to Buyer copies of all notices and material correspondence between
the applicable Authority and Seller regarding the Subdivision, as well as
copies of any
<PAGE> 20
parcel maps or other documents submitted to such Authority.
Buyer and Ball may participate in any and all meetings and hearings with or
at the applicable Authority regarding the Subdivision. Seller shall consult
with Buyer prior to making official submissions to any Authority in
connection with the Subdivision. In no event shall Seller execute any
documents which create, or agree with any Authority to impose, any
conditions, restrictions or easements which affect the Plant Land without
first obtaining Buyer's written approval, which approval shall not be
unreasonably withheld or delayed. If during the Subdivision process, the
applicable Authority requests changes to the description of the Plant Land
from that described on Exhibit 1.10(a) as a condition to approval of the
Subdivision, the parties shall work cooperatively and in good faith to
respond to such changes so as to maintain, to the greatest degree possible,
the business deal embodied in this Agreement and the related documents and
to provide each party the benefits contemplated herein; provided, that in
no event shall Seller modify the legal description of the Plant Land
without first obtaining the written approval of Buyer, which approval shall
not be unreasonably withheld or delayed.
(b) If the Subdivision is not completed and title to the
Plant Land in fee simple has not been transferred to Buyer on or before the
second anniversary of the Closing Date, then except to the extent that
Seller's failure to complete the Subdivision is directly attributable to
Buyer's act or failure to act as required under the Torrance Lease, Seller
will indemnify and hold harmless Buyer from all Losses arising: (i) from
Buyer's inability to operate the Plant Land in a manner reasonably
consistent with Seller's prior operation, where such inability is directly
attributable to Buyer's not holding title to the Plant Land in fee simple,
including all such Losses incurred after the Closing or (ii) from any bona
fide sale or mortgage, or attempt to sell or mortgage, the Leased Premises
(as defined in section 1.1 of the Torrance Lease) to an independent third
party, attributable to the "Differential." The "Differential" equals the
excess of the fair market value of a fee simple interest in the Plant Land
as if the Subdivision had occurred over the fair market value of the Leased
Premises as if the Subdivision had not occurred. Buyer will promptly notify
Seller of any inability to operate as described in clause (b)(i) above.
(c) Until the first to occur of (i) the fourth
anniversary of the Closing Date or (ii) the conveyance of the Plant Land to
Buyer, Seller will not sell, transfer or otherwise convey the Parcel to any
third party other than (w) to Buyer, (x) to an Affiliate of Seller, (y) in
connection with a taking by eminent domain or deed in lieu thereof or (z)
as reasonably required to effect the Subdivision and thereafter,
<PAGE> 21
Seller may
only sell such property subject to the Torrance Lease and the right of
first refusal set forth below. If at any time after the fourth anniversary
of the Closing Date but before the conveyance of the Plant Land to Buyer,
Seller receives a bona fide offer from any Person to purchase the Parcel
subject to the Torrance Lease or any interest therein, which offer Seller
intends to accept, or Seller intends to execute a contract with respect to
such sale, Seller shall notify Buyer of the terms and provisions of such
offer or contract in reasonable detail and of the intention of Seller to
accept such offer or execute such contract. Buyer shall have the right
within thirty (30) days after such notice to accept the offer to purchase
the Parcel on the same terms and conditions (with appropriate reduction of
the purchase price for any part thereof allocated to the Plant Land, if
indeed any reduction is appropriate given the observation in Section
1.10(g)) and on the other terms and conditions specified in such offer or
contract, subject to the provisions of Section 1.10(f) below. If Buyer
shall not so exercise its right or shall reject the terms and conditions of
such offer or contract within such thirty (30) day period, Seller may then
sell the Parcel, subject to the Torrance Lease, to said third party
purchaser, provided that such sale is for the purchase price and on the
same terms and conditions set forth in the notification to Buyer. If for
any reason, however, such sale to said purchaser is not consummated within
12 months from the initial notification to Buyer, any subsequent sale shall
again be subject to this right of first refusal. Following any such sale to
a third party purchaser and the assumption by the third party purchaser of
all of the obligations of Seller under the Torrance Lease, Buyer will
thereafter look to the third party purchaser for performance of the
Torrance Lease, and Seller will thereafter have no further obligations with
respect to the Plant Land except for the indemnity obligations of Seller as
provided in this Agreement. If Buyer exercises its right of first refusal
under this Section 1.10(c) to purchase the Parcel, or its Option under
Section 1.10(e) to purchase the Parcel, upon the closing of such sale, the
Torrance Lease will terminate, and Seller will have no further obligations
with respect to the Plant Land or the Extrusion Land, except as set forth
in the purchase agreement for the Parcel and in this Agreement. Buyer's
right of first refusal hereunder will not apply to any conveyance described
in clauses (w) - (z) above. If Seller makes a conveyance pursuant to clause
(x), Seller will remain liable for all of its duties and obligations
hereunder, and Buyer may exercise its right of first refusal and its Option
vis-a-vis the Affiliate.
(d) Buyer's right of first refusal is personal to Buyer
but may be assigned by Buyer to Ball or a Designee of Buyer and, to the
extent so assigned,
<PAGE> 22
the references in Section 1.10(c) to Buyer shall
include references to Ball or the Designee of Buyer, where appropriate.
(e) After the date which is three years and six months
after the Closing Date, and before the Plant Land has been conveyed to
Buyer, and provided that Seller's failure to complete the Subdivision is
not directly attributable to Buyer's act or failure to act as required
under the Torrance Lease, Buyer shall have the option to purchase (the
"Option") the Parcel at the fair market value of the Extrusion Land, as
determined by an independent M.A.I. appraiser chosen by the parties. In
estimating such fair market value, the appraiser will take into account
that the Parcel is not subdivided, is being sold "as-is" without
environmental indemnification of any kind pursuant to Section 1.10(f) but
shall ignore the effect of the Torrance Lease. The Option will be suspended
during the 12-month sale period described in Section 1.10(c) unless during
such period, (i) such sale is consummated, in which case the Option will
expire or (ii) such sale is terminated, in which case the Option will no
longer be suspended. At any time after the date which is three years and
five months after the Closing Date, and before the Plant Land has been
conveyed to Buyer, Buyer shall have the right to enter, or cause its
consultants to enter, upon the Extrusion Land to make physical inspections,
tests and surveys thereof, including environmental reports and audits,
soil, geology, boring, sampling and other tests, for the purpose of
determining whether Buyer will elect to exercise its Option. Buyer shall
indemnify Seller for any damage to the Extrusion Land and any liability for
personal injury or damage to other property of Seller or its tenants
directly caused by such inspection and testing and shall require its
consultants to leave the Extrusion Land in the same condition it was in
prior to such inspection and testing. Buyer shall provide Seller with
copies of the written results of all such tests and inspections but shall
otherwise keep the results of any such inspection or testing confidential
except to the extent that disclosure is required by law, judicial or
administrative process or, in the event Buyer elects to exercise its
Option, the results of such inspection and testing may be shared with the
appraiser (provided the appraiser also agrees to keep such results
confidential) to aid in its determination of fair market value of the
Extrusion Land.
(f) Any purchase of the Parcel by Buyer, whether pursuant
to its right of first refusal or the exercise of the Option, shall, as to
the Plant Land only, be governed by and in compliance with the terms of
this Agreement, including the title and survey requirements of Section 4.4
and the indemnities of Seller in Article VI. The purchase of the Parcel by
Buyer pursuant to the Option shall, as to the Extrusion Land, be "as-is"
without environmental or any other indemnities from
<PAGE> 23
Seller, provided Seller
will deliver to Buyer a special warranty deed, and, at Buyer's expense, an
ALTA form owner's title policy (Form B-1992 with extended coverage insuring
over the general or standard exceptions) and, at Seller's expense, a survey
meeting the requirements of Section 4.4(c) for the Parcel.
(g) The parties intend that Buyer will not have to pay
for the value of the Plant Land but once and only at the Closing Date. The
parties acknowledge that because the Torrance Lease is for a term of up to
99 years and calls for payment of only $1.00 in rent, no third party
purchaser or appraiser is likely to attribute any value to the Plant Land
and may, in fact, discount its offer for the Extrusion Land due to the
obligations imposed by the Torrance Lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Ball and Buyer as follows:
Section 2.1 Disclosure Schedule. All representations and
warranties in this Agreement shall survive the Closing to the extent
provided in Section 6.1 (and, except as otherwise provided herein, none
shall merge into any instrument of conveyance), regardless of any
investigation or lack of investigation by any of the parties to this
Agreement. Seller shall have no liability for any breach or alleged breach
of any representation or warranty relating to an Excluded Liability to the
extent Seller fully and timely discharges such Excluded Liability, without
Buyer incurring any cost of investigation or defense with respect thereto.
Each representation and warranty of Seller is made subject to the
exceptions which are noted in the corresponding section of the Disclosure
Schedule. For the purposes of this Agreement, the "Disclosure Schedule" is
the schedule delivered by Seller and Ball concurrently herewith and
identified by the parties as such. Seller shall number all exceptions noted
in the Disclosure Schedule to correspond to the applicable section of
Article II to which such exception refers. EXCEPT AS SPECIFICALLY SET FORTH
IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO BALL,
BUYER OR THEIR DESIGNEES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Except as otherwise expressly noted therein, the disclosures in
any subsection of the
<PAGE> 24
Disclosure Schedule thereof shall not constitute disclosure for purposes
of any other subsection.
Section 2.2 Corporate Organization. Each of Seller, RIB, and
LAR is (and at the Closing, each of RCAL and RIND will be) a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to carry on its business as it is now being conducted and to own
or lease and operate its assets. The copies of the charter, bylaws, or
corresponding organizational documents of Seller, RIB, RCAL, RIND and LAR
heretofore delivered to Buyer are true, complete and correct copies of such
instruments as in effect as of the date of this Agreement.
Section 2.3 Operation of the Business. Except for the license
agreements listed in Section 2.3 of the Disclosure Schedule, the Business
is conducted only through Seller, RCAL, RIND and LAR. Except for the
Business, and for the disposition of certain surplus equipment formerly
used in the Business at Seller's Houston can plant, and for interests held
by its majority-owned subsidiaries in Latasa, SVE, and UAC, Seller and its
Affiliates are not engaged in the design, manufacture, distribution and
sale of beverage can bodies and ends. The Business Assets taken as a whole,
together with the licenses being granted and the services being provided to
Buyer under the Ancillary Agreements, constitute all of the rights,
properties and assets (tangible and intangible) necessary for the continued
conduct of the Business by Ball and Buyer as such Business has been
conducted by Seller.
Section 2.4 Authorization. Except as set forth in Section 2.4
of the Disclosure Schedule, Seller has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements and to
carry out the transactions contemplated hereby and thereby. Seller's Board
of Directors has taken all corporate action required by law, Seller's
Certificate of Incorporation, its Bylaws or otherwise required to be taken
by it to authorize the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby. This Agreement constitutes, and the Ancillary
Agreements to be executed by Seller (when duly executed and delivered by
Seller at or before the Closing, assuming this Agreement and the Ancillary
Agreements constitute the valid and binding obligation of Ball and Buyer)
will constitute, the valid and binding obligation of Seller, each
enforceable in accordance with its terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
<PAGE> 25
rights and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
Section 2.5 No Violation. Except as set forth in Section 2.5 of
the Disclosure Schedule, neither the execution, delivery and performance of
this Agreement and the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) violate or be in
conflict with any provision of the charter, bylaws or similar
organizational document of Seller, RIB, RCAL, RIND or LAR, (ii) be in
conflict with, or constitute a default (or an event which, with the giving
of due notice or lapse of time, or both, would constitute such a default)
under, or cause the acceleration of the maturity of, or give rise to any
right of termination, imposition of fees or penalties on Ball, Buyer or
their Designees under any debt, lease, mortgage, indenture, license,
contract, instrument or other obligation to which Seller, RIB, RCAL, RIND
or LAR is a party or by which the Business Assets or the Shares are bound
or result in the creation of any Encumbrance upon any Business Assets or
the Shares, which would (A) have a Material Adverse Effect or (B) interfere
with Seller's ability to consummate the transactions contemplated by this
Agreement or any of the Ancillary Agreements, or (iii) violate any law,
judgment, order, regulation, rule, ordinance or decree (hereinafter
sometimes separately referred to as a "Law") of any foreign, federal, state
or local governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau,
instrumentality or other authority (hereinafter sometimes referred to as an
"Authority") which violation would (A) have a Material Adverse Effect or
(B) interfere with Seller's ability to consummate the transactions
contemplated by this Agreement.
Section 2.6 Consents and Approvals. Except as set forth in
Section 2.6 of the Disclosure Schedule, no filing or registration with,
notice to, or authorization, consent or approval of, any third party under
any Contract or any Authority, or any required filings with, or clearance
from, any Authority, is necessary for execution and delivery of this
Agreement or the Ancillary Agreements or the consummation by Seller of the
transactions contemplated hereby or thereby or to enable Ball or Buyer to
conduct the Business at its present locations immediately after the Closing
Date in a manner which is consistent with that in which the Business is
presently conducted, except for compliance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
Administrative Council for Economic Defense in Brazil ("Cade").
<PAGE> 26
Section 2.7 Financial Statements.
(a) The unaudited balance sheets of Seller's global can
operations (consisting of the Business, Seller's interests in Latasa and
SVE, together with certain other Excluded Assets and Excluded Liabilities
as described in Section 2.7 of the Disclosure Schedule) as of December 31,
1997 and December 31, 1996, and the related unaudited statements of income
and cash flows for the years ended December 31, 1997, 1996 and 1995
(including the notes thereto, the "Unaudited Financial Statements"), are
set forth in Section 2.7 of the Disclosure Schedule; provided that Buyer
acknowledges that the footnotes contained in the Unaudited Financial
Statements are incomplete with respect to disclosures to be included
relating to Latasa. Such financial statements (i) have been derived from
the books and records of Seller, (ii) have been prepared in conformity with
GAAP consistently applied for all periods, and (iii) present fairly the
results of operations, cash flows and financial condition of Seller's
global can operations as of the dates and for the periods specified
therein.
(b) The unaudited quarterly financial statements (balance
sheet and statements of income and cash flow) for Seller's global can
operations to be prepared and delivered to Buyer for periods after December
31, 1997 (the "Interim Financial Statements") (x) will be derived from the
books and records of Seller, (y), except as indicated below, will be
prepared in conformity with GAAP consistently applied for all periods and
consistently with the principles applied in preparation of the Audited
Financial Statements and (z) will present fairly the results of operations,
cash flows and financial condition of Seller's global can operations as of
the dates and for the periods specified therein; provided, however, that in
the preparation of the Interim Financial Statements.
(i) U.S. federal, state and local and Puerto
Rican income Taxes will not be included;
(ii) debt and interest expense will not be included;
(iii) Seller's corporate-level general and
administrative expenses will not be allocated to the Business;
<PAGE> 27
(iv) restructuring and environmental reserves
and costs will not be included; and
(v) footnotes will not be included, except to the
extent that quarterly financial statements on a Quarterly Report on
Form 10-Q filed under the Exchange Act in accordance with the rules
and regulations thereunder would be required to include footnotes.
Section 2.8 Accounts Receivable. All Accounts Receivable
reflected on the Closing Statement (a) arose in the ordinary course of
business and (b) are collectible in the ordinary course of business and are
not subject to counterclaims or setoffs, subject in either case to reserves
reflected on the Closing Statement. Except as set forth in Section 2.8 of
the Disclosure Schedule, Seller is not presently a party to and has not
entered into any agreement to factor, sell, pledge or otherwise dispose of
any Accounts Receivable.
Section 2.9 Inventory and Working Capital. Except as set forth
in Section 2.9 of the Disclosure Schedule, the Inventory (a) consists of
items of a quantity and quality which are usable or saleable in the
ordinary course of Seller's business, except for items of obsolete material
which have been written down on the Closing Statement to estimated net
realizable value and (b) is sufficient but not excessive in kind or amount
for the conduct of the Business as it is presently being conducted.
Based on Seller's current operating practices which, to the
Knowledge of Seller, may be continued after Closing at the discretion of
Ball and Buyer, the aggregate working capital of the Business is sufficient
to meet the current operating requirements of the Business and the sales
volume of the Business currently anticipated by Seller.
Section 2.10 Absence of Certain Changes. Except as set forth in
Section 2.10 of the Disclosure Schedule and as permitted by this Agreement,
since December 31, 1997, Seller has not, with respect to the Business,
(a) suffered any adverse change in its business,
operations, properties, assets, working capital, liabilities or condition
(financial or otherwise) which resulted in or is reasonably likely to
result in a Material Adverse Effect, and
<PAGE> 28
there has not been any damage,
destruction, loss or other event which resulted in, or is reasonably likely
to result in, a Material Adverse Effect;
(b) paid, discharged or satisfied any claims, liabilities
or obligations (absolute, accrued, contingent or otherwise) involving more
than $100,000 with respect to the Business, other than the payment,
discharge or satisfaction in the ordinary course of business and consistent
with past practices of liabilities and obligations reflected or reserved
against in the Audited Balance Sheet or incurred in the ordinary course of
business and consistent with past practice since the date of the Audited
Balance Sheet other than payment, discharge and satisfaction of Excluded
Liabilities;
(c) permitted or allowed any of the Business Assets to be
subject to any Encumbrance other than Permitted Exceptions;
(d) cancelled any debts of more than $100,000 or waived
any claims or rights of the Business having a value in excess of $100,000;
(e) sold, transferred or otherwise disposed of any of the
Business Assets other than sales of Inventory and other items described in
Section 4.1(a)(ii) in the ordinary course of business;
(f) granted any general increase in the compensation of
officers, senior executives or employees of the Business (including any
such increase pursuant to any bonus, pension, profit-sharing or other plan
or commitment) other than in the ordinary course of business;
(g) made capital expenditures or commitments for
additions to property, plant, equipment or intangible capital assets of the
Business totaling more than $1,000,000;
(h) made any change in any method of financial or Tax
accounting or financial or Tax accounting practice;
(i) except for travel advances in the ordinary course of
business, loaned or advanced amounts in excess of $10,000 to, or sold,
transferred or leased any Business Assets to, any of the officers or
employees of the Business or any affiliate or associate of any of the
officers or employees of the Business or
<PAGE> 29
entered into any agreement or
arrangement with respect to the foregoing or with respect to any payments
or acceleration of payments to such parties in connection with the
transactions contemplated hereby; or
(j) agreed to take any action described in this Section.
Section 2.11 Title to Properties; Encumbrances. Except as set
forth in Section 2.11 of the Disclosure Schedule, Seller has (or as of the
Closing, RCAL and RIND will have) good, valid and marketable title to the
Owned Real Property, and valid title, or, in the case of leased Business
Assets (including, without limitation, the Leased Premises), valid and
effective leases, to all the Business Assets which it purports to own or
lease (real, personal and mixed, tangible and intangible). With respect to
the Business Locations used by Seller in the operation of the Business in
Puerto Rico, except as set forth in Section 2.11 of the Disclosure
Schedule, LAR will, on the Closing Date, have good, valid and marketable
title to the Owned Real Property located in Puerto Rico and valid title,
or, in the case of leased Business Assets (including, without limitation,
the Leased Premises), valid and effective leases, to all the Business
Assets located in Puerto Rico (real, personal and mixed, tangible and
intangible). Except as set forth in Section 2.11 of the Disclosure
Schedule, the Owned Real Property and Seller's interests in the remaining
Business Assets (including, without limitation, the Shares and Seller's
interests in the Leased Premises but limited in the case of the Real
Property Leases and the Leased Premises to Seller's acts) are free and
clear of all title defects or objections, liens, claims, charges, security
interests or other encumbrances, including, without limitation, leases,
chattel mortgages, conditional sales contracts, collateral security
arrangements and other title or interest retention arrangements
(collectively, "Encumbrances") except for liens for current Taxes that are
not yet due or Taxes that are being contested in good faith by appropriate
proceeding; provided that Seller shall indemnify Ball and Buyer and hold
them harmless from any Encumbrances arising out of any such contests.
Seller has not received written notice of any proceedings, claims or
disputes affecting any Business Locations that are reasonably likely to
curtail or interfere with the present use or adversely affect the value of
such Business Locations in any material respect. There is not any action of
eminent domain or condemnation pending or, to the Knowledge of Seller,
threatened for any portion of any Business Locations.
(a) Seller has not received any written notice in the
last three years or which is currently unresolved from any Authority having
jurisdiction over
<PAGE> 30
any Business Locations threatening a suspension,
modification or cancellation of certificates of occupancy or Permits
required under applicable Law to occupy and use lawfully any Business
Location to conduct business as presently conducted.
(b) To the Knowledge of Seller, Seller's use and
operation of the Business Locations in the Business as presently conducted
is not dependent on a nonconforming use or other waiver from an Authority,
the absence of which would materially limit the use of the Business
Locations or the operation of the Business as presently conducted.
(c) To the Knowledge of Seller, no portion of the
Business Locations on which any building is located is in any flood plain
which requires Seller to obtain federal flood hazard insurance.
(d) There is free and uninterrupted ingress and egress
(which in some cases may be via easement which is perpetual or, in the case
of Leased Premises, at least of a duration equal to the term of the Real
Property Lease, and suitable for the operation of the Business as presently
conducted) to the Owned Real Property and, to the Knowledge of Seller,
Leased Premises from a public street, road or highway.
Section 2.12 Equipment. Except as set forth in Section 2.12 of
the Disclosure Schedule, with respect to each Business Location, the
plants, structures, machinery, vehicles, equipment and other tangible
personal property included in the Business Assets and located at such
Business Location (including, without limitation, any Business Assets used
in the operation of the Business at such Business Location and located on
any third party's property), taken as a whole, are in good operating
condition and repair (ordinary wear and tear excepted) and are adequate for
the uses to which they are being put. All water, gas, electrical, steam,
compressed air, telecommunications, sanitary and storm sewage lines and
systems and other similar systems reasonably necessary to operate the
Business as presently operated have been installed and are operating
sufficiently to conduct the Business as presently conducted. Except as
expressly set forth in this Agreement, Seller expressly disclaims any other
representation and warranty of any kind or nature, express or implied, as
to the condition, value or quality of the Business Assets and SPECIFICALLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, OR
FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE BUSINESS
ASSETS. EXCEPT AS EX-
<PAGE> 31
PRESSLY SET FORTH IN THIS AGREEMENT, THE BUSINESS
ASSETS SHALL BE TRANSFERRED TO PURCHASER "AS IS" AND "WHERE IS."
Section 2.13 Intellectual Property Rights.
(a) Section 2.13 of the Disclosure Schedule contains a
complete and accurate list of the following types of Intellectual Property
Rights included in the Business Assets: (i) registrations and applications
to register Trademarks; (ii) Patents; (iii) registrations and applications
to register Copyrights and (iv) license agreements and other material
agreements relating to the development or acquisition of or granting to
others the right to use Intellectual Property Rights. There are no
royalties, honoraria, fees or other payments payable by Seller to any
Person in connection with the ownership, licensure, use, or sale of any
Patents, registered Trademarks, Copyrights or other Intellectual Property
Rights which are material to the Business.
(b) (i) Seller, RIB, RCAL, RIND and LAR collectively own
or have the right to use all of the Intellectual Property Rights included
in the Business Assets, (ii) Seller is the owner of record of the
registrations and applications set forth in Section 2.13 of the Disclosure
Schedule and is listed in the records of the appropriate U.S., state or
foreign agency as the owner of record for each such registration and
application and (iii) no registration or application listed in Section 2.13
of the Disclosure Schedule is the subject of any existing or, to the
Knowledge of Seller, threatened opposition, interference, cancellation or
other proceeding before any registration authority in any jurisdiction. The
registrations listed in Section 2.13 of the Disclosure Schedule are valid
and subsisting, in proper form and enforceable, and have been duly
maintained.
(c) To the Knowledge of Seller, use of the Intellectual
Property Rights included in the Business Assets by Seller, RIB, RCAL, RIND
or LAR does not infringe upon, or misappropriate any intellectual property
right of any third party. There are no claims pending or, to the Knowledge
of Seller, threatened, and Seller has not received any notice of any claim
to such effect. To the Knowledge of Seller, no third party is infringing
upon or misappropriating any Intellectual Property Rights. No such claims
have been made by or on behalf of Seller to such effect within the past
three years.
<PAGE> 32
(d) There is no material default (or event which with the
giving of notice and/or passage of time would constitute a material
default) by Seller, RIB, RCAL, RIND or LAR, under any of the license
agreements set forth in Section 2.13 of the Disclosure Schedule and, to the
Knowledge of Seller, by any other party thereto.
(e) Section 2.13(e) of the Disclosure Schedule identifies
the general actions taken by Seller to date as part of a program to enable
software included in the Technology and related hardware to perform during
and after the year 2000 without error relating to date data, including,
without limitation, any error which references the wrong century or more
than one century. Nothing in this Section 2.13(e) or in Section 2.13(e) of
the Disclosure Schedule shall be construed as a guarantee by Seller that
such software or hardware will perform without error relating to such year
2000 date data.
(f) Section 2.13(f) of the Disclosure Schedule identifies
all Trademarks other than the Reynolds Marks that are used in the Business
and not transferred to Ball pursuant to Section 1.2(k).
(g) There are no Patents, Trademarks or Copyrights used
exclusively in the Business and not being transferred to Ball, Buyer or
their Designees hereunder other than those set forth in Section 2.13(g) of
the Disclosure Schedule.
Section 2.14 Certain Contracts.
(a) Section 2.14(a) of the Disclosure Schedule lists all
(i) employment or other contracts (including, without limitation,
consulting, non-competition, severance or indemnification agreements) which
are included in the Business Assets with any employee, agent, consultant or
current or living former officer or employee of Seller providing service to
the Business whose total rate of annual remuneration exceeds $90,000,
except (A) those that are terminable by Seller on 60 days' notice or less
without liability, penalty or premium and (B) at-will employment contracts,
(ii) union or collective bargaining contracts relating to employees of
Seller employed in the Business, (iii) instruments or agreements for money
borrowed (including, without limitation, any indentures, guarantees, loan
agreements, sale and leaseback agreements, or purchase money obligations
incurred in connection with the acquisition of property other than in the
ordinary and usual
<PAGE> 33
course of business consistent with past practice) in
excess of $100,000 included in the Assumed Liabilities, (iv) leases or
subleases for personal property included in the Business Assets which
require lease payments in excess of $100,000 annually (other than those
agreements which are terminable on 60 days' notice) and the Real Property
Leases, (v) agreements for acquisitions or dispositions, purchase or sale
of assets or stock or otherwise of a business unit of the Business entered
into within the last five years, (vi) joint venture or partnership
agreements included in the Business Assets, (vii) purchase and supply
contracts in existence (or under negotiation) with a remaining (or
prospective) term of six months or more included in the Business Assets and
calling for aggregate future payments exceeding $250,000, (viii)
guarantees, suretyships, indemnification and contribution agreements
included in the Business Assets and (ix) other agreements, contracts,
notes, security agreements, understandings or commitments that obligate
Seller for an amount in excess of $250,000 in the Business Assets (the
agreements described in clauses (i) through (ix) above are collectively
referred to as the "Contracts"). A true and complete copy of each Contract
(together with all amendments thereto) has been provided or made available
to Buyer. Each Contract is or upon execution will be a valid and binding
obligation of Seller. Seller is not in material breach or default under any
of the Contracts, and to the Knowledge of Seller, there has not been any
material breach or default of any Contract by any party thereto.
(b) The policy of Seller with respect to entering into
confidentiality agreements with its employees is as set forth in Section
2.14(b) of the Disclosure Schedule. Except as set forth in Section 2.14(b)
of the Disclosure Schedule, no Contract, Permit or other understanding that
would be binding upon Ball or Buyer restricts the ability of Seller to own,
possess or use any of the Business Assets or conduct any of Seller's
operations related to the Business in any geographic area.
Section 2.15 Orders and Commitments. Except as set forth in
Section 2.15 of the Disclosure Schedule, all outstanding orders and
commitments of the Business have been made in the ordinary course of the
Business. Returns of product manufactured in the Business as a percentage
of sales for the year 1997 are as set forth in Section 2.15 of the
Disclosure Schedule. As of the date of this Agreement, there are no claims
in excess of $100,000 per claim pending against Seller to return any
merchandise sold by the Business by reason of alleged overshipments,
defective merchandise or otherwise, or of merchandise in the hands of
customers under an understanding that such merchandise would be returnable.
As
<PAGE> 34
of the date of this Agreement, such claims in the aggregate do not
exceed $1,000,000.
Section 2.16 Taxes. Except as set forth in Section 2.16 of the
Disclosure Schedule,
(a) Each of Seller, RIB, RCAL, RIND and LAR has duly and
timely filed (or had filed on its behalf) all Tax Returns required to be
filed by it with respect to the Business, and each such Tax Return is true,
correct and complete in all material respects;
(b) Seller (with respect to the Business) and each of
RIB, RCAL, RIND and LAR has duly paid or made adequate provision for the
due and timely payment of all Taxes and other charges, including, without
limitation, deposits required with respect to employee withholdings,
interest, penalties, assessments and deficiencies, due or claimed to be due
from it (other than amounts being contested in good faith, adequate
reserves for which have been established);
(c) There are no liens for Taxes (other than statutory
liens for property Taxes not yet due and payable) or other such charges
upon the Business Assets or the Shares;
(d) All deficiencies and assessments resulting from
examination of the Tax Returns filed by (i) Seller with respect to the
Business Assets or (ii) by RIB, RCAL, RIND and LAR, in either case by any
Authority and declared by such Authority to be due or ordered to be paid,
have been paid (other than amounts being contested in good faith for which
adequate reserves have been established);
(e) There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Return
of RIB, RCAL, RIND or LAR for any period;
(f) No federal, state, local or foreign income or other
material Tax audits are pending with respect to RIB, RCAL, RIND and LAR;
(g) None of RIB, RCAL, RIND and LAR is a party to any
Tax-sharing agreement, arrangement or indemnity relating to Taxes;
<PAGE> 35
(h) None of RIB, RCAL, RIND and LAR has been a member of
any affiliated group within the meaning of section 1504(a) of the Code, or
any similar affiliated or consolidated group for Tax purposes under state,
local or foreign law, or has any liability for the Taxes of any person
under Treasury Regulation section 1.1502-6 or any similar provision of
state, local or foreign law, as a transferee or successor, by contract or
otherwise; and
(i) None of RIB, RCAL, RIND or LAR is a party to any
contract, agreement, arrangement or plan (and Seller is not a party to any
contract, agreement, arrangement or plan that will be assumed by Buyer,
Ball or any of their Affiliates as a result of this Agreement) that has
resulted or would result in connection with the transactions contemplated
by this Agreement, separately or in the aggregate, in the payment of (x)
any "excess parachute payments" within the meaning of section 280G of the
Code (without regard to the exceptions set forth in section 280G(b)(4) and
(5) of the Code) or (y) any amount for which a compensation deduction would
be disallowed under section 162(m) of the Code.
Section 2.17 Litigation. Except as set forth in Section 2.17 of
the Disclosure Schedule, no claim, demand, action, suit, inquiry,
proceeding or investigation by or before any Authority is pending or, to
the Knowledge of Seller, threatened against or involving Seller with
respect to the Business, the Business Assets or the Shares, or which
questions or challenges the validity of this Agreement or the Ancillary
Agreements or any action taken or to be taken by Seller pursuant to this
Agreement or the Ancillary Agreements or in connection with the
transactions contemplated hereby or thereby. Except as set forth in Section
2.17 of the Disclosure Schedule, Seller is not subject to any judgment,
court order or decree, or any arbitration order issued within six years
prior to the date of this Agreement with respect to the Business or
Business Assets.
Section 2.18 Compliance with Law. Except as set forth in
Section 2.18 of the Disclosure Schedule and excluding those matters
relating to the representations and warranties contained in Sections 2.19,
2.20 and 2.21, the Business has been conducted in compliance in all
material respects with all applicable Laws. Seller has not received any
notification from any Authority of any asserted present failure by Seller
to comply with Laws in regard to the Business. All material Permits held by
Seller in connection with the operation of the Business or the Business
Assets are set forth in Section 2.18 of the Disclosure Schedule.
<PAGE> 36
Section 2.19 Environmental Protection. Except as set forth in
Section 2.19 of the Disclosure Schedule,
(a) Seller has obtained (or is in the process of
obtaining) all material Environmental Permits which are required under
applicable Environmental Laws for the ownership, use and operation of each
parcel of Owned Real Property and for the conduct by Seller of its
activities on the Leased Premises. All such material Environmental Permits
previously obtained by Seller are in effect or in the application process.
To the Knowledge of Seller, no action is pending to revoke any such
material Environmental Permits. Seller is in material compliance with the
terms and conditions of such Environmental Permits. All such material
Environmental Permits with respect to the Business are listed in Section
2.19(a) of the Disclosure Schedule. To the extent Seller has not yet
obtained any Environmental Permit for which it is applying, it is not in
violation of any Environmental Law as a result thereof. All material
Environmental Permits for which Seller has applied but has not obtained are
listed in Section 2.19(a) of the Disclosure Schedule.
(b) With respect to the Business, Seller, the Owned Real
Property and Seller's activities on the Leased Premises are in material
compliance with all applicable Environmental Laws.
(c) Seller has made available to Buyer true and complete
copies of all material final environmental studies made or prepared by
third parties in the last five years relating to the Business Locations in
Seller's possession, such studies being listed in Section 2.19(c) of the
Disclosure Schedule.
(d) There is no civil, criminal or administrative action,
claim, investigation, notice or demand letter pending or, to the Knowledge
of Seller, threatened, under any Environmental Laws relating to the Owned
Real Property and Seller's activities on the Leased Premises on which any
substance relating to the Business has been disposed or released.
(e) Since January 1, 1992, to the best Knowledge of
Seller,
(i) except for the generation, storage, disposal and
transportation to offsite facilities in the ordinary course of
business in compliance in all material respects with applicable
Environmental Laws, there has been no generation, storage, disposal,
treat-
<PAGE> 37
ment or transportation of any Hazardous Substances at the Owned
Real Property or arising from Seller's activities at the Leased
Premises in violation of, or which could give rise to any material
obligation under, any Environmental Laws; and
(ii) there has been no Release requiring Cleanup at
the Owned Real Property or arising from Seller's activities at the
Leased Premises.
(f) No Release or Cleanup has occurred at any Owned Real
Property resulting in the assertion or creation of an Encumbrance on any
Owned Real Property by any Authority nor, to the Knowledge of Seller, has
any such assertion of an Encumbrance been made in writing by any Authority.
(g) To the Knowledge of Seller, except for matters which
are Excluded Liabilities under Section 1.3(b)(v), Seller has not, within
three years preceding the date of this Agreement or, to the extent
currently unresolved, at any time prior to the date hereof, received any
written notice or any order from any Authority advising it that it is, with
respect to any Business Location, responsible for or potentially
responsible for Cleanup or paying for the cost of Cleanup of Hazardous
Substances, and Seller has not entered into any agreements concerning such
Cleanup.
(h) To the Knowledge of Seller, the Business Locations do
not contain any (i) underground storage tanks, (ii) friable asbestos, (iii)
equipment containing PCBs, (iv) underground injection wells, or (v) septic
tanks in which any Hazardous Substances have been disposed.
Section 2.20 Labor Relations. Except as set forth in Section
2.20 of the Disclosure Schedule,
(a) Section 2.20(a) of the Disclosure Schedule identifies
all collective bargaining agreements (including, without limitation, any
written amendments or written side agreements thereto) to which Seller,
RCAL, RIND or LAR is a party that apply to the employees of the Business
(the "Collective Bargaining Agreements");
(b) each of Seller, RCAL, RIND or LAR is, with respect to
the Business, in compliance with all applicable Laws respecting employment
and
<PAGE> 38
employment practices, terms and conditions of employment, occupational
safety and health and wages and hours, except for such noncompliance that
could not reasonably be expected to have a Material Adverse Effect, and is
not engaged in any unfair labor practice as defined in the National Labor
Relations Act or other applicable Law;
(c) there is no unfair labor practice charge or complaint
against Seller, RCAL, RIND or LAR with respect to the Business pending or,
to the Knowledge of Seller, threatened before the National Labor Relations
Board or any similar Authority;
(d) there is no labor strike, dispute, slowdown, lockout
or stoppage pending or, to the Knowledge of Seller, threatened against
Seller, RCAL, RIND or LAR with respect to the Business, and during the past
three years, there has not been any such action;
(e) no written grievance rising to the fourth step of the
grievance procedures under the Collective Bargaining Agreements is pending
against Seller with respect to the Business;
(f) to the Knowledge of Seller, there are no current
union organizing activities among such employees, nor does any question
concerning representation exist concerning such employees;
(g) there are no material written personnel policies,
rules or procedures applicable to employees employed by Seller in the
Business, other than those listed in Section 2.20(a) of the Disclosure
Schedule, true and correct copies of which have been made available to
Buyer;
(h) no charges against or involving Seller, RCAL, RIND or
LAR with respect to the Business are pending or, to the Knowledge of
Seller, threatened before any Authority responsible for the prevention of
unlawful employment practices;
(i) there are no lawsuits or other proceedings pending
or, to the Knowledge of Seller, threatened by or on behalf of any present
or former employee employed by Seller, RCAL, RIND or LAR or alleged to be
employed by Seller, RCAL, RIND or LAR in connection with the operation of
the Business, any
<PAGE> 39
applicant for such employment or classes of the foregoing
alleging breach of any express or implied contract of employment, any Law
or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the
employment relationship; and
(j) none of the employees employed by Seller, RCAL, RIND
or LAR in the Business has suffered an "employment loss" (as defined in the
Worker Adjustment and Retraining Notification Act ("WARN Act")) since three
months before the date of this Agreement.
Section 2.21 Employee Benefit Matters.
(a) Section 2.21(a) of the Disclosure Schedule contains a
true and complete list of each pension, retirement, savings,
profit-sharing, stock bonus, stock purchase, stock option, restricted
stock, deferred compensation, bonus or other incentive compensation, equity
compensation plan, program, policy, agreement, contract, arrangement or
fund, including each pension plan, fund or program within the meaning of
section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), each medical, dental, hospitalization, supplemental
unemployment benefits, life insurance or other welfare plan, program,
policy, agreement, contract, arrangement or fund, including each welfare
plan, fund or program within the meaning of section 3(1) of ERISA, each
employment, termination or severance plan, program, policy, agreement,
contract or arrangement and each other employee benefit plan, program,
policy, agreement, contract, arrangement or fund, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by
Seller, RCAL, RIND or LAR or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with Seller would be
deemed a single employer within the meaning of section 4001(b) of ERISA, or
to which Seller or an ERISA Affiliate is party, that are currently
maintained by Seller for the benefit of, or to which Seller contributes on
behalf of, any employee of the Business as a result of such employee's
employment in the Business (each a "Plan"). Section 2.21(a) of the
Disclosure Schedule identifies each of the Plans that is subject to section
302 or Title IV of ERISA or section 412 of the Code (the "Title IV Plans").
Except as set forth in Section 2.21 of the Disclosure
Schedule (with respect to paragraphs (b)-(h)):
<PAGE> 40
(b) With respect to each Plan that covers Represented
Employees, Seller has heretofore delivered or made available to Buyer true
and complete copies of the current version of the Plan and any amendments
thereto, any related trust or other funding vehicle, any summaries required
under ERISA or the Code and the most recent determination letter received
from the Internal Revenue Service with respect to each Plan intended to
qualify under section 401(a) of the Code. To the Knowledge of Seller, no
event has occurred since the date of such determination that would affect
such determination.
(c) No liability under Title IV or section 302 of ERISA
has been incurred by Seller or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a risk to Seller
or any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation (which
premiums have been paid when due). To the extent this representation
applies to section 4064, 4069 or 4204 of Title IV of ERISA, it is made not
only with respect to the Title IV Plans but also with respect to any
material employee benefit plan, program, agreement or arrangement subject
to Title IV of ERISA to which Seller or an ERISA Affiliate made, or was
required to make, contributions during the six-year period ending on the
Closing.
(d) Neither Seller, any ERISA Affiliate, any Plan, any
trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which Seller, any ERISA
Affiliate, any Plan, any such trust, or any trustee or administrator
thereof, or any party dealing with any Plan or any such trust could be
subject to either a civil penalty assessed pursuant to section 409 or
502(i) of ERISA or a tax imposed pursuant to section 4975 or 4976 of the
Code.
(e) No Title IV Plan is a "multiemployer pension plan,"
as defined in section 3(37) of ERISA.
(f) All contributions required to be made with respect to
any Plan on or before the Closing Date have been timely made.
(g) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law,
including, without limitation, ERISA and the Code.
<PAGE> 41
(h) There are no pending or, to the Knowledge of Seller,
threatened, claims by or on behalf of any Plan by any employee or
beneficiary covered under any such Plan, or otherwise involving any such
Plan (other than routine claims for benefits).
(i) The Employee Lists and the Employee Benefits Data
provided to Buyer by Seller pursuant to Section 5.5 are true and complete
as of the date of such lists.
Section 2.22 Customers and Suppliers. Except as set forth in
Section 2.22 of the Disclosure Schedule, since September 30, 1997, (a)
there has not been any material adverse change in the business relationship
between Seller and any customer of the Business which customer accounts for
annual sales to Seller of $5,000,000 or more on an annualized basis and (b)
to the Knowledge of Seller, no such customer has advised Seller that it
intends to terminate its relationship with Seller or significantly reduce
its purchases from Seller. Since September 30, 1997, there has not been any
material adverse change in the business relationship between Seller and any
supplier of the Business accounting for sales to Seller of $1,000,000 or
more on an annualized basis providing supplies to Seller which are not
readily obtainable from other sources in the ordinary course of business.
Section 2.23 Brokers and Finders. Neither Seller nor any of its
officers, directors or Affiliates has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated by this Agreement.
Section 2.24 Investment. Seller (i) understands that the Ball
Shares have not been registered under the Securities Act of 1933, as
amended (the "Act"), or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, and may not be sold except
in a transaction registered under the Act or exempt from such
registration requirements and (ii) is acquiring the Ball Shares solely for
its own account for investment purposes, and not with a view to the
distribution thereof, other than a sale or distribution which is registered
under the Act or is exempt from such registration or except pursuant to the
registration rights provisions contained in the Stockholder's Agreement.
<PAGE> 42
Section 2.25 Capitalization of Subsidiaries.
(a) Section 2.25(a) of the Disclosure Schedule lists
RCAL's, RIND's and LAR's authorized, issued and outstanding capital stock
and all of the owners thereof. Seller's interest in RCAL, RIND or LAR is
free and clear of all Encumbrances and free of any limitation or
restriction on the right to vote, sell or otherwise dispose of such
interests (other than those imposed by foreign, federal and state
securities laws), and there are no outstanding (i) securities of RCAL, RIND
or LAR convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in RCAL, RIND or LAR or (ii)
options or other rights to acquire from RCAL, RIND or LAR any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities
or ownership interests in RCAL, RIND or LAR (the items in clauses (i) and
(ii) being referred to collectively as the "Domestic Subsidiary
Securities"). There are no outstanding obligations to repurchase, redeem or
otherwise acquire any outstanding Domestic Subsidiary Securities. The
issued and outstanding shares of capital stock of RCAL, RIND and LAR are
duly authorized, validly issued, fully paid and nonassessable and have not
been issued in violation of any preemptive rights, including any rights of
first refusal.
(b) Section 2.25(b) of the Disclosure Schedule lists the
authorized, issued and outstanding capital stock of RIB and the direct and
indirect ownership interest of Seller and its Affiliates therein as of the
date hereof. The issued and outstanding shares of capital stock of RIB are
duly authorized, validly issued, fully paid and nonassessable and have not
been issued in violation of any preemptive rights, including any rights of
first refusal. Seller's interest in RIB is free and clear of all
Encumbrances and free of any restriction on the right to vote, sell or
otherwise dispose of such interest (other than those imposed by foreign,
federal and state securities laws), and there are no outstanding (i)
securities of RIB convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in RIB, or (ii)
options or other rights to acquire from RIB, any capital stock, voting
securities or other ownership interest in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interest in RIB. There are no outstanding obligations to repurchase, redeem
or otherwise acquire any outstanding RIB securities.
(c) Section 2.25(c) of the Disclosure Schedule lists the
ownership interests of Seller or its Affiliates in Latasa, each of the
subsidiaries of
<PAGE> 43
Latasa (the "Latasa Subsidiaries"), the respective
authorized, issued and outstanding capital stock of each such entity and
all the owners thereof. Except as set forth in Section 2.25(c) of the
Disclosure Schedule, the interests of Seller or its Affiliates in Latasa
and of Latasa in the Latasa Subsidiaries are free and clear of all
Encumbrances and free of any limitation or restriction on the right to
vote, sell or otherwise dispose of such interests (other than those imposed
by foreign, federal and state securities laws), and there are no
outstanding (i) securities of Latasa or any of the Latasa Subsidiaries
owned by Seller or its Affiliates convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests
in Latasa or the Latasa Subsidiaries and (ii) options or other rights to
acquire from Latasa or the Latasa Subsidiaries any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in Latasa or the Latasa Subsidiaries independent of the assets
transferred to Buyer. There are no outstanding obligations to repurchase,
redeem or otherwise reacquire any outstanding securities of Latasa or the
Latasa Subsidiaries. The issued and outstanding shares of capital stock of
each of Latasa and the Latasa Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and have not been issued in violation
of any preemptive rights, including any rights of first refusal.
(d) Section 2.25(d) of the Disclosure Schedule lists all
agreements, arrangements or commitments to which Seller or any of its
Affiliates is a party relating to the holding, voting or transfer of any of
RIB, RCAL, RIND and LAR securities or the governance of any of such
subsidiaries.
(e) The execution, delivery and performance of this
Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby will not create an Encumbrance
on the Shares.
(f) RIB and RILA own 11,504,994 and 5,159,250 shares,
respectively, of capital stock in Latasa, which shares are duly authorized,
validly issued, fully paid and nonassessable.
(g) Reynolds and its Affiliates own 123,840 shares of
capital stock of SVE.
<PAGE> 44
Section 2.26 Latasa Agreements.
(a) Seller has previously delivered to Buyer true and
complete copies of all the Latasa Agreements.
(b) Seller is not in material breach of any of the Latasa
Agreements.
(c) Other than the transactions contemplated by this
Agreement, to the Knowledge of Seller, there is no fact that would allow a
party to the Latasa Agreements to terminate any such agreement or that
would result in an Encumbrance on the Shares.
(d) Except as set forth in Section 2.26(d) of the
Disclosure Schedule, neither the execution, delivery and performance of
this Agreement and the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) violate or be in
conflict with any provision of the charter, bylaws or similar
organizational document of Latasa or any of the Latasa Subsidiaries or (ii)
be in conflict with, or constitute a default (or an event which, with the
giving of due notice or lapse of time, or both, would constitute such a
default) under, or cause the acceleration of the maturity of, or give rise
to any right of termination, imposition of fees or penalties on Ball or
Buyer under any debt, lease, mortgage, indenture, license, contract,
instrument or other obligation to which Latasa or any of the Latasa
Subsidiaries is a party or by which the Business Assets or the Shares are
bound or result in the creation of any Encumbrance upon any Business Assets
or the Shares, which would (A) have a Material Adverse Effect or (B)
interfere with Seller's ability to consummate the transactions contemplated
by this Agreement or the Ancillary Agreements; or (iii) violate any law,
judgment, order, regulation, rule, ordinance or decree of any Authority
which violation would (A) have a Material Adverse Effect or (B) interfere
with Seller's ability to consummate the transactions contemplated by this
Agreement.
Section 2.27 Latasa Offering Statement. The Latasa offering
statement dated May 14, 1997 (the "Latasa Offering Statement"), a copy of
which has been previously delivered to Buyer, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading. Except as set forth in Section 2.27 of the
Disclosure Schedule, to the Knowledge of Seller, since
<PAGE> 45
the date of the
Offering Statement, no event has occurred which could reasonably be
expected to have a material adverse effect on Latasa.
Section 2.28 Latasa Financial Statements. The unaudited balance
sheets of Latasa as of December 31, 1997 and 1996 and the related unaudited
statements of income and cash flows for the years then ended, including the
related notes thereto (in English) are set forth in Section 2.28 of the
Disclosure Schedule (the "Unaudited Latasa Financial Statements"). Such
financial statements (i) have been derived from the books and records of
Latasa, (ii) have been prepared in conformity with GAAP consistently
applied for all periods and (iii) present fairly the results of operations,
cash flows and financial condition of Latasa as of the dates and for the
periods specified therein.
Section 2.29 SVE Agreement. Seller has previously delivered to
Buyer a true and complete copy of the Continuing Know-How and Technical
Services Agreement between Seller or its Affiliate and SVE (the "SVE
Technical Services Agreement"). Seller is not in material breach of the SVE
Technical Services Agreement.
Section 2.30 Seller's Exposure Estimates. The information
contained in Section 2.30 of the Disclosure Schedule is based on Seller's
records, Seller's past business experiences and practices and Seller's
current business beliefs and expectations. Assuming the continuation of
Seller's existing business practices and existing, pending and anticipated
contracts related to Seller's existing metals cost programs and can price
programs, the information contained in Section 2.30 of the Disclosure
Schedule is a reasonable estimate of the exposure limits described therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BALL AND BUYER
Ball and Buyer jointly and severally represent and warrant to
Seller as follows:
Section 3.1 Corporate Organization, etc. Each of Ball and Buyer
is a corporation duly organized, validly existing and in good standing
under the laws of
<PAGE> 46
the state of its incorporation, and
each has full corporate power and authority to carry on its business as
it is now being conducted and to own or lease and operate its assets and,
in the case of Buyer, to operate the Business after the Closing. The
copies of the charter and bylaws of each of Ball and Buyer delivered to Seller
as of the date hereof are true, complete and correct copies of such
instruments as in effect on the date of this Agreement.
Section 3.2 Authorization, etc. Each of Ball and Buyer has all
necessary corporate power and authority to enter into this Agreement and
the Ancillary Agreements and to carry out the transactions contemplated
hereby and thereby. The Board of Directors of each of Ball and Buyer has
taken all action required by law, and the charter and bylaws of each of
Ball and Buyer, and otherwise required to be taken by it to authorize the
execution and delivery of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby. This
Agreement constitutes, and the Ancillary Agreements to be executed by Ball
and Buyer (when duly executed and delivered by Ball and Buyer at or before
Closing, assuming this Agreement and the Ancillary Agreements constitute
the valid and binding obligations of Seller) will constitute, the valid and
binding obligation of Ball and Buyer, each enforceable in accordance with
its terms except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
Section 3.3 No Violation. Neither the execution, delivery and
performance of this Agreement and the Ancillary Agreements nor the
consummation of the transactions contemplated hereby or thereby will (i)
violate or be in conflict with any provision of the charter or bylaws of
Ball or Buyer, (ii) as of the Closing, violate, or be in conflict with, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or cause the acceleration of the
maturity of or give rise to any right of termination, imposition of fees or
penalties on Ball or Buyer under any debt, lease, mortgage, indenture,
license, contract, instrument or other obligation to which Ball or Buyer is
a party or by which the property or assets of Ball or Buyer are bound or
result in the creation of any Encumbrance upon any property or assets of
Ball or Buyer which violation or Encumbrance would materially (A) adversely
affect the business of Ball or Buyer or (B) interfere with Buyer's or
Ball's ability to consummate the transactions contem-
<PAGE> 47
plated by this
Agreement or the Ancillary Agreements, or (iii) violate any Law, which
violation would materially (A) adversely affect the business of Ball or
Buyer or (B) interfere with Buyer's or Ball's ability to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements.
Section 3.4 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending, or, to the best
knowledge of Ball and Buyer, threatened against or involving Ball or Buyer
which questions or challenges the validity of this Agreement or the
Ancillary Agreements or any action taken or to be taken by Ball or Buyer
pursuant to this Agreement or the Ancillary Agreements or in connection
with the transactions contemplated hereby or thereby; nor, to the best
knowledge of Ball and Buyer, is there any valid basis for any such action,
proceeding or investigation.
Section 3.5 SEC Reports. Ball has filed all periodic reports
required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") with the U.S. Securities and Exchange
Commission (the "SEC") since January 1, 1996 , all of which, as of their
respective filing dates, complied in all material respects with all
applicable requirements of the Exchange Act (as such documents have been
amended since the time of their filing, collectively, the "Ball SEC
Reports"). None of the Ball SEC Reports, including, without limitation, any
financial statements or schedules included therein, as of their respective
dates or, if amended, as of the date of the last such amendment, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 3.6 Brokers and Finders. Except for the fees and
expenses of Lehman Brothers (which shall be paid by Ball), neither Ball nor
Buyer nor any of their officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
Section 3.7 Authorization of Shares. The issuance of the Ball
Shares has been duly authorized by all requisite corporate action on the
part of Ball, and upon issuance in accordance with the terms hereof, the
Ball Shares will be validly issued, fully paid, and nonassessable free and
clear of all encumbrances (other than
<PAGE> 48
under applicable federal or state
securities laws) and shall not have been issued in violation of any
preemptive rights. The authorized, issued and outstanding shares of capital
stock of Ball, all of which are validly issued and outstanding, fully paid
and non-assessable, are set forth in Section 3.7 of the Disclosure
Schedule. Except as disclosed in Section 3.7 of the Disclosure Schedule,
there are no (a) options, warrants, conversion privileges or other rights,
agreements, arrangements or other commitments obligating Ball to issue,
sell, purchase or redeem any shares of its capital stock or (b) any stock
appreciation, phantom or similar rights outstanding based upon the book
value, earnings or any other attribute of any of the capital stock of Ball.
Section 3.7 of the Disclosure Schedule lists all agreements, arrangements
or commitments to which Ball or Buyer is a party relating to the holding,
voting or transfer of any of the shares in Ball or the operations or
governance of Ball. Ball owns all of the outstanding capital stock of each
of its subsidiaries, including Buyer, free of Encumbrances other than (i)
liens for taxes not yet due or taxes being contested in good faith by
appropriate proceedings and (ii) any other encumbrances incurred as a
result of the Financing (as defined in Section 3.9).
Section 3.8 Consents and Approvals. Except as set forth in
Section 3.8 of the Disclosure Schedule, no filing or registration with,
notice to or authorization, consent or approval of, any third party under
any material contract to which Ball or Buyer is a party or any Authority,
or any required filings with, or clearance from, any Authority, is
necessary for execution and delivery of this Agreement or the Ancillary
Agreements by Ball or Buyer or the consummation by Ball or Buyer of the
transactions contemplated hereby or thereby except for compliance with the
HSR Act or Cade.
Section 3.9 Financing. Ball has received a commitment letter
(the "Commitment Letter"), dated April 22, 1998, from The First National
Bank of Chicago, First Chicago Capital Markets, Inc., Bank of America
National Trust and Savings Association, BancAmerica Robertson Stephens,
Inc., Lehman Brothers Inc. and Lehman Commercial Paper Inc. to provide $1.8
billion of debt financing (the "Financing") to Ball and Buyer in connection
with the transactions contemplated hereby and the refinancing of other
indebtedness of Ball on the terms set forth in the Commitment Letter. A
true and complete copy of the Commitment Letter has been delivered to
Seller.
<PAGE> 49
ARTICLE IV
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer:
Section 4.1 Conduct of the Business.
(a) From the date hereof until the Closing Date, Seller
shall conduct the Business in the ordinary course consistent with past
practice and use all reasonable efforts to preserve intact the present
business organization and its relationships with suppliers, dealers,
customers and third parties having business relationships with the Business
and keep available the services of the present employees of the Business.
Without limiting the generality of the foregoing, from the date hereof
until the Closing Date, Seller will not, without the prior written consent
of the Chairman, Vice Chairman or President of Ball:
(i) acquire assets valued in excess of $250,000 in
the aggregate from any Person other than in the ordinary course
consistent with past practice or as provided in the capital
expenditure plan included in Section 2.10 of the Disclosure Schedule;
(ii) sell, lease, license or otherwise dispose of any
Business Assets except for sales of Inventory and the following other
items in the ordinary course consistent with past practice: (A)
aluminum scrap generated by the production process; (B) other scrap
metal; (C) used beverage cans; (D) waste oil; (E) recyclable paper,
chipboards and separators; (F) non-usable pallets; (G) corrugated
cardboard; (H) waste water treatment room slurry accumulation; and
(I) packing materials and plant process materials sold to other can
and end manufacturers who are experiencing emergency shortages;
(iii) enter into any material agreement or contract
with respect to the Business or any of the Business Assets which is
not assignable (or which requires the consent of a third party to
assign which consent has not been obtained) to Ball or Buyer;
<PAGE> 50
(iv) cancel any debts in excess of $200,000
individually or $1,000,000 in the aggregate, or waive any claims or
rights of material value related to the Business or the Business
Assets;
(v) grant any increase in the rates or terms of
compensation payable or to become payable to officers or employees of
Seller related to the Business (including any such increase pursuant
to any benefit plan), except in the ordinary and usual course of
business consistent with past practice or required by any labor or
other agreement in effect as of the date hereof or as described in
Section 2.10 of the Disclosure Schedule;
(vi) enter into, extend, amend, or renew any material
contract, agreement, purchase or supply agreement or commitment or
other obligation of the Business to which Seller is a party, except
in the ordinary and usual course of business consistent with past
practice;
(vii) make any material change in any management,
operation, financial, Tax or accounting principles, methods,
practices or procedures of the Business;
(viii) enter into any collective bargaining agreement
or labor contract of any kind related to the Business; or
(ix) agree or commit to do any of the foregoing.
(b) From the date hereof until Closing, Seller shall not,
without the prior written consent of the Chairman, Vice Chairman or
President of Ball or Buyer:
(i) vote, or allow any of its subsidiaries to vote,
the equity interests in Latasa held by RIB and RILA so as to
materially change the nature of the business conducted by Latasa; or
(ii) allow any of its subsidiaries to (A) dispose of,
(B) grant any rights, options or warrants with respect to or (C)
<PAGE> 51
create any Encumbrances on any shares owned directly or indirectly by
Seller which represent or hold equity interests in Latasa or SVE.
Section 4.2 Access. Seller shall afford to Buyer, Ball, and
their counsel, accountants, other representatives and financing sources,
reasonable access during normal business hours and subject to Seller's
safety regulations, as Ball or Buyer may reasonably request, to the plants,
offices, warehouses, properties, advisors, auditors, officers, employees
and the books and records of Seller related to the Business, the Business
Assets and the Shares, and with Seller's consent, material customers,
suppliers and joint venture partners, so that Buyer may investigate the
Business (including, without limitation, conducting environmental
investigations) and obtain information requested by financing sources.
Seller will cooperate with Ball and Buyer in their investigation and
furnish to Buyer such additional financial, operating and other information
related to the Business, Business Assets or the Shares as Buyer shall from
time to time reasonably request. If employee consent is required for Buyer
to review any personnel file, at Buyer's reasonable request Seller shall
use reasonable efforts to obtain such consent. Such investigations shall be
conducted so as not to interfere unreasonably with the operation of the
Business. Notwithstanding anything contained herein to the contrary, Seller
shall not be required to make available to Buyer, Ball or their Affiliates,
agents, or representatives any information relating to existing or
contemplated pricing, price discount, and customer rebate information or
other similar sensitive information relating to the Business. From and
after the date hereof, Seller will provide to Buyer, promptly following the
end of each month, monthly financial reports consistent with those
currently provided to management of the Business and, as available,
quarterly financial statements of the Business consistent with the
representations set forth in Section 2.7.
Section 4.3 Consents. Seller shall use all reasonable efforts
to obtain all consents necessary to consummate the transactions
contemplated hereby, including those approvals set forth in Section 2.6 of
the Disclosure Schedule. Seller will provide to Buyer copies of each such
consent promptly after it is obtained. Ball and Buyer will cooperate with
Seller in obtaining such consents and shall use all reasonable efforts to
obtain all consents from parties to agreements with Ball or Buyer necessary
to consummate the transactions contemplated hereby (including those
approvals referred to in Section 3.8).
<PAGE> 52
Section 4.4 Title to Real Property.
(a) Except as contemplated by Section 1.10, Seller shall
convey to Buyer, at the Closing, by special warranty deeds, in a form
reasonably acceptable to Buyer, title in fee simple to all of the Owned
Real Property subject only to (i) liens for real estate taxes and
assessments and other governmental charges which are a lien but which are
not yet due and payable and (ii) Permitted Exceptions and such additional
title and survey matters as are contemplated by Section 4.4(b) and (c)
below or, in the case of Torrance, California, as are contemplated herein
or in the Torrance Lease.
(b) Seller has previously delivered to Buyer title
commitments (the "Title Commitments"), which are described in Section
4.4(b) of the Disclosure Schedule, issued by Lawyers' Title Insurance
Company (the "Title Company"), along with copies of all documents creating
exceptions, as listed in the Title Commitments and surveys of the Owned
Real Property and any other document with respect to Real Property
reasonably requested by Buyer. Buyer hereby approves the following as
"Permitted Exceptions": (i) the matters shown on the Title Commitments and
on the surveys heretofore delivered to Buyer which are specifically
identified as Permitted Exceptions in Section 4.4(b) of the Disclosure
Schedule; (ii) a deed restriction applicable to burden the Fort Worth,
Texas parcel substantially as contemplated by the Model Deed Certificate
Language set forth as part of Exhibit 4.4(b); (iii) a 20-foot utility
easement for electric lines to burden the Moultrie, Georgia parcel
substantially in the form contemplated as a part of Exhibit 4.4(b); (iv) a
railroad easement to burden the Hayward, California parcel for the benefit
of the surplus property to be retained by Seller as shown on the drawing
attached as a part of Exhibit 4.4(b); (v) such matters as are to relate to
the Torrance, California parcel as are contemplated herein or in the
Torrance Lease; and (vi) such matters as to which Buyer does not timely
object as set forth in Section 4.4(b) or 4.4(c) or which are otherwise
resolved either by affirmative insurance from the Title Company or Seller's
indemnity or which are waived by Buyer all as hereinafter provided. No less
than 20 days prior to Closing, Seller shall deliver to Buyer date downs of
the Title Commitments. At the Closing, Seller, provided that Buyer pays the
cost thereof, shall cause the Title Company to furnish to Buyer ALTA form
owner's policies of title insurance (Form B-1992 with extended coverage
insuring over the general or standard exceptions), or "marked-up" Title
Commitments, in amounts equal to the value of the Owned Real Property
designated by Buyer. In connection with the issuance of such title
insurance, Seller shall furnish such reasonable and customary
<PAGE> 53
affidavits or
documents requested by the Title Company which do not expand Seller's
special warranty covenant so as to enable the Title Company to issue to
Buyer owner's policies of title insurance. The cost of such title insurance
shall be borne by Buyer. Buyer, at its sole expense, may obtain such
endorsements as Buyer may desire (including, without limitation, survey
endorsement, contiguity endorsement (if applicable), subdivision
endorsement, zoning 3.1 endorsement (or equivalent), access endorsement and
tax parcel endorsement); however, the obtaining of such endorsements shall
not be a condition of Closing and, in connection therewith, Seller shall
furnish such reasonable and customary affidavits requested by the Title
Company which do not expand Seller's special warranty covenant. If any such
date downs of the Title Commitments reveal any exceptions which are not
already Permitted Exceptions and which have an "Adverse Effect" (which
term, for purposes of this Section 4.4(b), shall mean having an effect on
the applicable parcel of Owned Real Property as a whole that is reasonably
expected to be materially adverse to the use of the Owned Real Property for
industrial purposes, except that exceptions resulting from the acts of
Seller after the date of the Title Commitments and not otherwise
specifically permitted by the terms of this Agreement or the Torrance Lease
shall be deemed to have an "Adverse Effect"), then Buyer shall give Seller
notice of objection within ten days after receipt of the date downs of the
Title Commitments (otherwise the objection shall be deemed waived). If any
survey described in Section 4.4(c) reveals any exceptions which are not
already Permitted Exceptions and which have an Adverse Effect, then Buyer
shall give Seller notice of objection within ten days after receipt of the
survey (otherwise the objection shall be deemed waived). If Buyer gives
notice of objection to matters shown on the date downs or the surveys and
if the Title Company is not willing to provide Buyer with adequate
affirmative coverage insuring over the same then Ball and Buyer may either
(A) waive the exception, (B) cause Seller to indemnify and hold harmless
Buyer for any loss, claim, cause of action or damage arising from such
objections having an Adverse Effect or (C) in the event such matters have a
Material Adverse Effect, terminate the Agreement in accordance with Article
IX, including without limitation, Section 9.2(e) hereof. The cost of
affirmative title insurance over such matters shall be paid by Seller to
the extent that the cost of the title policies required by this Section 4.4
(b), with extended coverage over general or standard exceptions, but not
the cost of additional endorsements Buyer elects to obtain (the "Title
Costs"), exceeds $250,000. Buyer shall pay all costs of affirmative
insurance until the cost thereof, when added to the Title Costs, equals
$250,000. In the event Seller is required to pay additional sums for
affirmative insurance pursuant to the preceding two sentences, Seller, at
its option, may elect to indemnify Buyer for any loss, claim,
<PAGE> 54
cause of
action or damage arising from such objections in lieu of paying the cost of
such affirmative insurance.
(c) Seller has ordered surveys of the Owned Real Property
(other than Torrance, California, which survey shall not be provided until
that Owned Real Property has been subdivided) as hereinafter described. The
surveys shall (i) be prepared and certified by a Registered Public Surveyor
or Registered Professional Engineer, (ii) comply with 1997 ALTA/ACSM
minimum detail requirements for Urban Land Title Surveys including Table A,
items 1-4, 6-11 and 13, (iii) locate all improvements, building lines,
rights-of-way and easements (identified by appropriate recording reference)
and other matters of record, evidenced by on-site observation or as
determined by the surveyor's examination of Seller's records affecting the
Owned Real Property, (iv) contain a legal description of the Owned Real
Property and (v) be certified to Buyer and the Title Company and Buyer's
lender, if such name is provided prior to Closing. To the extent Seller has
not already delivered any such surveys on or before the date of execution
of this Agreement, Seller shall do so promptly following receipt and review
thereof, but in any event Seller shall deliver the remaining surveys to
Buyer at least 20 days before Closing.
Section 4.5 No Solicitation.
(a) Until Closing or the earlier termination or
expiration of this Agreement, Seller shall not, directly or indirectly,
without the consent of Buyer, through any officer, director, employee,
investment banker, attorney or agent, (i) solicit, initiate, or encourage
any inquiries or proposals regarding the sale, lease or other disposition
of the Business or any substantial part of the Business or Business Assets
or the Shares other than the transactions contemplated by or described in
this Agreement (any of the foregoing inquiries or proposals being referred
to in this Agreement as an "Acquisition Proposal"), (ii) engage in
negotiations or discussions concerning, or provide any non-public
information or data to any person or entity relating to, any Acquisition
Proposal or (iii) agree to any Acquisition Proposal or otherwise facilitate
any effort to make an Acquisition Proposal. Seller will immediately
terminate any existing activities with any parties conducted heretofore
with respect to any of the foregoing and secure the return of confidential
information regarding the Business provided to any party other than Ball
and Buyer in connection therewith.
<PAGE> 55
(b) Seller shall promptly notify Buyer after receipt by
Seller of any Acquisition Proposal or any inquiries indicating that any
person is considering making or wishes to make an Acquisition Proposal,
identifying such person and the details thereof.
Section 4.6 Supplements to Disclosure Schedule. From time to
time prior to the Closing, Seller will promptly supplement or amend the
Disclosure Schedule with respect to any matter hereafter arising which, if
existing at the date of this Agreement, would have been required to be set
forth in the Disclosure Schedule. Except for supplements and amendments
reflecting transactions permitted by this Agreement (including, for
example, and not by way of limitation, the execution of contracts permitted
by Section 4.1), no such supplement to or amendment shall be deemed to
qualify or amend any representation or warranty or cure any breach of any
representation or warranty made in this Agreement; provided, that if any
such breach arising out of events occurring after the date hereof and prior
to the Closing is sufficiently material that Ball and Buyer would not be
obligated to close under Section 8.1 as a result thereof, their remedy for
such breach, unless the parties otherwise agree, shall be to elect not to
close.
Section 4.7 Bulk Sales Laws. Each party hereby waives
compliance by Seller with the provisions of the "bulk sales," "bulk
transfer" and similar laws of any state. Seller agrees to indemnify and
hold Ball, Buyer and their respective Affiliates (including, after the
Closing, LAR, RCAL and RIND) harmless against any and all claims, losses,
damages, liabilities (including Tax liabilities), costs and expenses
incurred by Buyer, Ball or any of their respective Affiliates (including,
after the Closing, LAR, RCAL and RIND) as a result of any failure to comply
with any such "bulk sales," "bulk transfer" or similar laws.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.1 Reasonable Efforts. Subject to the terms and
conditions of this Agreement, the parties will use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary or desirable to consummate, as promptly as
practicable, the transactions contemplated by this Agreement; provided that
Ball may, in its discretion upon written notice to Seller,
<PAGE> 56
extend the 7 day
time period referred to in Section 1.7(a) by up to 21 days in order to
complete its financing arrangements with respect to the transactions
contemplated hereby. In addition, subject to the terms and conditions of
this Agreement, Ball and Buyer will use their best reasonable efforts to
consummate the Financing in accordance with the terms of the Commitment
Letter. Each party agrees to cooperate fully with the other parties in
assisting them to comply with the provisions of this Section 5.1. Each
party agrees to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
reasonably necessary or desirable to consummate the transactions
contemplated by this Agreement.
Section 5.2 WARN Act. The parties agree to cooperate in good
faith to determine whether any notification may be required under the WARN
Act as a result of the transactions contemplated by this Agreement. Seller
will be responsible for providing any notification that may be required
under the WARN Act with respect to any employees of the Business.
Section 5.3 Regulatory and Other Authorizations; Consents.
(a) Each party will use all reasonable efforts to obtain
all authorizations, consents, orders and approvals of Authorities
(including from Cade) and all third party consents that may be or become
necessary for the execution and delivery of, and the performance of its
respective obligations pursuant to, this Agreement and the Ancillary
Agreements, provided that neither Ball nor Buyer shall be under any
obligation to divest itself of any assets, to hold assets separate or to
agree to alter the manner in which Ball operates its business, the Business
is operated or the business of Latasa is operated. As soon as practicable
and in any event no more than 5 business days after the date hereof,
Seller, Ball and Buyer will each file with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice, pursuant to the HSR Act, Notification and Report Forms (FTC Form
C4, Rev. 9/95) with respect to the transactions contemplated by this
Agreement and respond as promptly as is practicable to all inquiries
received from either agency for additional information or documentation.
The parties agree that no filing will be made with Cade until after the
Closing.
(b) The parties will consult with one another, and
consider in good faith the views of one another, in determining whether any
action by or in respect of, or filing with, any Authority is required or in
connection with any filings,
<PAGE> 57
analyses, appearances, representations,
memoranda, briefs, arguments, opinions and proposals made, or required to
be made or submitted by or on behalf of any party in connection with
proceedings under or relating to the HSR Act or any other federal, state or
foreign antitrust or fair trade law. Each party shall promptly notify the
other party of any communication to that party from any Authority in
connection with any required filing with, or approval or review by, such
Authority in connection with the transactions contemplated by this
Agreement.
(c) Seller, Ball and Buyer shall each use its best
efforts to (i) lift, rescind or appeal any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate
the transactions contemplated hereby and (ii) defend any litigation seeking
to enjoin, prevent or delay the consummation of the transactions
contemplated hereby or seeking material damages as a result thereof;
provided, that no party shall be required to take any such action to the
extent there is not a reasonable chance of prevailing with respect thereto.
Section 5.4 Employee Matters for Represented Employees.
(a) The term "Represented Employees" means all of the
employees of the Business represented in collective bargaining units
pursuant to the Collective Bargaining Agreements, including those employees
("Absent Represented Employees") on lay-off, disability or leave of
absence, whether paid or unpaid, including without limitation under the
Family Medical Leave Act of 1993 ("FMLA"), military leaves or workers'
compensation, and the term "Transferred Represented Employees" shall mean
all of the Represented Employees (including Absent Represented Employees)
employed by Buyer pursuant to this Section 5.4.
(b) Effective at Closing, Buyer shall offer employment to
all Represented Employees as of the Closing Date. At Closing, except as
otherwise provided in this Section 5.4, Buyer shall also assume Seller's
obligations under the Collective Bargaining Agreements, other than with
respect to plans maintained by Seller as of the Closing Date (all such
plans, collectively, "Seller's Plans"), it being acknowledged and agreed
that (i) Seller shall remain liable to all Transferred Represented
Employees for benefits under Seller's Plans in which such employees are or
will become vested as of the Closing Date and that Buyer shall provide to
Transferred Represented Employees the benefits under the Collective
Bargaining Agreements from and after the Closing Date under the Replacement
Plan (as defined in Section 5.4(f) below), and other plans of Buyer,
subject to the remainder of this
<PAGE> 58
Section 5.4, and (ii) Seller shall amend
Seller's Plans to provide that all Represented Employees shall be 100%
vested in their benefits accrued as of the Closing Date under all
tax-qualified plans maintained or contributed to by Seller on behalf of
Represented Employees. Seller hereby represents that it neither maintains
nor contributes to any other employee benefit plan under which Represented
Employees may be eligible to receive benefits that have the potential to
vest, but not including for purposes of this sentence any vacation pay
plan.
Buyer and Seller shall cooperate and shall use their reasonable
efforts to enable all Transferred Represented Employees to commence
participation in employee benefit plans maintained by, or on behalf of,
Buyer commencing effective as of the Closing Date.
Notwithstanding the foregoing, with respect to (i) any
gainsharing plan, (ii) any plan based in whole or in part on either
Seller's or Buyer's profits, earnings, returns or revenues, or (iii) any
provision of a plan pursuant to which provision benefits or plan assets are
distributed or invested (including investments directed by plan
participants or beneficiaries) in employer securities or other forms of
investment in which it would be impracticable or infeasible for Buyer to
distribute or invest (as the case may be), or plan assets that Buyer
determines should be invested, in whole or in part, in investments
different from the plan investments immediately prior to the Closing Date,
such benefits, provisions, investments or any similar modifications or
adaptations shall be subject to good faith negotiations between Buyer and
the applicable unions. Because it would be inappropriate or impracticable
for Buyer to assume the foregoing plans and provisions in their entirety,
Buyer, after negotiating with the appropriate unions, shall provide
reasonably comparable alternative benefits for Transferred Represented
Employees to replicate or substitute for Seller's profit sharing and
gainsharing plans and those provisions of the employee benefit plans that
are described in clause (iii) of the preceding sentence.
Seller represents that, to the best of its knowledge and belief
the interplant transfer provisions in Article XXXV of the Collective
Bargaining Agreements at the Bristol, Kansas City, Seattle and Tampa can
plants (the "Interplant Transfer Provisions") and, the plans and
provisions described in the preceding paragraph represent the only
obligations (other than procedural or administrative obligations) under the
Collective Bargaining Agreements that would be impracticable or
inappropriate for another reasonable party to assume. Buyer shall not
assume the Interplant Transfer Provisions.
<PAGE> 59
Notwithstanding anything in this Agreement to the contrary,
Seller shall reimburse Buyer for all liabilities and obligations incurred
by Buyer with respect to all Absent Represented Employees unless and until
such employees commence active employment with Buyer.
Seller shall retain (i) all liabilities and obligations with
respect to severance, termination pay and related liabilities for all
Represented Employees who terminate or are terminated by Seller on or prior
to the Closing Date, or arising in connection with the Closing by reason of
any action, omission or failure to take action by, or on behalf of, Seller,
(ii) all liabilities and obligations incurred by Buyer relating to the
failure of any of Seller's Plans to conform to, or be administered in
accordance with, the Collective Bargaining Agreement to which it relates,
if applicable.
Buyer, however, shall assume and be solely responsible for any
Losses incurred by Seller as a result of any equal employment opportunity
claims, disability discrimination claims and/or claims under the Collective
Bargaining Agreements alleging a violation arising solely from Buyer's
decision not to restore an Absent Represented Employee to active
employment.
(c) There will be no transfer of any funds at Closing
from Seller to Buyer regarding the contractual supplemental unemployment
benefit plans. Buyer shall assume the obligation to pay supplemental
unemployment benefits under its own plan or plans (collectively, if more
than one, "Buyer's SUB Plan") in accordance with the terms of the
Collective Bargaining Agreements, with respect to benefits payable from and
after the Closing Date.
Seller, however, shall reimburse Buyer for benefits provided by
Buyer under Buyer's SUB Plan to, or on behalf of, Absent Represented
Employees (i) with respect to any restructuring initiated prior to Closing
(e.g., Torrance), for any and all periods prior to the date such employee
first becomes actively employed by Buyer (if ever), and (ii) with respect
to layoffs in the ordinary course, for any and all payment periods
commencing on, or prior to, the 60th day following the Closing Date. Seller
shall include on the Closing Statement $250,000 as an accrued liability for
SUB payments pursuant to Section 1.5(a ). Seller hereby represents that
Seller is not and has not been required to fund (other than on a
pay-as-you-go basis) any supplemental unemployment compensation benefits on
behalf of Seller Employees (as defined in Section 5.5(a)). Seller shall
indemnify and hold Buyer and its Affiliates harmless
<PAGE> 60
from and against any
and all Losses with respect to (i) Seller's supplemental unemployment
compensation benefit plans or their funding arrangements or their summary
plan descriptions, (ii) any liability incurred by Buyer as a result of
Seller's breach of the foregoing representation, and (iii) any liabilities
arising out of Seller's obligation to make cash funding contributions to
trusts established pursuant to its supplemental unemployment compensation
benefit plans or to disclose such benefits or funding, or any incidents of
mistakes or noncompliance by Seller with respect to the supplemental
unemployment compensation benefits.
(d) Buyer acknowledges that certain Collective Bargaining
Agreements require Buyer to establish a 401(k) defined contribution plan as
of the Closing Date, and Buyer shall use its reasonable efforts to promptly
implement any such plan. If Buyer is unable to provide a 401(k) defined
contribution plan as of the Closing Date, Buyer shall take such reasonable
steps as may be necessary to contribute to the applicable plan or plans the
required matching or other employer contributions due for the period
between the Closing Date and the date Buyer's plan becomes effective, but
not including any wage deferral contributions pursuant to employee
elections under section 401(k) of the Code.
(e) Buyer shall recognize Transferred Represented
Employees' seniority and service with Seller and any predecessor under
Buyer's employee benefit plans (whether or not funded and whether or not
subject to ERISA), personnel policies and fringe benefit plans, programs
and arrangements established for or offered to Transferred Represented
Employees to the same extent and for the same purposes that Seller is
required to recognize such service pursuant to the Collective Bargaining
Agreements. On and after the Closing Date, Buyer and the applicable unions
are free to negotiate from time to time new terms and conditions of
employment, including without limitation seniority and benefit plans,
consistent with the National Labor Relations Act.
(f) Except as otherwise provided in Section 5.4(g)
regarding the possible assumption of certain Single Location Plans (as
defined therein), on or as soon as practicable following the Closing Date,
but with retroactive effect to the Closing Date, Buyer shall establish a
defined benefit pension plan or plans (collectively, if more than one, the
"Replacement Plan") providing benefits to Transferred Represented Employees
required pursuant to the Collective Bargaining Agreements, which
Replacement Plan shall (x) be designed to qualify under section 401(a) of
the Code, and (y) provide that the Transferred Represented Employees who
were
<PAGE> 61
participants in a Union Pension Plan immediately before Closing and
who become Transferred Represented Employees shall commence participation
in the Replacement Plan as of the Closing Date.
Each Replacement Plan shall provide Transferred Represented
Employees with credit for service with Seller for purposes of eligibility
to participate, vesting, eligibility to receive benefits, and benefit
accruals under the Replacement Plan; provided, however, that the benefit
payable to a Transferred Represented Employee under a Replacement Plan
shall be offset by the benefit payable to the Transferred Represented
Employee under the applicable Seller's Plans (collectively, the "Union
Pension Plans"). Such offset (the "Offset") shall be calculated in
accordance with the principles outlined below. The pension benefit examples
set forth in Exhibit 5.4(f) are intended to illustrate the calculations of
the Offset in accordance with these principles, but are not intended to be
exhaustive.
(i) A participant may elect to begin receiving a
benefit under the Union Pension Plan as provided under that plan.
(ii) In the event that a Transferred Represented
Employee is eligible for a monthly retirement benefit (other than a
retirement benefit due to Permanent Shutdown, layoff, accident or
sickness, which benefit is hereinafter referred to as a "Special
Retirement Benefit") or a deferred vested monthly benefit under the
Replacement Plan, the Offset shall be based on the age 65 (or if
later, normal retirement date) benefit payable under the Union
Pension Plan, and the benefit payable under the Replacement Plan
shall be adjusted based on age at benefit commencement under the
Replacement Plan, the participant's form of payment under the
Replacement Plan, the preretirement survivor coverage, if any, under
the Replacement Plan, and preretirement survivor coverage, if any,
under the Union Pension Plan that was in force while such participant
was employed by Buyer. Notwithstanding the foregoing, this
subparagraph (ii) shall not apply for determining the Offset for a
Transferred Represented Employee with a deferred vested monthly
benefit under a Defined Benefit Single Location Plan (as defined in
Section 5.4(g)) that has not been assumed by Buyer, which participant
cannot elect to commence receiving such monthly benefit before age 65
due to having earned fewer than 10 years of vesting service with
Seller. For
<PAGE> 62
such Transferred Represented Employee, the Offset shall
be equal to (a) $0 until the date immediately preceding age 65, and
(b) from and after such date, such monthly benefit that is payable
under such Defined Benefit Single Location Plan.
(iii) In the event that a Transferred Represented
Employee is eligible for a monthly retirement benefit (other than a
Special Retirement Benefit) under the Replacement Plan, the Offset
shall include the graded minimum supplement under the Union Pension
Plan if such Transferred Represented Employee is eligible for such
supplement as of the Closing Date.
(iv) In the event that a Transferred Represented
Employee is eligible for a special retirement payment under the
Replacement Plan, the Offset shall include the special, ten week,
payment, if any, payable under the Union Pension Plan but shall not
include weeks of accrued vacation, if any, as of the Closing Date,
and if the special retirement payment payable under the Union Pension
Plan exceeds $0, the Transferred Represented Employee shall commence
to receive a monthly retirement benefit under the Replacement Plan
upon retirement instead of three months following retirement.
(v) In the event that a Transferred Represented
Employee is eligible for a disability benefit or a Special Retirement
Benefit under the Replacement Plan, the Offset shall be equal to (a)
$0 until the date immediately preceding the earliest date that
benefits could commence under the Union Pension Plan, and (b) from
and after such earliest date, the benefit that could be paid under
the Union Pension Plan assuming that the benefit commences on such
earliest date.
(vi) In the event that a Transferred Represented
Employee dies while employed by Buyer and the Transferred Represented
Employee's surviving spouse is eligible for a death benefit under the
Replacement Plan, the Offset shall equal the benefit, if any, which
is payable under the Union Pension Plan on account of such death.
<PAGE> 63
(vii) In the event that a Transferred Represented
Employee either (A) separates from service with Buyer at a time when
the participant is eligible for a deferred vested monthly benefit
under the Replacement Plan and subsequently dies prior to the
commencement of benefits under the Replacement Plan, and the
Transferred Represented Employee's surviving spouse is eligible for a
death benefit under the Replacement Plan due to preretirement
survivor coverage under the Replacement Plan, or (B) separates from
service with Buyer at a time when the participant is eligible for a
monthly retirement benefit under the Replacement Plan and
subsequently dies prior to the commencement of benefits under the
Replacement Plan, then in either case, the benefit payable under the
Replacement Plan shall be determined as in (ii) above, and further
reduced by 50% on account of payment to the surviving spouse.
(viii) In the event that a Transferred Represented
Employee dies subsequent to both separation from service with Buyer
and benefit commencement from the Replacement Plan, the death
benefit, if any, payable from the Replacement Plan shall be
determined solely with regard to the form of payment in effect at
death and the monthly benefit under the Replacement Plan.
(ix) Benefits under the Union Pension Plans shall be
paid to Transferred Represented Employees based on the plan
provisions in effect as of the Closing Date, but taking into account
the amendments described below in this Section 5.4(f).
(x) The above principles (i) through (ix) should not
be interpreted to entitle a participant in a Defined Benefit Single
Location Plan to any benefits, including but not limited to Special
Retirement Benefits and special retirement payments under the
Replacement Plan or the Union Pension Plans, other than benefits
expressly contemplated by the applicable Collective Bargaining
Agreement.
Seller shall fund the Union Pension Plans as necessary to
ensure that benefits payable thereunder to Transferred Represented
Employees will be fully paid when due. In addition, Seller shall amend each
Union Pension Plan that is not a
<PAGE> 64
Defined Benefit Single Location Plan and
that provides an unreduced benefit upon retirement with 30 years of service
so that Transferred Represented Employees' service with Buyer will be
credited under the Union Pension Plans for purposes of determining a
Transferred Represented Employee's eligibility for, and entitlement to, a
thirty-year pension under the Union Pension Plan upon a Transferred
Represented Employee's termination, resignation, retirement or death from
Buyer following the Closing Date. Further, Seller shall amend each Union
Pension Plan that is not a Defined Benefit Single Location Plan to provide
that (i) a Transferred Represented Employee who retires under a Replacement
Plan shall have his or her benefit under such Union Pension Plan converted
to a joint and 50% survivor annuity using factors applicable to a
participant who retires under such Union Pension Plan irrespective of
whether such Transferred Represented Employee was eligible to retire under
such Union Pension Plan as of the Closing Date, (ii) if a Transferred
Represented Employee elects, or does not opt out of, preretirement survivor
coverage under a Union Pension Plan, and subsequently dies while employed
by Buyer and while such coverage is in effect, the death benefit payable
from the Union Pension Plan shall commence at death in a monthly amount
equal to 50% of the accrued benefit, including the reduction for
preretirement survivor coverage, and (iii) the special retirement payment
payable to a Transferred Represented Employee shall be determined without
regard to any weeks of accrued vacation.
Notwithstanding the foregoing, in the event that Buyer incurs
any additional liabilities or obligations as a result of the failure of the
applicable union or any applicable governmental agency or authority, to
agree to, or approve, the crediting of service, or the timing or
methodology of the Offset, in each case, in the manner and to the extent
described in this Section 5.4(f) and Exhibit 5.4(f), thereby resulting in a
duplication of pension benefits or additional benefits beyond those
contemplated by this Section 5.4(f) and Exhibit 5.4(f), payable to or on
behalf of Transferred Represented Employees, Seller shall reimburse Buyer
for any additional out-of-pocket costs incurred by Buyer to the extent
resulting from such duplication of benefits or additional benefits beyond
those contemplated by this Section 5.4(f) and Exhibit 5.4(f). In addition,
Seller shall reimburse Buyer for any and all Losses suffered by Buyer by
reason of any Permanent Shutdown (as defined in Section 5.4(h)) occurring
as a result of Seller's actions on or before the Closing Date or as a
result of the execution, delivery or performance of this Agreement, or the
consummation of transactions contemplated hereby, provided that Buyer has
assumed Seller's obligations under the Collective Bargaining Agreements as
required by this Section 5.4.
<PAGE> 65
(g) Single Location Plans.
(i) With respect to any Business Locations where
separate tax-qualified defined benefit and/or defined contribution
plans are maintained for Transferred Represented Employees and/or
Transferred Nonrepresented Hourly Employees (as defined in Section
5.5(b)) ("Single Location Plans"), Buyer shall have the right, in its
sole discretion, to elect, on or prior to the Closing Date, to assume
sponsorship of one or more of the Single Location Plans that are
defined contribution plans (the "Defined Contribution Single Location
Plans"), and to elect, at the time prescribed in clause (vii) below,
to assume sponsorship of all (or none) of the Single Location Plans
that are defined benefit plans (the "Defined Benefit Single Location
Plans"). In this regard, if Buyer elects to assume sponsorship of any
of the Defined Contribution Single Location Plans, Buyer may elect to
either assume the trust in which the assets of any such plan are
invested, or to receive a transfer of plan assets from the plan's
trust in conjunction with the assumption of the liabilities of such
plan, and if Buyer elects to assume sponsorship of the Defined
Benefit Single Location Plans, Buyer shall receive transfers of plan
assets in conjunction with the assumption of the liabilities from
each of the respective trusts in which assets of the Defined Benefit
Single Location Plans are invested, as described below.
(ii) With respect to each Single Location Plan,
Seller has heretofore delivered to Buyer true and complete copies of
the current version of the plan and any amendments thereto, any
related trust or other funding vehicle, the most recent summary plan
descriptions and summaries of economics provided to participants
under ERISA or the Code, the most recent determination letter
received from the Internal Revenue Service with respect to each such
plan and other related documents. To the knowledge of Seller, no
event has occurred since the date of such determination that would
affect such determination. The plans and related documents provided
to Buyer as of the date hereof pursuant to this Section 5.4(g)(ii)
are herein referred to as the "Initial Document Production."
Commencing as of the date hereof, Seller shall use its reasonable
efforts to provide to Buyer updated plans, related trusts,
amendments, summaries of
<PAGE> 66
economics, summary plan descriptions,
summary of material modifications and related information required
under ERISA or the Code. In addition, as of the Closing Date, Seller
shall identify for Buyer those documents required under ERISA or the
Code relating to the Single Location Plans that Seller will not
deliver to Buyer as of the Closing Date. To the extent that Seller
fails to timely provide Buyer with the documents and information that
are reasonably appropriate or needed for Buyer to operate and
administer the Single Location Plans, Seller shall indemnify and hold
harmless Buyer from any and all Losses suffered by Buyer pursuant to
Section 5.4(g)(x) related to such failure, and further, to the extent
that such failure interferes with Buyer's ability to satisfy its
obligations under Section 5.4, 5.5 or 5.6, Buyer shall be relieved of
its obligations to the extent that Buyer's inabilities result from
Seller's failure, until (A) Seller cures such failure and (B) Buyer
has had a reasonable period of time thereafter to satisfy its related
obligations.
(iii) Seller hereby represents that each of the
Single Location Plans is, and has been administered, in compliance
with its terms and, to the extent required, with all applicable law,
including the applicable provisions of ERISA and the Code ;provided,
however, that Seller shall not be deemed to have breached this
representation to the extent that plan documents provided to Buyer
have not been amended to comply with applicable law, but solely with
respect to those amendments that are not required to be made as of
the date hereof, or as of the Closing Date, as the case may be. In
addition, Seller hereby represents that all documents, financial and
census data and reports and other pertinent information provided, or
required to be provided to Buyer pursuant to this Agreement, are true
and complete as of the date so provided, and that, where applicable,
the terms of each Single Location Plans or, if updated by a summary
of economics, then the terms of the applicable summary of economics
are consistent with the terms of the Collective Bargaining Agreements
to which such plan or summary relates as of the date hereof with
respect to the documents provided to Buyer as of the date hereof, and
as of the date provided to Buyer with respect to the documents
provided to Buyer following the date hereof, but prior to the Closing
Date.
<PAGE> 67
(iv) With respect to the Defined Contribution Single
Location Plans that Buyer may elect to assume, if any, on, or as soon
as practicable following, the Closing Date, Buyer shall take all
actions necessary and appropriate to assume such plans, and Buyer and
Seller shall cooperate to effectuate the foregoing.
(v) With respect to the Defined Benefit Single
Location Plans that Buyer may elect to assume, no later than the
earlier of (A) June 1, 1998, or (B) 45 days prior to the Closing
Date, Seller or Seller's actuary or the trustee or trustees (the
"Master Trustee") of the master trust or trusts in which the assets
of the Defined Benefit Single Location Plans are invested (the
"Master Trust") shall provide to Buyer (A) a schedule containing the
projected benefit obligations, as of January 1, 1998, or such later
date as Seller shall determine, for each participant, beneficiary and
alternate payee (within the meaning of section 414(p)(8) of the Code)
under each of the Defined Benefit Single Location Plans, (B) such
additional census data for all plan participants and other pertinent
census-related information that Buyer or Buyer's actuary may
reasonably request to enable Buyer to calculate the liabilities under
such plans, in each case, as of January 1, 1998, or such later date
as Seller shall determine, and (C) such other pertinent information
that Buyer or Buyer's actuary may reasonably request to evaluate such
plans from a financial and legal compliance perspective.
(vi) On the day following the last day of the month
coincident with or next following the Closing Date (the "Valuation
Date"), Seller shall provide to Buyer an estimate of the fair market
value of the assets allocable to each of the Defined Benefit Single
Location Plans (the "Guaranteed Pension Asset Value").
(vii) As soon as practicable, but in no event more
than five business days following the Valuation Date, Buyer shall
notify Seller whether or not Buyer has elected to assume the Defined
Benefit Single Location Plans. If Buyer has elected to assume such
plans, then, as soon as practicable, but in no event later than four
business days following the date that Buyer has notified Seller that
it has elected to assume such plans, Seller shall cause the
<PAGE> 68
Master Trustee to transfer to a trustee or trustees designated by
Buyer, in cash, assets from the Master Trust equal to 90% of the
Guaranteed Pension Asset Value.
(viii) No later than 60 days following the Valuation
Date, Seller shall cause the Master Trustee to transfer to a trustee
or trustees designated by Buyer, in cash, assets from the Master
Trust equal to the greater of (A) 10% of the Guaranteed Pension Asset
Value or (B) the fair market value of the assets allocable to each of
the Defined Benefit Single Location Plans as of the Valuation Date
minus 90% of the Guaranteed Pension Asset Value. At such time, Seller
(or Seller's actuary or the Master Trustee) shall also provide to
Buyer a report of the fair market value of the assets of each of the
Defined Benefit Single Location Plans as of the Valuation Date,
financial information relating to the calculation of such assets as
of the Valuation Date, and such other pertinent information as Buyer
may reasonably request to evaluate the report on assets prepared by
the Master Trustee, and such other reports, if any, prepared by
Seller or Seller's actuary, and (C) such other pertinent information
that Buyer or Buyer's actuary may reasonably request to evaluate such
plans from a financial and legal compliance perspective, and to
evaluate the calculations prepared by the Master Trustee, and Seller
or Seller's actuary, if applicable. The report prepared valuing the
assets in the Master Trust allocable to the Defined Benefit Single
Location Plans as of the Valuation Date shall be prepared by the
Master Trustee in accordance with such rules, regulations and
procedures governing such preparation.
(ix) Seller hereby represents that the transfer of
assets and liabilities contemplated by this Section 5.4(g) shall be
in compliance with section 414(l) of the Code, to the extent
applicable.
(x) Seller shall indemnify and hold Buyer and its
Affiliates harmless from and against any and all Losses with respect
to all liabilities and obligations arising under the plans that are
assumed by Buyer pursuant to this Section 5.4(g) that result from (A)
the acts or omissions of Seller, any trustee or other fiduciary with
respect to such plans, which acts or omissions occurred, or should
<PAGE> 69
have occurred, on or prior to the date the applicable assets are
transferred, including, without limitation, any acts or omissions
relating to any inaccuracies or omissions in the data, documents or
other information that Seller (or Seller's actuary or the Master
Trustee) were required to provide to Buyer pursuant to this Agreement
or that were reasonably appropriate or needed for Buyer to operate
and administer the Single Location Plans, or (B) Buyer's reliance on,
or taking any actions with respect to, the Initial Document
Production, to the extent that the information provided therein
differed from, or failed to conform with, any documents or subsequent
information received by Buyer from Seller, the terms of any
applicable Collective Bargaining Agreement or applicable law.
(xi) Seller and Buyer shall cooperate in the filing
of any required forms, applications or communications, and in taking
all other actions that are necessary or appropriate relating to the
Internal Revenue Service, the Pension Benefit Guaranty Corporation,
the U.S. Department of Labor, and any other regulatory agency that
has jurisdiction over the transfers and assumptions contemplated by
this Section 5.4(g) to consummate such transfers and assumptions.
(xii) To the extent that Buyer elects to assume any or
all of the Defined Contribution Single Location Plans and all of the
Defined Benefit Single Location Plans pursuant to this Section 5.4(g)
(each, an "Assumed Benefit Plan," and collectively, the "Assumed
Benefit Plans"), Buyer shall not be required to establish a plan for
the employees at the applicable Business Locations pursuant to
paragraph (f) above, or Section 5.5 hereof.
(h) The parties to this Agreement intend that this
transaction should not be construed as a "permanent shutdown" either under
the Collective Bargaining Agreements or for purposes of Article III of
Seller's Pension Plans for Hourly Employees or otherwise ("Permanent
Shutdown").
(i) All reimbursements described in this Section 5.4
shall be made in accordance with the reimbursement procedures set forth in
Section 5.5(i) hereof. All references in this Section 5.4 to liabilities or
obligations incurred by Buyer, shall be deemed to include all liabilities
or obligations incurred by any
<PAGE> 70
pension plan maintained or sponsored by
Buyer or Ball, or to which Buyer or Ball is obligated to contribute,
including the Replacement Plan.
(j) For purposes of Sections 5.4, 5.5 and 5.6 of this
Agreement, references to Buyer shall be interpreted to include or be
replaced by references to Ball with respect to references to the entity
sponsoring or maintaining an employee benefit plan, the entity taking or
required to take any action with respect to any such plan, the entity for
whom an employee is employed or from whom an employee has terminated
employment, and the entity incurring employee benefit related liability, in
each case, as the context permits.
Section 5.5 General Employee Matters, Employee Matters
for Nonrepresented Employees and Welfare Benefit Provisions for All
Employees.
(a) General. Seller has previously provided to Buyer the
information listed below pertaining to all employees employed by Seller in
the Business, including Headquarter Employees (as defined in Section
5.5(c)) as of the date indicated (the "Employee Lists"). Each such person
is herein referred to individually as a "Seller Employee," and collectively
as the "Seller Employees": name, title, work location, wage grade or Hay
Grade, date of birth, status as salaried or hourly employee and union code,
whether such employee is exempt or non-exempt, monthly salary or hourly
wage rate, employee's current status, status date and reason code if
employee is inactive, service dates and the date definitions for purposes
of vesting and eligibility to participate under any employee benefit plan.
As soon as practicable, but no later than 30 days following the
date hereof, Seller shall provide to Buyer certain employee benefits data
(the "Employee Benefits Data") with respect to all Seller Employees
containing the type of information set forth on Section 5.5(a) of the
Disclosure Schedule. Seller shall provide updated Employee Benefits Data no
later than 14 days following the Closing Date.
No later than 14 days following the Closing Date, Seller shall
provide Buyer with (i) the number of remaining 1998 vacation days accrued
as of the Closing Date for each Transferred Employee (as defined below),
and (ii) Employee Lists updated as of the Closing Date.
In addition, within 180 days following the Closing Date, Seller
shall provide to Buyer (i) for each Transferred Employee, individual
pension service
<PAGE> 71
information, including the period of continuous service
with Seller (and including all service that Seller is required to take into
account for purposes of all applicable benefit plans), which information
includes credited service for benefit and vesting purposes, and (ii) such
other information regarding Transferred Represented Employees and
Transferred Nonrepresented Hourly Employees (as defined in Section 5.5(b))
that actuaries would reasonably agree is sufficient and necessary to value
the liabilities of, and/or administer, the Replacement Plans and any
Defined Benefit Single Location Plans that are assumed by Buyer, pursuant
to the terms of such plans, including individual accrued benefits for each
Transferred Represented Employee and Transferred Nonrepresented Hourly
Employees. In the event, however, that any Transferred Employee terminates,
retires, dies or becomes disabled during the 180 day period following the
Closing Date, upon notification of the date of separation of service,
Seller shall provide to Buyer all pension information for such person
within 5 business days of notification.
Commencing as of the date hereof, Seller shall provide to
Buyer, upon Buyer's request, such employee benefits data, including dates
of hire and breaks in service, pertaining to a specific individual or
individuals, reasonably requested by Buyer, as soon as practicable, but in
no event later than 7 days, following the date of such request. In
addition, Seller shall provide to Buyer, within 36 months following the
Closing Date, break in service information with respect to each Transferred
Employee, by individual.
To the extent that Seller fails to satisfy its obligations to
provide Buyer with the information described in the foregoing paragraphs of
this Section 5.5(a) in a timely and accurate manner, Seller shall indemnify
and hold harmless Buyer from any and all Losses related to such failure,
and further, to the extent that such failure interferes with Buyer's
ability to satisfy its obligations under Section 5.4, 5.5 or 5.6 hereof,
Buyer shall be relieved of its obligations to the extent that Buyer's
inabilities result from Seller's failure, until (i) Seller cures such
failure and (ii) Buyer has had a reasonable period of time thereafter to
satisfy its related obligations.
Each Seller Employee (other than any Represented Employee) who
becomes actively employed by Buyer within the time prescribed by Section
5.5 or 5.6, is herein referred to individually as a "Transferred Employee"
and all such Seller Employees collectively as "Transferred Employees," in
each case, as of the date such Transferred Employee commences active
employment with Buyer. Each Transferred Represented Employee is herein
referred to individually as a Transferred Employee
<PAGE> 72
and all such Transferred
Represented Employees, collectively as Transferred Employees, as of the
Closing Date. Employment of Transferred Employees by Buyer on or after the
Closing Date, other than those employees covered by a Collective Bargaining
Agreement, shall be employment "at will," and nothing herein shall be
construed to be an employment agreement for the benefit of any such
employee.
Any Absent Nonrepresented Hourly Employee, as defined Section
5.5(b), or Absent Salaried Employee, as defined in Section 5.5(c), shall
not be deemed to be a Transferred Employee until such employee commences
active employment with Buyer.
Except for certain obligations relating to Assumed Benefit
Plans that are assumed by Buyer as of the Closing Date, as described in
Section 5.4(g), and obligations relating to Represented Employees, as
described in Sections 5.4 and 5.5, Seller shall retain all liabilities and
obligations whatsoever pertaining to (i) all Seller Employees, or any
employees of Seller who have retired or terminated, are on lay off,
short-term disability, long-term disability, workers' compensation, leave
of absence or any other inactive status immediately prior to the Closing
Date and, in each case, who do not become Transferred Employees, whether
such liabilities and obligations are incurred prior to, on or after the
Closing Date, and (ii) all Seller Employees, including Transferred
Employees, with respect to all liabilities and obligations incurred prior
to the Closing Date, and Seller shall reimburse Buyer for any and all
liabilities or obligations incurred by Buyer that are described in clauses
(i) or (ii), above. Except as otherwise provided in Sections 5.4, 5.5 and
5.6 hereof, Buyer shall be liable for all obligations incurred with respect
to Transferred Employees from the date such employees become Transferred
Employees.
(b) Nonrepresented Hourly Employees. Effective at
Closing, Buyer shall offer employment to all hourly employees associated
with the Business who are not covered by a Collective Bargaining Agreement
("Seller Nonrepresented Hourly Employees") other than those employees
("Absent Nonrepresented Hourly Employees") on short- and long-term
disability, leaves of absence, including, without limitation, under FMLA or
military leaves, lay off or workers' compensation.
In addition, Buyer shall offer employment to all Absent
Nonrepresented Hourly Employees who are available to commence active
employment on or prior to the 180th day following the Closing Date or such
later date to the extent that Buyer is so required pursuant to applicable
law. Those Seller Nonrepre-
<PAGE> 73
sented Hourly Employees who commence active
employment with Buyer as of the Closing Date and those Absent
Nonrepresented Hourly Employees who commence active employment with Buyer
within the time prescribed by this paragraph shall, as of the date such
employees commence active employment with Buyer, be considered Transferred
Employees and shall herein be referred to as the "Transferred
Nonrepresented Hourly Employees."
Buyer shall offer to Transferred Nonrepresented Hourly
Employees who commence active employment on the Closing Date the same
hourly wage rate in effect with Seller immediately prior to the Closing
Date, and benefits substantially comparable to those benefits provided to
such employees by Seller immediately prior to the Closing Date. Buyer shall
offer to Transferred Nonrepresented Hourly Employees who commence active
employment after the Closing Date the same hourly wage rate in effect for
similarly situated employees of Buyer at that location, and benefits
substantially comparable to those benefits provided to similarly situated
employees of Buyer at that location, in each case, as of the date such
employees commence active employment with Buyer. Notwithstanding the
foregoing, Buyer shall have no obligation to guarantee to continue the
hourly wage rate or benefits provided to Transferred Nonrepresented Hourly
Employees pursuant to this paragraph.
Buyer shall recognize Transferred Nonrepresented Hourly
Employees' service with Seller to the same extent and for the same purposes
(other than for purposes of benefit accrual under defined benefit plans)
that Seller is required to recognize such service pursuant to the terms of
Seller's plans, in accordance with the provisions governing crediting of
service from time to time under Buyer's employee benefit plans (whether or
not funded and whether or not subject to ERISA) and personnel policies;
provided, however, that Buyer shall be required to credit service with
Seller under Buyer's employee benefit plans only if, and to the extent
that, Buyer gives credit to similarly situated employees of Buyer for
comparable service performed by such employees for Buyer.
Except as provided in Section 5.6(a)(4), Seller shall be solely
responsible for, and shall retain all liabilities and obligations for, all
Absent Nonrepresented Hourly Employees unless and until such employees
become Transferred Employees. Seller shall be solely responsible for, and
shall retain all liabilities and obligations with respect to, severance,
termination pay and related liabilities for all Seller Nonrepresented
Hourly Employees who terminate or are terminated by Seller prior to
<PAGE> 74
the date such employees become Transferred Employees, and shall reimburse
Buyer for any and all liabilities and obligations incurred by Buyer that are
retained by Seller or for which Seller is obligated to reimburse Buyer
pursuant to this paragraph.
(c) Salaried Employees Including Headquarter Employees,
Commencing Employment as of the Closing Date. Effective at Closing, Buyer
may offer employment to (i) any salaried employees associated with the
Business who are employed at Seller's Can Division headquarters, and (ii)
any salaried employees listed on Section 5.5(c)(2) of the Disclosure
Schedule hereto located at operating locations but who are not directly
associated with plant responsibilities (e.g., regional sales or services
employees) (collectively, the "Headquarter Employees"), in either case,
whom Buyer, in its sole discretion, chooses to employ.
Effective at Closing, Buyer shall also offer employment to all
salaried employees located at operating locations and directly associated
with plant responsibilities of the Business (collectively, the "Plant
Salaried Employees") other than those employees ("Absent Salaried
Employees") on short- and long-term disability, leaves of absence,
including, without limitation, under FMLA or military leaves, layoff or
workers' compensation. The definition of Absent Salaried Employees shall
not include any Headquarter Employees.
In addition, Buyer shall offer employment to all Absent
Salaried Employees who are available to commence active employment on or
prior to the 180th day following the Closing Date or such later date to the
extent that Buyer is so required pursuant to applicable law.
Those salaried employees of Seller described in this Section
5.5(c), including Headquarter Employees ("Seller Salaried Employees") who
commence active employment with Buyer within the time prescribed by this
Section 5.5(c) or Section 5.6 shall, as of the date such employees commence
active employment with Buyer, be herein referred to as "Transferred
Salaried Employees."
Buyer shall offer to Transferred Salaried Employees who
commence active employment with Buyer as of the Closing Date the same
salary levels in effect with Seller immediately prior to the Closing Date,
and benefits consistent with benefits provided to similarly situated
employees of Buyer as of the Closing Date. Buyer shall offer to Transferred
Salaried Employees who commence active employment with Buyer after the
Closing Date salary levels consistent with salary levels in
<PAGE> 75
effect for
similarly situated employees of Buyer and benefits consistent with benefits
provided to similarly situated employees of Buyer, in either case, as of
the date such employees commence active employment with Buyer.
Notwithstanding the foregoing, (i) Buyer shall have no obligation to
guarantee to continue the salary levels or benefits provided to such
Transferred Salaried Employees pursuant to this paragraph, (ii) Buyer shall
have no obligation to provide Transferred Salaried Employees who are not
participants as of the Closing Date in an incentive plan maintained by
Seller with incentive compensation or bonuses, or to include such employees
as participants in any incentive compensation or bonus plans, and (iii)
with respect to Transferred Salaried Employees who were participants in
Seller's Performance Incentive Plan for 1997 during the 1997 calendar year,
Buyer shall permit such employees to participate in the annual cash
incentive compensation plan, if any, maintained by Buyer from and after the
Closing Date at such levels as shall be determined by Buyer in its sole
discretion, from time to time, pursuant to the terms of Buyer's plans.
Prior to the date hereof, Seller shall have provided Buyer with a true and
complete list of the Transferred Salaried Employees described in clause
(iii) above.
Buyer shall recognize Transferred Salaried Employees service
with Seller to the same extent and for the same purposes (other than for
purposes of benefit accrual under defined benefit plans) that Seller is
required to recognize such service pursuant to the terms of Seller's plans,
in accordance with the provisions governing crediting of service from time
to time under Buyer's employee benefit plans (whether or not funded and
whether or not subject to ERISA) and personnel policies; provided, however,
that Buyer shall be required to credit service with Seller under Buyer's
employee benefit plans only if, and to the extent that, Buyer gives credit
to similarly situated employees of Buyer for comparable service performed
by such employees for Buyer.
Except as provided in Section 5.6(a)(4), Seller shall be solely
responsible for, and shall retain all liabilities and obligations for, all
Absent Salaried Employees unless and until such employees become
Transferred Employees. Seller shall be solely responsible for, and shall
retain all liabilities and obligations with respect to, severance,
termination pay and related liabilities for all Seller Salaried Employees
who terminate or are terminated by Seller prior to the date such employees
become Transferred Employees, and shall reimburse Buyer for any and all
liabilities and obligations incurred by Buyer that are retained by Seller
or for which Seller is obligated to reimburse Buyer pursuant to this
paragraph.
<PAGE> 76
(d) Employee Defined Benefit Pension Benefits.
(i) Transferred Nonrepresented Hourly Employees.
Buyer shall provide Transferred Nonrepresented Hourly Employees with
pension benefits substantially comparable in the aggregate to those
benefits provided to them immediately prior to the Closing Date by
Seller pursuant to the terms of Seller's pension plans that are
intended to qualify under section 401(a) of the Code; provided,
however, that Buyer shall have no obligation to provide any
gainsharing plan, any plan based in whole or in part on either
Seller's or Buyer's profits, earnings, returns or revenues, any plan
pursuant to which benefits or plan assets are distributed or invested
in employer securities or other form of investment in which it would
be impracticable or infeasible for Buyer to distribute or invest, as
the case may be, or any plan the assets of which Buyer determines
should be invested, in whole or in part, in investments different
from the plan investments immediately prior to the Closing Date
(including participant directed investments).
Effective on, or as soon as practicable following, the
Closing Date, Seller shall timely amend Seller's tax-qualified
pension plans that cover Transferred Nonrepresented Hourly Employees
to provide that all Nonrepresented Hourly Employees participating in
such plans shall be 100% vested in their benefits accrued under such
plans as of the Closing Date.
(ii) Transferred Salaried Employees. With respect to
Transferred Salaried Employees, effective as of the Closing Date or,
if later, the date such employees become Transferred Salaried
Employees, Buyer shall provide or cause to be provided coverage under
a tax-qualified defined benefit plan maintained by Buyer, which is
intended to provide benefits consistent with the benefits provided to
similarly situated employees of Buyer, and that provides benefits for
periods of service of such employees occurring on or after the
Closing Date, or if later, the date such employees become Transferred
Salaried Employees. Buyer shall recognize, for purposes of vesting
and eligibility for participation, ancillary benefits or early
retirement or disability subsidies, but not for purposes of benefit
accrual or final average compensation, under such plan, all service
credited to such Trans-
<PAGE> 77
ferred Salaried Employees for such purposes
under the tax-qualified defined benefit plans maintained by Seller
for such employees immediately prior to the Closing Date, or if later
the date such employees become Transferred Employees. Buyer shall
have no liability or obligation whatsoever with respect to the
defined benefit plans retained by Seller pursuant to this Section
5.5.
Effective on, or as soon as practicable following, the Closing
Date, Seller shall timely amend Seller's tax-qualified pension plans that
cover Transferred Salaried Employees to provide that all Transferred
Salaried Employees participating in such plans shall be 100% vested in
their benefits accrued under such plans as of the Closing Date.
(e) Defined Contribution Plans. Effective on, or as soon
as practicable following, the Closing Date, Buyer shall adopt a
tax-qualified defined contribution plan or plans, or amend an existing
defined contribution plan or plans, as necessary or appropriate, to permit
Transferred Employees to direct that distributions from Seller's defined
contribution plans that satisfy the requirements of an "eligible rollover
distribution" within the meaning of section 402(c)(4) of the Code be rolled
over into Buyer's plan or plans. Notwithstanding the foregoing, the parties
agree that Buyer shall have no obligation to accept (directly or
indirectly) participant loans as rollovers into Buyer's plans, and in no
event shall Buyer's failure to accept participant loans be deemed to be a
breach of, or failure by Buyer to satisfy its obligations under, Section
5.4. Buyer and Seller shall cooperate as necessary to effectuate the
foregoing. In addition, Seller shall use reasonable efforts to take all
actions necessary or appropriate to enable Buyer, at Buyer's election, to
accept direct rollovers of participant loans from Seller's defined
contribution plans.
(f) Welfare Benefits.
(i) Post-Retirement Medical and Life Insurance
Benefit Liability For All Employees. Seller shall retain all
liabilities and obligations for all post-retirement medical and life
insurance liabilities payable under the terms of Seller's
post-retirement plans for employees ("Post-Retirement Eligible
Employees") receiving or eligible to receive post-retirement medical
and life insurance benefits as of the Closing Date, including those
who are eligible for post-retirement medical and life insurance
benefits upon termination of
<PAGE> 78
employment or commencement of pension
benefits as of the Closing Date, or if later, the date such employees
become Transferred Employees.
Post-Retirement Eligible Employees shall be primarily
covered by Buyer's active medical plans and shall be covered
secondarily, using a "carve-out" method of claims payment, by
Seller's post-retirement medical plans while actively employed by
Buyer. Once such employees terminate employment with Buyer, such
employees shall be covered primarily by the post-retirement medical
plans maintained by Seller as of the Closing Date, and shall be
covered secondarily, using a "carve-out" method of claims payment, by
the post-retirement medical plans, if any, maintained by Buyer as of
the date of retirement for similarly situated employees. For purposes
of the foregoing sentence, a "carve-out" method of claims payment
shall mean that for the same covered health care expense, the
benefits payable by the secondary claims payor are reduced by the
benefits payable by the primary claims payor.
With respect to Transferred Employees who are not
PostRetirement Eligible Employees, when such employees terminate
employment with Buyer, Buyer shall provide such employees
post-retirement medical and life insurance benefits in accordance
with the terms of Buyer's plan or plans, if any (including
requirements for eligibility and participation), then in effect for
such employees.
With respect to those employees who have not satisfied
the age and service requirements for "Rule of 90" post-retirement
benefits as of the Closing Date pursuant to the terms of Seller's
post-retirement welfare plans, and consequently are required to
contribute toward their coverage, Seller shall not be required to
give such employees credit for service with Buyer for purposes of
reducing such employees' required contributions for such coverage.
Each of Seller and Buyer retains the right to change at
any time, and from time to time, any and all of its employee benefit
plans, including those plans providing medical and other welfare
benefits to its retired employees, including those who may become
Transferred Employees, provided that no change may be made that would
single out the Transferred
<PAGE> 79
Employees for special adverse treatment or
that would adversely affect Transferred Employees differently than
other similarly situated employees of Seller or Buyer.
Notwithstanding the foregoing, if in accordance with the foregoing
sentence, Seller changes the kind and/or level of the benefits
covered by its retiree medical benefit plans from those in effect as
of the Closing Date, Seller shall reimburse Buyer for any additional
out-of-pocket costs incurred by Buyer as a result of such change. In
like manner, if Buyer changes the kind and/or level of the medical
benefits covered by the plans it maintains for its active employees
from those in effect as of the Closing Date, Buyer shall reimburse
Seller for any additional out-of-pocket costs incurred by Seller
under its retiree medical plans as a result of such change.
(ii) Active Welfare Benefits. Effective as of the
Closing Date (or such later date as a Seller Employee becomes a
Transferred Employee), Buyer shall provide, or cause to be provided,
without any waiting period, where applicable, medical, life
insurance, accident, sickness and other group insurance benefits and
short-term and long-term disability benefits ("Welfare Benefits") to
all Transferred Employees and, to the extent applicable, their
respective eligible dependents, in plans maintained by, or for the
benefit of, Buyer ("Buyer's Welfare Plans"). Benefits under Buyer's
Welfare Plans, (A) shall be, with respect to Transferred
Nonrepresented Hourly Employees who commence active employment with
Buyer on the Closing Date, substantially comparable to those benefits
provided to such employees by Seller immediately prior to the Closing
Date, and with respect to Transferred Nonrepresented Hourly Employees
who commence active employment with Buyer after the Closing Date,
substantially comparable to those benefits provided to similarly
situated employees of Buyer as of the date such employee commences
active employment with Buyer, and (B) with respect to Transferred
Salaried Employees, shall be consistent with benefits provided to
similarly situated employees of Buyer. With respect to Transferred
Represented Employees, Buyer's Welfare Plans shall conform to the
terms of the applicable collective bargaining agreements.
Buyer shall be responsible for medical expenses covered under
the terms of the applicable Buyer's Welfare Plans incurred by a Transferred
Employee and/or his or her covered dependents who are enrolled in such
plans on and after the
<PAGE> 80
later of (A) the Closing Date or (B) the date such
employee becomes a Transferred Employee. Seller shall be responsible for
medical expenses covered under the terms of Seller's welfare plans (the
"Seller's Welfare Plans") incurred prior to the Closing Date or the date
the employee becomes a Transferred Employee, if later, by a Transferred
Employee or a covered dependent. If a Transferred Employee or a covered
dependent of a Transferred Employee is hospitalized immediately prior to
the Closing Date, Seller's Welfare Plans shall pay the covered medical
expenses of such person until he or she is discharged from the hospital, to
the extent coverage is provided under the terms of Seller's Welfare Plans.
Buyer shall be responsible for claims for Welfare Benefits
other than medical claims covered under Buyer's Welfare Plans that are
incurred by a Transferred Employee and/or his or her covered dependents who
are enrolled in such plans on and after the later of (A) the Closing Date
or (B) the date such employee becomes a Transferred Employee.
For purposes of this Section 5.5(f), a claim will be deemed
"incurred" on the date that the event that gives rise to the claim occurs
(for purposes of life insurance, severance and sickness, accident and
disability programs), or on the date that treatment or services are
provided (for purposes of healthcare programs).
Seller shall be responsible for, and shall reimburse Buyer for
claims for Welfare Benefits other than medical claims, in each case with
respect to Seller Employees and their covered dependents, whether covered
under Seller's Welfare Plans, Buyer's Welfare Plans, or otherwise, that are
incurred prior to the later of the Closing Date and the date the affected
Seller Employee becomes a Transferred Employee.
(g) Workers' Compensation Claims. Seller shall be
responsible for and shall pay any and all workers' compensation and other
similar statutory claims asserted by or with respect to Seller Employees in
respect of any injury or other compensable event or occupational illness or
disease that occurred or is attributable to any event, state of facts or
condition that existed or occurred in whole before the later of the Closing
Date and the date the applicable Seller Employee becomes a Transferred
Employee. Buyer shall be responsible for and shall pay any and all workers'
compensation and other similar statutory claims asserted by or with respect
to any Transferred Employees in respect of any injury or any other
compensable event or occupational illness or disease that occurred or is
attributable to any
<PAGE> 81
event, state of facts or condition that existed or
occurred in whole after the later of the Closing Date and the date the
applicable Transferred Employee becomes a Transferred Employee.
If the liabilities for any claims for injuries or other
compensable events or occupational illnesses or diseases of any Transferred
Employee who was employed by Seller before the Closing Date and was
actively employed by Buyer on or after the Closing Date is attributable in
part to causes occurring before the Closing Date and in part to causes
occurring on or subsequent to the Closing Date and is the basis of a
workers' compensation or other similar statutory claim, the liability for
any such claims shall be shared by Seller and Buyer in the proportion of
the period of employment of such Transferred Employee with Seller and the
period of active employment with Buyer, if any. In the event that one party
hereto is required by an applicable state workers' compensation law to pay
workers' compensation otherwise allocated to the other party pursuant to
this Section 5.5(g), the party obligated to pay such amount pursuant to
this Section shall reimburse the paying party.
(h) Alternate Arrangements; Parties' Cooperation.
Notwithstanding anything in Section 5.4, 5.5 or 5.6 to the contrary, to the
extent that Buyer, in its sole discretion, deems it necessary or
appropriate in order to implement Section 5.4, 5.5 or 5.6, or otherwise to
fulfill its obligations hereunder during a transition period from and
following the Closing Date, Buyer may cause the benefits and coverage
described in Section 5.4, 5.5 or 5.6, to be provided under separate
arrangements that are not maintained by Buyer, including leased or
contracted plans or arrangements.
Buyer and Seller shall cooperate and shall use reasonable
efforts (i) to enable Buyer to satisfy its obligations under Sections 5.4,
5.5 and 5.6, (ii) to facilitate Buyer's relationships with the applicable
unions, and (iii) to facilitate the administration of Buyer's and Seller's
employee benefit plans.
(i) Reimbursement. The parties to this Agreement agree
that the provisions of Sections 5.4, 5.5 and 5.6 set forth the intent of
the parties with regard to the allocation of liabilities, responsibilities
and costs relating to employees of the Business and the payment of benefits
to such employees before, on, and after the Closing Date. If one party
makes a payment that under the terms of Section 5.4, 5.5 or 5.6 should have
been made by or on behalf of the other party, whether by mistake or in
accordance with a ruling, regulation, or order of an Authority, or as a
<PAGE> 82
payment where a reimbursement is expressly contemplated pursuant to Section
5.4, 5.5 or 5.6, then the party that is obligated under the provisions of
Section 5.4, 5.5 or 5.6, to make such payment or reimbursement, as the case
may be, shall reimburse the party that actually made the payment or who is
entitled to the reimbursement (or for whose benefit the payment was made).
Anything in this Agreement to the contrary notwithstanding, the
reimbursement obligations under Section 5.4, 5.5 or 5.6 shall remain in
force and effect so long as either party is making payments to which these
provisions apply; provided however, that a specific request for a
reimbursement must be made no later than two years following the date that
the related reimbursement obligation arose.
All reimbursements under this Section 5.5(i) shall be paid to
the party to be reimbursed once each month for the first two years
following the Closing Date and once each calendar quarter thereafter, in
either case, within thirty (30) days after receipt of a bill from the party
to be reimbursed (which bill shall not be submitted more frequently than
monthly, or quarterly, as the case may be) describing each element of
reimbursement claimed and shall be subject to reasonable timely audit and
verification by the other party, and their accountants, actuaries and/or
consultants.
(j) COBRA. With respect to each (i) current and former
employee of Seller who does not become a Transferred Employee, (i) each
Transferred Employee for any period prior to the date any such employee
becomes a Transferred Employee, and (iii) each other individual who is a
"qualified beneficiary" with respect to such current or former employee, in
connection with a "group health plan" maintained by Seller or an Affiliate
(as such terms are defined in Code section 4980B), Seller shall be
responsible for providing "group health plan" continuation coverage with
regard to any event that occurs before the employee becomes a Transferred
Employee. Seller shall indemnify and hold Buyer and its Affiliates harmless
from and against any and all Losses with respect to such individual arising
in connection with group health plan continuation required under Code
section 4980B or Part 6 of Subtitle B of ERISA.
<PAGE> 83
Section 5.6 Special Employment and Transition Rules for
Salaried Employees.
(a) Employment of Salaried Employees.
(i) No later than 14 days before the Closing Date,
Buyer shall provide Seller with a list identifying those Headquarter
Employees whom Buyer desires to remain employed by Seller on and
after the Closing Date, but who shall on and after the Closing Date
perform services for Buyer, at the direction of Buyer (the "Seconded
Employees"). It is not intended that Seconded Employees will perform
services covered by the transition agreements described in Section
1.7(d). Once identified, except with respect to the "Extended
Seconded Employees," as defined below, a Seconded Employee shall
remain employed by Seller in this capacity for 180 days from the
Closing Date (the "Selection Period") or for such shorter period as
Buyer may determine if it so notifies Seller at least 14 days in
advance with regard to a particular Seconded Employee. Prior to the
expiration of the Selection Period, Buyer may extend the Selection
Period for up to an additional 60 days with respect to no more than
35 Seconded Employees (the "Extended Seconded Employees"), who shall
be selected by Buyer in its sole discretion. Buyer shall provide
Seller at least 14 days before the end of the original Selection
Period with a list identifying the Extended Seconded Employees. For
purposes of the Extended Seconded Employees, if any, the Selection
Period shall mean the period commencing on the Closing Date and
terminating 240 days following the Closing Date, or for such shorter
period as Buyer may determine if it so notifies Seller at least 14
days in advance with regard to a particular Extended Seconded
Employee. Buyer shall reimburse Seller monthly in arrears in
accordance with Section 5.6(a)(1) of the Disclosure Schedule for the
costs incurred by Seller with respect to the salary and benefits
provided by Seller to the Seconded Employees during the Selection
Period.
(ii) At any time during the Selection Period, Buyer
in its sole discretion may offer employment to any or all of the
Seconded Employees. A Seconded Employee who becomes employed by Buyer
by the end of the Selection Period shall be treated as a
<PAGE> 84
Transferred Salaried Employee for purposes of this Agreement as of
the date such employee commences active employment with Buyer.
(iii) A Seconded Employee who has not been employed by
Buyer by the end of the Selection Period (or by the end of such
shorter period as Buyer may determine if it so notifies Seller at
least 14 days in advance with regard to a particular Seconded
Employee) shall be either retained or terminated by Seller in
Seller's sole discretion, but in either case Buyer shall have no
further reimbursement or other obligation with regard to such
Seconded Employee after the end of the Selection Period (or after
such shorter period as Buyer may determine with regard to a
particular Seconded Employee). Buyer shall give Seller at least 14
days advance notice with regard to any Seconded Employee to whom
Buyer does not intend to offer employment by the end of the Selection
Period.
(iv) Buyer shall indemnify Seller against, and shall
hold it harmless from, any and all Losses incurred or suffered as a
result of any claim by (A) a Seconded Employee (during the period
such employee was seconded to Buyer, but in no event after the
Selection Period), (B) an Absent Nonrepresented Hourly Employee or an
Absent Salaried Employee (in each case, during the period from the
Closing Date to the 180th day thereafter), in each case, that arises
out of or in any way relates to the acts or omissions of Buyer,
including, without limitation, claims arising under federal, state or
local statute(s) (including, without limitation, Title VII of the
Civil Rights Act, as amended, the Age Discrimination in Employment
Act, as amended, the Equal Pay Act, as amended, the Americans with
Disabilities Act, as amended, and all other statutes regarding the
terms and conditions of employment), regulation(s) or ordinance(s),
under the common law or equity (including any claims for wrongful
discharge or otherwise).
(v) Seller shall indemnify Buyer against, and shall
hold it harmless from, any and all Losses incurred or suffered as a
result of any claim by a Seconded Employee, an Absent Nonrepresented
Hourly Employee or an Absent Salaried Employee that arises out of or
in any way relates to the acts or omissions of
<PAGE> 85
Seller, including,
without limitation, claims arising under federal, state or local
statute(s) (including, without limitation, Title VII of the Civil
Rights Act, as amended, the Age Discrimination in Employment Act, as
amended, the Equal Pay Act, as amended, the Americans with
Disabilities Act, as amended, and all other statutes regarding the
terms and conditions of employment), regulation(s) or ordinance(s),
under the common law or equity (including any claims for wrongful
discharge or otherwise).
(b) Severance Obligation.
(i) Notwithstanding anything in this Agreement to
the contrary except for Buyer's reimbursement obligations as set
forth in Section 5.6(a)(i) and (iv), Seller shall retain all
liabilities and obligations, including but not limited to severance
obligations, pertaining to Headquarter Employees and Plant Salaried
Employees who do not become Transferred Salaried Employees pursuant
to this Agreement, including, without limitation, Seconded Employees
who terminate employment on or prior to the end of the Selection
Period without becoming Transferred Salaried Employees. Seller shall
reimburse Buyer for any and all liabilities and obligations incurred
by Buyer that are retained by Seller pursuant to this paragraph.
(ii) If a Seller Nonrepresented Hourly Employee
becomes a Transferred Nonrepresented Hourly Employee, or a Salaried
Employee becomes a Transferred Salaried Employee, and in either case,
Buyer terminates such employee's employment other than for cause,
then Buyer shall be obligated to pay such employee severance
benefits, if any, determined pursuant to the terms of Buyer's
severance plan or policy, if any, in effect at such time, based on
combined service with Buyer plus service credited with Seller, to the
extent and for the same purposes that such service was required to
have been taken into account for purposes of Seller's severance plan
in effect as of the Closing Date, or if later, the date the
individual becomes a Transferred Employee.
(c) Nonsolicitation Agreement. Except for the four
individuals listed on Section 5.6(c) of the Disclosure Schedule of this
Agreement, Seller shall
<PAGE> 86
refrain, and shall use its best efforts to cause
its Affiliates to refrain, from (i) interfering with Buyer's efforts to
hire any of the employees employed by Seller in the Business, including its
Headquarter Employees and (ii) without obtaining prior written consent from
Buyer, offering employment to any Transferred Employees from the date of
this Agreement until the end of 24 months following the Closing Date,
unless such employee has been terminated from Buyer for at least six
continuous months. Notwithstanding the foregoing, Seller may offer
employment (i) to any Plant Salaried Employee who does not become a
Transferred Salaried Employee as of the Closing Date, or such later date as
an Absent Salaried Employee is available to commence employment with Buyer,
if applicable; (ii) to any Headquarter Employee who does not become a
Seconded Employee or a Transferred Salaried Employee as of the Closing
Date; and (iii) to any Seconded Employee who does not become a Transferred
Employee by the end of the Selection Period. Seller agrees that (x) if it
retains a Seconded Employee to whom Buyer has offered employment and such
employee has rejected Buyer's offer, then Seller shall reimburse Buyer for
any and all amounts paid by Buyer to Seller to cover the costs of benefits
for such Seconded Employee during the Selection Period (but not for the
direct cost of compensation or FICA or FUTA (as defined in Section 5.6(d)
hereof)), and (y) if Seller hires any Transferred Employee prior to the
earlier of 24 months following the Closing Date and six months following
such employee's termination of employment from Buyer, Seller shall
reimburse Buyer for all relocation, severance and related costs and
expenses paid by or on behalf of Buyer for such Transferred Employee.
(d) Employment Taxes. Seller, Buyer and Ball shall (i)
treat Buyer and Ball each as a "successor employer" and Seller as a
"predecessor," within the meaning of section 3121(a)(1) of the Code and for
purposes of Taxes imposed under the United States Federal Unemployment Tax
Act ("FUTA") or the United States Federal Insurance Contributions Act
("FICA") and (ii) cooperate with each other to avoid, to the extent
possible, the filing of more than one Internal Revenue Service Form W-2
with respect to each Transferred Employee for the calendar year within
which the Closing Date occurs. At the request of Buyer with respect to any
particular applicable Tax Law relating to employment, unemployment
insurance, social security, disability, workers' compensation, payroll,
healthcare or other similar Tax other than Taxes imposed under FICA and
FUTA, Seller, Buyer and Ball shall (i) treat Buyer and Ball each as a
successor employer and Seller as predecessor employer, within the meaning
of the relevant provisions of such Tax Law, with respect to Transferred
Employees who are employed by Buyer, to the extent permitted by applicable
state and local laws and (ii) cooperate with each other to avoid, to
<PAGE> 87
the extent possible, the filing of more than one individual information
reporting form pursuant to each such Tax Law with respect to each such
Transferred Employee for the calendar year within which the Closing Date
occurs.
(e) Reimbursement. All reimbursements described in this
Section 5.6, including Section 5.6(a)(1) of the Disclosure Schedule, shall
be made in accordance with the reimbursement procedures set forth in
Section 5.5(i) hereof.
(f) Indemnification Procedures. Any claim for
indemnification made under Sections 5.4, 5.5 or 5.6 hereunder shall be made
according to, and shall be governed by, the procedures contained in Section
6.4(c)- (h) of this Agreement.
Section 5.7 Tax Matters.
(a) Consolidated Subsidiaries. Seller represents and
warrants that each of LAR, RCAL and RIND is a fully consolidated subsidiary
of Seller for federal income Tax purposes at Closing. Each of LAR, RCAL and
RIND will be included in the consolidated Tax Return of Seller for federal
income Tax purposes for the taxable period of each of LAR, RCAL and RIND
that includes the date of Closing.
(b) Section 338 Elections and Forms. With respect to the
acquisition of the stock of LAR, RCAL and RIND hereunder, Seller, Ball and
Buyer shall jointly make all available Section 338(h)(10) Elections, and
with respect to the acquisition of the stock of RIB hereunder, Buyer or
Ball shall make a Section 338(g) Election, in each case in accordance with
applicable Tax Laws on a timely basis and as set forth herein. Seller, Ball
and Buyer will supply in advance to one another copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) to be sent or made by Ball, Buyer or Seller or their
respective representatives to or with the IRS relating to any Section 338
Elections. Buyer, Ball and Seller agree to report the transfers under this
Agreement consistent with any Section 338 Elections and the allocations
provided by Section 5.7(d), and shall take no position contrary thereto
unless required to do so by applicable Tax Laws pursuant to a
"determination" (as described in section 1313 of the Code).
(c) Preparation of Forms. Buyer shall be responsible for
the preparation and filing of all Section 338 Forms in accordance with
applicable Tax
<PAGE> 88
Laws and the terms of this Agreement; provided that Seller
shall be responsible for filing any form related to a Section 338 Election
that must be filed with a Tax Return of Seller or one of its Affiliates.
Buyer shall deliver such forms and related documents to Seller at least 20
days prior to the date such Section 338 Forms are required to be filed
under applicable Tax Laws. Seller shall provide all information reasonably
requested by Buyer and shall execute and deliver to Buyer such documents or
forms as are reasonably requested by Buyer and are required by any Tax Laws
to properly complete the Section 338 Forms, no more than 10 days after the
date such documents or forms are requested by Buyer. Seller shall be
responsible for the preparation and filing of the Tax Returns of LAR, RCAL
and RIND for all taxable years ending on or before the Closing Date
(including, without limitation, any consolidated, combined or unitary group
return of which LAR, RCAL or RIND is a member which includes the gain or
loss on the deemed sale of assets of LAR, RCAL and RIND under section 338
of the Code or similar state or local statute).
(d) Allocation. Seller and Buyer will allocate the
"Aggregate Deemed Sales Price" arising from the Section 338(g) Elections
and the "Modified Aggregate Deemed Sale Price" arising from the Section
338(h)(10) Elections, as computed under applicable Treasury Regulations (or
similar state law provisions) with respect to the acquisition of shares of
stock of RIB, LAR, RCAL and RIND among the assets of RIB, LAR, RCAL and
RIND, respectively, for tax purposes in accordance with the provisions of
Section 1.9.
(e) Taxable Periods Ending On or Before the Closing Date.
Except as set forth in Section 1.6, Seller shall be liable for, shall pay
and shall indemnify and hold Buyer, Ball, RIB, LAR, RCAL and RIND harmless
against, all Taxes of Seller, RIB, LAR, RCAL, RIND and their Affiliates for
any taxable year or taxable period ending on or before the Closing Date due
or payable with respect to the Business or the operations, assets or
business of Seller, LAR, RCAL, RIND and their Affiliates on or before the
Closing Date, including any Taxes resulting from the making of the Section
338 Elections and any liability for Taxes pursuant to Treasury Regulations
ss.ss. 1.1502-6, 1.338-5(b)(3) or 1.338(h)(10)-1(e)(5) (or any similar
provision of Law). All liabilities and obligations between RIB, LAR, RCAL
or RIND on the one hand, and Seller or its Affiliates on the other hand,
under any tax allocation agreement or arrangement in effect prior to
Closing (other than this Agreement or as set forth herein) shall cease to
apply to RIB, LAR, RCAL and RIND as of the Closing.
<PAGE> 89
(f) Taxable Periods Commencing After the Closing Date.
Buyer shall be liable for, shall pay and shall indemnify and hold Seller
and its Affiliates harmless against, any and all Taxes of RIB, LAR, RCAL
and RIND for any taxable year or taxable period commencing after the
Closing Date other than Taxes resulting from Section 338 Elections.
(g) Taxable Periods Commencing On or Before the Closing
Date and Ending After the Closing Date. Except as set forth in Section 1.6,
any Taxes for a taxable period beginning on or before the Closing Date and
ending after the Closing Date (the "Closing Period") with respect to RIB,
LAR, RCAL or RIND shall be apportioned between Seller and Buyer as if the
Closing Period had ended at the Closing but with Seller bearing the effect
of all Section 338 Elections. For purposes of Section 5.7(e), (f) and (g),
the portion of the Closing Period deemed to end on the Closing Date shall
be deemed to be a taxable period (the "Pre-Closing Period"). All real
property Taxes, personal property Taxes, intangible Taxes and similar ad
valorem obligations levied with respect to the Business Assets or assets
held by RIB, LAR, RCAL or RIND for the Closing Period shall be apportioned
between Seller and Buyer as of the Closing Date based on the number of days
of such taxable period included in the Pre-Closing Period and the number of
days of such taxable period after the Closing Date. Upon receipt of any
bill for Taxes relating to the Closing Period, Seller, Buyer or their
respective Affiliates, as the case may be, shall present to the other a
statement setting forth amounts of any reimbursement due under this Section
5.7(g) together with such supporting evidence as is reasonably necessary to
calculate the apportioned amount. The apportioned amount shall be paid by
the party owing the reimbursement to the other party as soon as possible
but no later than 30 days after delivery of such statement.
(h) Refunds or Credits. Except as otherwise set forth in
this Agreement, any refunds or credits of Taxes, to the extent that such
refunds or credits are attributable to taxable periods ending on or before
the Closing Date shall be for the account of Seller, and, to the extent
that such refunds or credits are attributable to taxable periods beginning
after the Closing Date, such refunds or credits shall be for the account of
Buyer. To the extent that such refunds or credits are attributable to Taxes
for the Closing Period that are described in Section 5.7(g), such refunds
and credits shall be for the account of the party who bears responsibility
for such Taxes pursuant to Section 5.7(g). Buyer shall, or shall cause RIB,
LAR, RCAL or RIND to, forward to Seller or to reimburse Seller for any such
refunds or credits due Seller pursuant to this Section 5.7(h) within 15
days after receipt thereof by any of Buyer,
<PAGE> 90
Ball, RIB, LAR, RCAL or RIND
that are for the account of Seller hereunder, and Seller shall forward to
Buyer or reimburse Buyer for any refunds or credits that are for the
account of Buyer within 15 days after receipt thereof by Seller or its
Affiliates that are for the account of Buyer hereunder; provided, however,
that the refunding party shall be entitled to deduct from the amount to be
refunded a proportionate share of reasonable costs and expenses incurred by
such refunding party in obtaining such refund and provided further that the
amount of costs and expenses deducted by the refunding party from the
amount to be paid to the other party shall not exceed such other party's
share of such refund.
(i) Certificates. Seller shall, on the Closing Date,
provide Buyer with any clearance certificates or similar documents which
may be required by any foreign or domestic Taxing Authority to relieve
Buyer of any obligation to withhold any portion of the Purchase Price or to
hold Buyer harmless for any sales or use or other Tax liability, including,
without limitation, an affidavit described in section 1445(b)(2) of the
Code.
(j) Mutual Cooperation. Seller and Buyer shall each (i)
provide the other with such assistance as may reasonably be requested by
either of them in connection with the preparation of any Tax Return, audit
or other examination by any Taxing Authority relating to liability for
Taxes, (ii) retain and provide the other, at the other's expense, with any
records or other information which may be relevant to such Tax Return,
audit or examination, proceeding or determination and (iii) provide the
other, at the other's expense, with any requested information relating to
final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax
Return of the other for any period. Without limiting the foregoing, Buyer
and Ball on the one hand, and Seller on the other hand, shall cooperate in
taking all reasonable actions to obtain and provide each other with
information necessary to allow either party to determine and claim United
States foreign Tax credits with respect to foreign income Taxes paid by
LAR, RIB and Latasa (including the Latasa Subsidiaries) attributable to any
Closing Period. Specifically and without limitation, the parties shall
provide to each other, as applicable, official receipts (or other evidence
acceptable to the United States Internal Revenue Service) showing the
amount of foreign income Tax paid by each of LAR, RIB and Latasa (in-
<PAGE> 91
cluding the Latasa Subsidiaries) with respect to its applicable Closing
Period, copies of the foreign income Tax Returns filed by each of LAR, RIB and
Latasa (including the Latasa Subsidiaries) for its applicable Closing
Period and schedules prorating the taxable income of LAR, RIB and Latasa
(including the Latasa Subsidiaries) for its applicable Closing Period
between the Pre-Closing Period and the portion of such Closing Period after
the Closing Date.
(k) Contests. Whenever any Taxing Authority asserts a
claim, makes an assessment, or otherwise disputes the amount of Taxes owed
by RIB, LAR, RCAL or RIND for which Seller is or may be liable under this
Agreement, Buyer shall promptly inform Seller, and Seller shall have the
right to control any resulting proceedings and to determine whether and
when to settle any such claim, assessment or dispute to the extent such
proceedings or determinations would affect the amount of Taxes for which
Seller is liable under this Agreement; provided, however, that Seller shall
not enter into any such settlement without the consent of Buyer (which
consent shall not be unreasonably withheld) if such settlement could
reasonably be expected to affect the amount of Taxes for which Buyer or
Ball is liable under this Agreement. Whenever any Taxing Authority asserts
a claim, makes an assessment or otherwise disputes the amount of Taxes for
which Buyer or Ball is liable under this Agreement, Seller shall promptly
inform Buyer, and Buyer shall have the right to control any resulting
proceedings and to determine whether and when to settle any such claim,
assessment or dispute to the extent such proceedings would affect the
amount of Taxes for which Buyer or Ball is liable under this Agreement;
provided, however, that Buyer shall not enter into any such settlement
without the consent of Seller (which consent shall not be unreasonably
withheld) if such settlement could reasonably be expected to affect the
amount of Taxes for which Seller is liable under this Agreement.
(l) Resolution of Disagreements between Seller and Buyer.
If Seller, on the one hand, and Buyer or Ball, on the other hand, disagree
as to the amount of Taxes for which each is liable under this Agreement or
are unable to agree on any matter relating to the Section 338 Elections,
Seller and Buyer shall promptly consult each other in an effort to resolve
such dispute. If any such point of disagreement cannot be resolved within
15 days of the date of consultation (which period may be extended by mutual
agreement of Buyer and Seller), Seller and Buyer shall within 10 days after
such 15-day period jointly engage the Neutral Auditor to act as an
arbitrator to resolve all points of disagreement concerning tax accounting
matters with respect to this Agreement. All fees and expenses relating to
the work performed by the Neutral Auditor in accordance with this Section
5.7(l) shall be borne equally by Seller and Buyer, unless otherwise ordered
by the Neutral Auditor.
<PAGE> 92
(m) Puerto Rico Tax Exemption. Seller will use all
reasonable efforts to assist Ball, Buyer and LAR in obtaining such
approvals and consents as are necessary so that from and after the Closing
Ball, Buyer and LAR will have the full benefit of the partial Puerto Rico
Tax exemptions that are currently enjoyed by LAR with respect to the
operation of the Business in Puerto Rico.
Section 5.8 Non-Competition.
(a) Seller agrees that, to assure Ball and Buyer that
Buyer will retain the value of the Business as a "going concern," for a
period of six years beginning on the Closing Date, Seller shall not,
directly or indirectly, itself or through one or more Affiliates, engage or
have an interest, anywhere in the world, alone or in association with
others, as partner or shareholder or through the investment of capital,
lending of money or property, provision of management or engineering
services, technology or know-how, or otherwise, in the development,
manufacture, distribution, sale or marketing of products or services that
are competitive with the products or services provided by the Business,
consisting of metal beverage cans and ends and PET beverage containers.
Notwithstanding the foregoing, Seller and its Affiliates may, after the
Closing, engage or continue to engage in the following business activities
related to metal beverage can bodies and ends: the development,
manufacture, distribution, sale and marketing of can, end and tab sheet;
the recycling and reclamation of metal beverage can bodies and ends;
Machinery Operations; the design, manufacture and sale of printing
cylinders, printing plates and color separations used by Persons other than
Seller and its Affiliates in the manufacture of metal beverage can bodies
and ends; and ancillary services customarily provided to manufacturers of
metal beverage can bodies and ends by persons engaged in the foregoing
businesses, provided that such services are directly related to such
businesses and do not use any Intellectual Property Rights. In addition,
notwithstanding the foregoing, Seller may:
(i) from and after the Closing Date, own an equity
interest of not greater than 50% in the Russian company or group of
companies which owns the Sayansk aluminum smelter and/or the Samara
rolling mill (such company or group, "Siberian Aluminum"), even
though Siberian Aluminum in turn owns a significant interest in the
Rostar-Dmitrov aluminum can and end manufacturing plant near Moscow;
provided that Seller shall use all reasonable efforts as an equity
holder in Siberian Aluminum, if Siberian Alumi-
<PAGE> 93
num includes can, end
and tab sheet operations, to facilitate the supply of can, end and
tab sheet to the can and end plant near Moscow established by PLM
Beverage Can Manufacturing ZAO on mutually acceptable terms;
(ii) from and after the third anniversary of the
Closing Date, own an equity interest of not greater than 50% in any
Person which, in addition to its primary business or businesses, is
engaged in the development, manufacture, distribution, sale or
marketing of metal beverage cans and ends provided that the portion
of such Person's consolidated revenues attributable to activities
related to metal beverage cans and ends does not exceed 20% of its
total consolidated revenues and such Person's manufacturing
activities are conducted solely in Russia, China or India; provided
further that (x) subject to other obligations such Person may have,
Seller shall use all reasonable efforts as an equity holder in such
Person to cause such Person to offer to Ball the opportunity to
invest in such metal beverage can and end business and/or to provide
management and engineering services, technology and know-how to such
business on mutually acceptable terms, and (y) Seller shall, if such
Person's operations include can, end and tab sheet operations, use
all reasonable efforts as an equity holder to facilitate the supply
of can, end and tab sheet on mutually acceptable terms to any can
and/or end manufacturing ventures in Russia, China and India in which
Ball or any of its Affiliates has an equity interest; and
(iii) from and after the Closing Date, continue to own
its current 27.5% equity interest in UAC and continue activities
directly related to the current operations of UAC pursuant to its
current agreements with UAC;
and for greater certainty, Seller and its Affiliates shall not, as a
consequence of clauses (i), (ii) or (iii) hereof, be permitted, in respect
of any Person, to provide management or engineering services, technology or
know-how to any operations engaged in the development, manufacture,
distribution, sale or marketing of metal beverage cans and ends and PET
beverage containers.
<PAGE> 94
(b) Seller shall not at any time on or after the Closing
Date, directly or indirectly, through one or more Affiliates, use or
purport to authorize any person to use any name, mark, logo, trade dress or
other identifying words or images which are the same as or confusingly
similar to any of those included in the Intellectual Property Rights,
whether or not such use would be in a business in which Seller is
prohibited from engaging pursuant to Section 5.8(a) provided, that this
Section 5.8(b) shall not apply to any registered trademark which Ball, its
successors or assigns has allowed to expire commencing one year after such
expiration.
(c) The provisions of this Section 5.8 shall not be
deemed to prohibit Seller from acquiring not more than 5% of any class of
securities of any company with a class of securities registered under the
Exchange Act (or any similar foreign statute) or otherwise publicly traded,
provided that Seller does not have control over or does not attempt to
control or influence such company.
(d) If, at the time of enforcement of this Section 5.8, a
court shall hold that the duration, scope or area restrictions stated
herein are unreasonable under the circumstances then existing, the maximum
duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area. Seller acknowledges and
agrees that Ball and Buyer would be damaged irreparably if any of the
provisions of this Section 5.8 are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, Seller and Buyer
each agrees that the other party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Section 5.8 and
to enforce specifically the terms and provisions of this Section 5.8 in any
action instituted in any court having jurisdiction over the parties and the
matter, in addition to any other remedy to which it may be entitled, at law
or in equity.
Section 5.9 Confidentiality.
(a) Prior to the Closing, each party will hold and will
cause its consultants and advisors to hold in confidence, all documents and
information concerning the other party furnished it by such other party or
its representatives in connection with the transactions contemplated by
this Agreement pursuant to the terms of the Confidentiality Agreement,
dated May 28, 1997 between Seller and Buyer, as amended (the
"Confidentiality Agreement").
<PAGE> 95
(b) Prior to and after the Closing, Seller, Ball and
Buyer will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants,
advisors, agents and Affiliates to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of
law, all confidential documents and information (x) concerning the
Business, the Business Assets, the Shares and Seller and provided to Ball
or Buyer or (y) concerning Ball or Buyer and provided to Seller, except to
the extent that such information can be shown to have been or to have
become (i) generally available to the public other than as a result of
disclosure by the officers, directors, employees, representatives,
consultants or advisors of Seller, Ball or Buyer, (ii) disclosed to the
other party from a source other than the officers, directors, employees,
representatives, consultants or advisors of Seller, Ball or Buyer from a
source that was permitted to disclose it or (iii) known to the other party
before the date of the disclosure of such information. However, nothing
contained in this Section 5.9(b) shall (i) prevent any party from using or
disclosing information to (A) perform its obligations or enforce its rights
hereunder or (B) to defend or prosecute any claim or (ii) preclude the
disclosure of such information on the condition that it remain confidential
to auditors, attorneys, lenders, financial advisors and other consultants
and advisors in connection with the performance of their duties in
preparation for consummation of the transactions contemplated hereby.
Section 5.10 Materials Received After Closing. Following the
Closing, Buyer may receive and open all mail, telecopies or telexes
addressed to Seller and deal with the contents thereof in its discretion to
the extent that such mail, telecopies or telexes and the contents thereof
relate to the Business, Business Assets or the Shares. Ball and Buyer shall
promptly deliver to Seller all material they receive (including mail,
checks, money, telecopies, telefaxes and the contents thereof) which is
addressed to Seller or its Affiliates to the extent it does not relate to
the Business, the Business Assets or the Shares or to the extent it deals
with Excluded Assets or Excluded Liabilities. Seller shall promptly deliver
to Ball or Buyer, as the case may be, all of the mail, checks, money,
telecopies, telexes and the contents thereof with respect to the Business,
the Business Assets or the Shares received by Seller following the Closing.
Section 5.11 Access to Books and Records.
(a) Each party agrees that from and after the Closing
Date to the seventh anniversary thereof, during normal business hours, it
will permit (at no
<PAGE> 96
charge, cost or expense to such party and without
unreasonable disruption of such party's business) the other party and its
auditors, through their authorized representatives, to have reasonable
access to and to examine and take copies of all books and records
(including, without limitation, correspondence, memoranda, books of
account, tax reports and returns and the like) included in the Business
Information or otherwise reasonably relating to the Business or the
Business Assets (including, without limitation, records with respect to
Tax, pension, severance and litigation matters) and reasonably relating to
events occurring prior to the Closing Date and to events occurring
subsequent to the Closing Date which are related to or arise out of events
occurring prior to the Closing Date, in any case, subject to the
confidentiality provisions of Section 5.9.
(b) Each party will direct its employees to render any
assistance which the other party may reasonably request in examining or
using such books and records. Until the seventh anniversary of the Closing
Date, neither party will destroy any files or records which are subject to
this Section 5.11 without giving reasonable notice to the other party, and
within 30 days of receipt of such notice, the other party may cause to be
delivered to it the records intended to be destroyed; provided, however,
that books or records relating to Tax matters may not in any event be
destroyed for seven years after the Closing Date (and, if at the expiration
thereof, any Tax audit or judicial proceeding is in progress or the
applicable statute of limitations has been extended, for such longer period
as such audit or judicial proceeding is in progress or such statutory
period is extended).
(c) Seller shall request that records of the type
described in Section 5.11(a) in possession of its independent accountants
be retained by them for the customary retention period established by the
firm (but not less than the applicable statute of limitations period) and
that such records be made available to Buyer on request.
(d) Seller is currently engaged in a study to establish
Seller's right to research and experimentation tax credits for the years
1990 through 1997. In connection with this study, Seller may require
information pertaining to the Business or the Business Assets, including,
without limitation, interviews with persons employed in the Business prior
to the Closing Date. Ball or Buyer shall permit Seller reasonable access
(solely for purposes of the study) to any such persons and/or information
in the employ or possession of Ball, Buyer or any Affiliate of either, at
Seller's expense but without any charge for any interviewee's time.
<PAGE> 97
Section 5.12 Actions by Ball. Ball shall be jointly and
severally liable with Buyer for all obligations of Buyer (or any assignee
or Designee of Ball or Buyer) hereunder or under the Ancillary Agreements.
Ball hereby guarantees Buyer's (or any assignee's or Designee's)
performance of all obligations required of Buyer by this Agreement or the
Ancillary Agreements.
Section 5.13 Delivery of Financial Statements.
(a) Within 30 days after the date hereof, Seller shall
deliver to Buyer the financial statements of Seller's global can operations
referred to in Section 2.7(a), except that such financial statements shall
be audited and shall be delivered with the report thereon of Ernst and
Young LLP, independent certified public accountants (the "Audited Financial
Statements"). Insofar as the Audited Financial Statements pertain to the
U.S. domestic operations of the Business, they shall not differ in any
respect from the Unaudited Financial Statements previously delivered to
Buyer. The amounts included in the balance sheets, results of operations
and cash flows included in the Audited Financial Statements which relate to
Latasa shall not differ in any material respect from those contained in the
Unaudited Financial Statements previously delivered to Buyer.
(b) Within 30 days after the date hereof, Seller shall
deliver to Buyer the financial statements of Latasa referred to in Section
2.28, except that such statements shall be audited and shall be delivered
with the report thereon of Price Waterhouse, independent certified public
accountants (the "Audited Latasa Financial Statements"). The Audited Latasa
Financial Statements shall not differ in any material respect from the
Unaudited Latasa Financial Statements previously delivered to Buyer.
Section 5.14 Litigation Support. With respect to any litigation
being conducted by Seller, Buyer, Ball or their Affiliates, not the subject
of indemnification under Article VI hereof, but relating to the Business,
the Business Assets, the Shares, the Assumed Liabilities or the Excluded
Liabilities, the other party shall cooperate with the litigating party and
its counsel in such action, make available personnel and provide such
testimony and access to books and records as shall be reasonably necessary
in connection with such action, provided that the litigating party shall
reimburse the other party for reasonable out-of-pocket costs and expenses
(including reimbursement for employees' time) for furnishing such
cooperation.
<PAGE> 98
Section 5.15 Returns. At Seller's request and expense, Ball and
Buyer shall use reasonable efforts to assist Seller in the processing of
any returns by, and the provision of any replacement products to, customers
of the Business for product sales as to which Seller remains liable.
Section 5.16 Accounts Receivable. If any Accounts Receivable
reflected in the Final Closing Statement remain uncollected six months
after the Closing Date, Seller shall purchase such Accounts Receivable from
Buyer at the amounts reflected in the Final Closing Statement therefor less
(i) amounts previously paid to Ball or Buyer with respect thereto and (ii)
any reserve for uncollectible amounts included in the Final Closing
Statement. Such purchase shall be completed within seven days of receipt by
Seller of a written request from Buyer to such effect. If no such notice
has been received by Seller within nine months after Closing, Seller's
obligations under this paragraph shall expire.
Section 5.17 Inadvertently Retained Information. Ball, Buyer
and Seller acknowledge that the Business and certain other portions of
Seller's operations (including, without limitation, the Machinery
Operations) have been run on an integrated basis. Accordingly, Seller may
have in its possession after Closing documents (whether in paper, mylar,
microfilm or electronically stored form) containing or embodying Business
Information or Intellectual Property Rights, and Buyer or Ball may have in
its possession after Closing documents (whether in paper, mylar, microfilm
or electronically stored form) containing or embodying confidential
business information or intellectual property of Seller which are Excluded
Assets (in either case, "Inadvertently Retained Information"). Each of
Ball, Buyer and their Designees and Seller shall (i) use Inadvertently
Retained Information only to the extent expressly permitted by this
Agreement or the Ancillary Agreements and (ii) as the existence of
Inadvertently Retained Information comes to its attention, use reasonable
efforts to destroy or expunge it or return it to Ball, Buyer and their
Designees or Seller, as the case may be; provided, however, Ball, Buyer,
their Designees and Latasa and its subsidiaries shall not be required to
destroy, expunge or return documents which Seller or its Affiliates make
available to third party purchasers of goods and services from Seller or
its Affiliates or would make available if the Business were a third party
purchaser of goods and services from Seller or its Affiliates.
<PAGE> 99
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
Section 6.1 Survival of Representations, Warranties and
Covenants. All representations and warranties of each party contained in
this Agreement shall survive the Closing, regardless of any investigation
made by the other party, for a period ending on the second anniversary of
the Closing Date, except that: (i) the representations and warranties set
forth in Sections 2.4, 2.23, 3.2 and 3.6 shall survive indefinitely and
(ii) the representations and warranties set forth in Section 2.16 shall
survive until the expiration of the applicable statutes of limitation plus
90 days. The covenants and agreements contained herein shall survive the
Closing without limitation as to time unless the covenant or agreement
specifies a term, in which case such covenant or agreement shall survive
for such specified term. The respective expiration dates for the survival
of the representations and warranties and the covenants shall be referred
to herein as the relevant "Expiration Date." All representations with
respect to title to Owned Real Property shall be merged into the respective
special warranty deeds and shall not survive the Closing.
Section 6.2 Indemnification by Ball and Buyer. Ball and Buyer
agree to indemnify, defend and hold Seller, its officers, directors,
employees, agents, Affiliates and representatives harmless, from and
against any and all cost, expense, loss, liability or damage (except
punitive damages attributable to an Indemnified Party's acts or omissions)
and actions and claims in respect thereof (including, without limitation,
amounts paid in settlement and herein referred to as "Losses" suffered or
incurred by reason of (i) the representations and warranties of Ball and
Buyer in Article III hereof or the Article V Representations of Ball and
Buyer being untrue (without giving effect to any qualification contained
therein as to materiality, Material Adverse Effect or knowledge of any
party) as of the date hereof and as of the Closing Date, notice of which is
given to Ball and Buyer on or prior to the relevant Expiration Date, (ii)
any nonfulfillment of any covenant or agreement of Ball and Buyer in this
Agreement, notice of which is given to Buyer on or prior to the relevant
Expiration Date, (iii) subject to Section 6.5 with respect to the Assumed
Liabilities referred to in Section 1.3(a)(v), any failure to pay and
discharge the Assumed Liabilities, (iv) claims arising out of conduct of
the Business by Buyer, Ball or their Designees after the Closing Date to
the extent Seller is not obligated to indemnify Ball or Buyer with respect
thereto pursuant to Section 6.3, and (v) all reasonable costs and expenses,
including, without limitation, legal fees and expenses,
<PAGE> 100
incurred in connection with enforcing the indemnification rights of Seller
pursuant to this Section 6.2.
Section 6.3 Indemnification by Seller. Seller agrees to
indemnify, defend and hold Ball and Buyer, their officers, directors,
employees, agents, Affiliates and representatives harmless from and against
all Losses suffered or incurred by reason of (i) the representations and
warranties of Seller in Article II hereof or the Article V Representations
of Seller being untrue (without giving effect to any qualification
contained therein as to materiality, Material Adverse Effect or knowledge
of any party in Sections 2.5, 2.11(b), 2.11(c), 2.13(a) (last sentence),
2.13(c) (first two sentences), 2.13(d) (with respect to defaults by
Seller), 2.14 (with respect to defaults by Seller), 2.16, 2.18, 2.20(b),
2.20(c), 2.21(b), 2.21(g), 2.26(b) and 2.29) as of the date hereof and as
of the Closing Date, notice of which is given to Seller on or prior to the
relevant Expiration Date; (ii) any nonfulfillment of any covenant or
agreement of Seller in this Agreement, notice of which is given to Seller
on or prior to the relevant Expiration Date; (iii) any liability,
obligation or contract of Seller not specifically assumed by Ball or Buyer
hereunder (including, but not limited to, the Excluded Liabilities); (iv)
any Losses arising out of or in connection with Seller's or Buyer's
non-compliance with any so-called bulk transfer laws set forth in Section
4.7; (v) any Tax liability caused by the recapture of any deferred
intercompany gains or excess loss accounts or by any consolidated return
liability arising under Treasury Regulation Section 1.1502-6 or similar
provision of state, local or foreign law; and (vi) all reasonable costs and
expenses, including, without limitation, legal fees and expenses, incurred
in connection with enforcing the indemnification rights of Ball and Buyer
pursuant to this Section 6.3. Notwithstanding anything contained herein to
the contrary, any claims for which indemnification is provided under
Section 6.5 shall not be subject to this Section 6.3, and notwithstanding
anything herein to the contrary, if Seller shall be required to indemnify
both Ball and Buyer with respect to the same matter, the satisfaction of
such indemnity to one of them shall discharge its obligation to the other
to the extent of the amount paid.
Section 6.4 Claims for Indemnification.
(a) Limits on Indemnification. Notwithstanding the
provisions of Sections 6.2 and 6.3, to the extent that (x) Seller incurs a
Loss under Section 6.2(i) or (y) Ball or Buyer incurs a Loss under Section
6.3(i) (other than with respect to a breach of the representation set forth
in Section 2.13(g) for which Ball and Buyer shall be entitled to
indemnification without such limits), the other party shall
<PAGE> 101
be required to
indemnify and hold harmless the party incurring the Loss with respect to
such Loss only if the aggregate of all such Losses to that party exceeds
$3.75 million and then only with respect to Losses in excess of that
amount, provided that the foregoing limit does not apply to Seller's breach
of any representation or warranty relating to Taxes. Notwithstanding
anything contained in this Agreement, Seller's indemnification obligations
shall not, in the aggregate, exceed the Purchase Price.
(b) Notwithstanding any provision hereof to the contrary,
(i) Seller's obligations with respect to any breach of the representations
and warranties set forth in the first sentence of Section 2.8 shall be
solely as provided in Section 5.16 (ii) Seller's obligations with respect
to any breach of the representations and warranties set forth in Section
2.9(a) insofar as any such breach relates to obsolete or slow-moving
Inventory shall be solely as provided in Section 1.5(d) and (iii) Seller's
indemnification obligations under Section 1.7(e) shall be limited to
$1,000,000.00 in the aggregate.
(c) General. The parties intend that all indemnification
claims be made as promptly as practicable by the party seeking
indemnification (the "Indemnified Party"). Whenever any claim shall arise
for indemnification, the Indemnified Party shall promptly notify the party
from whom indemnification is sought (the "Indemnifying Party") of the
claim, and the facts constituting the basis for such claim. The failure to
so notify the Indemnifying Party shall not relieve the Indemnifying Party
of any liability that it may have to the Indemnified Party, except to the
extent the Indemnifying Party demonstrates that the defense of such action
is prejudiced thereby.
(d) Claims by Third Parties. With respect to claims made
by third parties, the Indemnifying Party, upon acknowledgment of its
liability for the claim, shall be entitled to assume control of the defense
of such action or claim with counsel reasonably satisfactory to the
Indemnified Party, provided, however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel at its
own expense to assist in the handling of such claim;
(ii) no Indemnifying Party shall consent to the entry
of any judgment or enter into any settlement if such judgment or
settlement (A) does not include as an unconditional term thereof the
<PAGE> 102
giving by each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect to such claim or (B) if as a
result of such consent or settlement injunctive or other equitable
relief would be imposed against the Indemnified Party or such
judgment or settlement could materially interfere with the business,
operations or assets of the Indemnified Party;
(iii) if the Indemnifying Party does not assume
control of the defense of such claim in accordance with the foregoing
provisions within 10 days after receipt of notice of the claim, the
Indemnified Party shall have the right to defend such claim in such
manner as it may deem appropriate at the cost and expense of the
Indemnifying Party, and the Indemnifying Party will promptly
reimburse the Indemnified Party therefor in accordance with this
Article VI, provided that without the prior written consent of the
Indemnifying Party the Indemnified Party shall not be entitled to
consent to the entry of any judgment or enter into any settlement (A)
if such consent or settlement does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each
Indemnifying Party of a release from all liability in respect of such
claim or (B) if as a result of such consent or settlement injunctive
or other equitable relief would be imposed against the Indemnifying
Party or such judgment or settlement could materially interfere with
the business operations or assets of the Indemnifying Party; and
(iv) the Indemnified Party shall make available to
the Indemnifying Party and its attorneys, accountants and other
representatives all books and records in its possession relating to
such claim and the parties shall otherwise render each other
assistance as may be reasonably requested to ensure the proper and
adequate defense to the claim.
(e) Remedies Cumulative. Subject to Section 10.12, the
remedies provided herein shall be cumulative and shall not preclude
assertion by any party of any rights or the seeking of any other remedies
against any other party.
(f) Disclosure. Except as otherwise provided herein, no
action by an Indemnified Party to determine the extent of indemnified
liability,
<PAGE> 103
including, without limitation, voluntary disclosure to
Authorities or potential claimants, shall in any way affect such
Indemnified Party's right to indemnification from the Indemnifying Party.
(g) Subrogation. In connection with any indemnity payment
hereunder, an Indemnifying Party shall not be entitled to require that any
action be brought against any third party before an action is brought
against the Indemnifying Party hereunder by an Indemnified Party but, to
the extent of such payment, the Indemnifying Party shall be subrogated to
any such right of action of the Indemnified Party against any third party
(other than any third party insurer) in respect of the Loss to which such
payment relates; provided, however, that until the Indemnified Party
recovers full payment of such Loss, any claims of the Indemnifying Party
against any such third party are hereby made expressly subordinated and
subject, in right of payment, to the Indemnified Party's rights against
such third party.
(h) No Duplication of Remedies. If a party is entitled to
indemnification under more than one provision of this Agreement for the
same Loss, it shall be entitled to only a single recovery for such Loss,
or, if applicable, such Loss shall only be taken into account once in the
calculation of the $3.75 million threshold amount set forth in Section
6.4(a).
(i) Certain Employee Benefits Representations. Statements
in Sections 5.4, 5.5 and 5.6 hereof which use the word "represent" and
derivations thereof (the "Article V Representations") shall be deemed
"representations" for purposes of Section 6.3(i) hereof (if made by Seller)
and Section 6.2(i) hereof (if made by Ball or Buyer). Notwithstanding the
foregoing, any provision of Sections 5.4, 5.5 and 5.6 that expressly
provides for indemnification or reimbursement of any party shall not be
subject to the limitations contained in Section 6.4(a) hereof.
Section 6.5 Environmental Indemnification.
(a) Without regard to whether any breach of a
representation or warranty is involved, subject to the limits set forth in
Section 6.5(b) and the provisions of Exhibit 6.5, Seller shall indemnify
and hold harmless Ball and Buyer against Losses (as calculated herein)
arising out of any Environmental Condition existing at the Business
Locations, to the extent attributable to any condition existing at or
before the Closing or event occurring at or before the Closing, (i) that,
as of the Closing, constitutes a violation of applicable Environmental Law
or (ii) with respect
<PAGE> 104
to which there is liability for Cleanup before or
after the Closing under applicable Environmental Law in effect as of the
Closing, any such Loss being referred to herein as an
"Environmental Loss."
(b) With respect to Environmental Losses relating to
matters that are initially asserted:
(i) on or before the third anniversary of
Closing, Seller shall be responsible for 100% of the Loss;
(ii) on or before the fourth anniversary of
Closing, Seller shall be responsible for 80% of the Loss;
(iii) on or before the fifth anniversary of
Closing, Seller shall be responsible for 60% of the Loss; and
(iv) on or before the date five years and six months
after the Closing, Seller shall be responsible for 40% of the Loss.
Notwithstanding any provision hereof to the contrary, with regard to
matters initially asserted after the date five years and six months after
the Closing, Seller shall have no responsibility pursuant to this Agreement
for any Loss under any Environmental Law other than for any Offsite
Obligations.
(c) All claims for indemnification under either Section
6.3 (i) (with respect to a breach of Section 2.19 relating to matters
located on the Business Locations) or this Section 6.5 with respect to
Environmental Laws shall be subject to the provisions of this Section 6.5
and the provisions of Exhibit 6.5.
<PAGE> 105
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATION
The obligation of Seller to consummate the sale of the
Business, the Business Assets and the Shares pursuant to this Agreement
shall be subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by
Seller:
Section 7.1 Representations and Warranties True. The
representations and warranties contained in Article III and in all
certificates and other documents delivered by Ball or Buyer to Seller
pursuant to this Agreement shall be true, complete and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of another date) as of
the Closing Date as though such representations and warranties were made on
and as of such date, except for changes expressly contemplated by the terms
of this Agreement.
Section 7.2 Performance. Ball and Buyer shall have performed
and complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by
Ball and Buyer or both, as the case may be, at or before
the Closing.
Section 7.3 No Injunction, Litigation, etc. On the Closing
Date, there shall be no injunction, writ, preliminary restraining order or
any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for in this Agreement or any of
them not be consummated as so provided. No order of any Authority shall be
in effect which restrains or prohibits the consummation of the transactions
contemplated by this Agreement, and there shall not have been threatened,
nor shall there be pending, any action or proceeding in any such court or
before any such governmental agency seeking to prohibit or delay, or
challenging the validity of, the transactions contemplated by this
Agreement.
Section 7.4 Stockholder's Agreement. If any Ball Shares are
issued pursuant hereto, Ball shall have executed and delivered the
Stockholder's Agreement.
<PAGE> 106
Section 7.5 Legal Opinion. Ball shall have furnished Seller
with a legal opinion from its general counsel substantially in the form set
forth in Exhibit 7.5.
Section 7.6 HSR Act Waiting Periods. All waiting periods
applicable to this Agreement and the transactions contemplated hereby under
the HSR Act shall have expired or been terminated.
Section 7.7 Certificates. Ball and Buyer shall have furnished
Seller with such certificates of their officers to evidence compliance with
the conditions set forth in this Article VII as may be reasonably requested
by Seller, including, without limitation, a certificate as to the
effectiveness of attached resolutions authorizing execution by Ball and
Buyer of this Agreement and the Stockholder's Agreement and the
consummation by Ball and Buyer of the transactions contemplated hereby.
Section 7.8 Consents. Those consents of third parties
identified in Section 7.8 of the Disclosure Schedule shall have been
obtained.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATION
The obligation of Ball and Buyer to consummate the purchase of
the Business, the Business Assets and the Shares pursuant to this Agreement
shall be subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by Ball and Buyer:
Section 8.1 Representations and Warranties True. The
representations and warranties contained in Article II hereof, the
Disclosure Schedule and in all certificates and other documents delivered
by Seller to Ball or Buyer pursuant to this Agreement shall be true,
complete and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of another date) as of the Closing Date as though such
representations and warranties were made on and as of such date, except for
changes expressly contemplated by the terms of this Agreement.
<PAGE> 107
Section 8.2 Performance. Seller shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by
Seller at or before the Closing.
Section 8.3 No Injunction, Litigation, etc. On the Closing
Date, there shall be no injunction, writ, preliminary restraining order or
any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for in this Agreement or any of
them not be consummated as so provided. No order of any Authority shall be
in effect which restrains or prohibits the consummation of the transactions
contemplated by this Agreement, and there shall not have been threatened,
nor shall there be pending, any action or proceeding in any such court or
before any such governmental agency seeking to prohibit or delay, or
challenging the validity of, the transactions contemplated by this
Agreement.
Section 8.4 Governmental Filings and Consents; Third Party
Consents. All governmental filings or consents required to be made or
obtained prior to the Closing Date by Seller in connection with the
execution and delivery of this Agreement and the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby shall
have been made or obtained. All authorizations, consents and approvals of
any third party (other than an Authority) required in connection with the
execution and delivery of this Agreement and the Ancillary Agreements and
the transactions contemplated hereby and thereby which are material to the
operation of the Business or the consummation by Seller of the transactions
contemplated hereby (including those expressly set forth in Section 8.4 of
the Disclosure Schedule) shall have been obtained.
Section 8.5 Stockholder's Agreement. If any Ball Shares are
issued pursuant hereto, Seller shall have executed and delivered the
Stockholder's Agreement.
Section 8.6 HSR Act Waiting Periods. All waiting periods
applicable to this Agreement and the transactions contemplated hereby under
the HSR Act shall have expired or been terminated.
Section 8.7 No Material Adverse Change. Since December 31,
1997, no condition, event, change or occurrence, or any series of the
foregoing, shall exist or shall have occurred which, individually or in the
aggregate, has had, or is reasonably likely to have, a Material Adverse
Effect.
<PAGE> 108
Section 8.8 Certificates. Seller shall have furnished Buyer
with such certificates of its officers and others to evidence compliance
with the conditions set forth in this Article VIII as may be reasonably
requested by Buyer, including, without limitation, certificates as to the
effectiveness of attached resolutions authorizing execution by Seller of
this Agreement and the Stockholder's Agreement and the consummation by
Seller of the transactions contemplated hereby.
Section 8.9 Financing Conditions. The conditions set forth in
clauses (i), (ii) and (iii) of the fourth paragraph of the Commitment
(commencing at the end of page two thereof and continuing on the top of
page three thereof) Letter and under the heading "Conditions Precedent -
Due Diligence" on the Term Sheet attached thereto (the "Due Diligence
Condition") shall have been satisfied; provided that, only with respect to
the condition set forth in clause (i) of the fourth paragraph of the
Commitment Letter (the "Documentation Condition") and the Due Diligence
Condition, the condition set forth in this Section 8 shall expire and be of
no further effect at the close of business on the 45th day after the date
hereof.
Section 8.10 Actions by Seller. Seller shall
have completed all of the actions described in Annex 8.10.
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.1 Methods of Termination. This Agreement and the
transactions contemplated herein may be terminated and abandoned at any
time prior to the Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller if the Closing shall not
have occurred on or before December 31, 1998;
(c) by either Seller or Buyer if any court of competent
jurisdiction in the United States or other Authority shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby, and such order,
decree or ruling or other action
<PAGE> 109
shall have become final and nonappealable
after the affected party or parties have made all reasonable efforts to
contest and appeal the issuance of such order, decree, ruling or other
action;
(d) by either Buyer or Seller (provided that the
terminating party is not then in material breach of any representation,
warranty or covenant in this Agreement) if there shall have been a material
breach of any of the representations, warranties or covenants in this
Agreement on the part of the other party, which breach is not cured within
30 days following written notice to the party committing such breach, or
which breach, by its nature, cannot be cured prior to Closing; and
(e) by Buyer on the next business day following the 45th
day after the date hereof if either the Documentation Condition or the Due
Diligence Condition has not been satisfied on or before such 45th day.
Section 9.2 Procedure upon Termination. In the event of
termination and abandonment of this Agreement pursuant to Section 9.1
hereof, written notice thereof shall forthwith be given to the other party,
and the transactions contemplated by this Agreement shall be terminated and
abandoned. If the transactions contemplated by this Agreement are so
terminated and abandoned:
(a) each party, if requested, will redeliver all
documents, work papers and other material of any other party relating to
the transactions contemplated hereby, whether so obtained before or after
the execution hereof, to the party furnishing the same;
(b) all confidential information received by Seller with
respect to Ball or Buyer or their Affiliates shall be treated in accordance
with the Confidentiality Agreement and Section 5.9 hereof;
(c) all confidential information received by Ball or
Buyer with respect to Seller or its Affiliates shall be treated in
accordance with the Confidentiality Agreement and Section 5.9 hereof;
(d) notwithstanding any such termination, Sections 5.9,
9.2, 10.3 and 10.12 shall remain in full force and effect; and
<PAGE> 110
(e) no party and none of its respective directors,
officers, Affiliates or agents shall have any liability to the other
parties to this Agreement or the Ancillary Agreements as a result of the
transactions contemplated hereby or thereby, except for the willful breach
of this Agreement or any breach of the provisions of this Agreement that
survive such termination pursuant to Section 9.2(d).
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Amendment and Modification. This Agreement may be
amended, modified and supplemented only by written agreement of Seller,
Ball and Buyer.
Section 10.2 Waiver of Compliance. Any failure of Seller on the
one hand, or Ball and Buyer on the other, to comply with any obligation,
covenant, agreement or condition herein may be expressly waived in writing
by an authorized representative of Buyer or Seller, respectively, but such
waiver or failure to insist upon compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 10.3 Expenses, etc. Except as otherwise set forth
herein, whether or not the transactions contemplated by this Agreement
shall be consummated, the fees and expenses incurred by a party in
connection with this Agreement shall be borne by such party.
Section 10.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given if delivered by hand or sent by
overnight courier or telecopy (and promptly confirmed by certified mail,
return receipt requested):
<PAGE> 111
(a) if to Seller, to:
Reynolds Metals Company
6601 West Broad Street
Richmond, Virginia 23230
Attention: General Counsel
Telecopier: (804) 281-3740
and a copy to:
McGuire, Woods, Battle & Boothe, LLP
One James Center
901 E. Cary Street
Richmond, Virginia 23219-4030
Attention: Marshall H. Earl, Jr., Esq.
Telecopier: (804) 698-2044
or to such other person or address as Seller shall furnish to Ball and
Buyer in writing.
(b) if to Ball or Buyer, to:
Ball Corporation
Ball Metal Beverage Container Corp.
10 Longs Peak Drive
Broomfield, Colorado 80021-2510
Attention: General Counsel
Telecopier: (303) 460-2691
and a copy to:
Skadden, Arps, Slate, Meagher &
Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
Telecopier: (312) 407-0411
or to such other person or address as Ball or Buyer shall furnish to Seller
in writing.
<PAGE> 112
Section 10.5 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party without the prior written consent of the
other party, except by operation of law and except that Buyer may assign
its rights under this Agreement, in whole or in part, to Ball or any direct
or indirect wholly-owned subsidiary or subsidiaries of Ball.
Section 10.6 Publicity. Neither Seller nor Ball and Buyer shall
make any announcement or statement concerning this Agreement or the
transactions contemplated hereby to the general public or Seller's
Employees without the prior consent of the other party. This provision
shall not apply, however, to any announcement or written statement required
to be made by law or the regulations of any federal or state governmental
agency, except that the party required to make such announcement shall,
whenever practicable, consult with the other party concerning the timing
and content of such announcement before such announcement is made.
Section 10.7 Governing Law. This Agreement and the legal
relations among the parties shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts of law doctrine.
Section 10.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
Section 10.9 Headings. The headings of the Sections and
Articles of this Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or interpretation
of this Agreement.
Section 10.10 Entire Agreement. This Agreement, including the
Annexes and Exhibits hereto, the Disclosure Schedule, the Ancillary
Agreements, the other documents and certificates delivered pursuant to this
Agreement and the Confidentiality Agreement set forth the entire agreement
and understanding of the parties in respect of the subject matter hereof
and supersede all prior agreements, representations or warranties, whether
oral or written, by any party unless a contrary intention is indicated by a
specific reference to this clause in any such written agreement.
<PAGE> 113
Section 10.11 Third Parties. Except as specifically referred to
herein, nothing herein shall be construed to give to any Person other than
the parties and their successors or assigns, any rights or remedies under
or by reason of this Agreement.
Section 10.12 Dispute Resolution.
(a) Except as otherwise provided in this Agreement or any
Ancillary Agreement, including by way of example Exhibit 6.5, all disputes,
controversies or claims (a "Dispute") arising between Seller on the one
hand, and Buyer, Ball or their Designees, on the other hand, arising out of
or relating to this Agreement and the subject matter hereof, will be
settled as provided herein. The parties may by written agreement modify the
specified time limitations and procedures.
(b) The parties shall promptly attempt to resolve any
Dispute by negotiation. If a Dispute is not resolved by negotiations in the
normal course of business, and a party wishes to pursue the matter further,
it shall give the other party written notice requesting "Higher Level
Executive Negotiations." Specifically, Executives of both parties at levels
one step above the personnel who have previously been involved in the
Dispute shall meet at a mutually acceptable time and place in Chicago,
Illinois (or such other place as the parties mutually agree), within 15
calendar days after giving such notice, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the Dispute.
(c) If a Dispute has not been resolved by Higher Level
Executive Negotiations within 30 calendar days of the claiming party's
giving notice, and the claiming party wishes to pursue the matter further,
it shall give the responding party written notice requesting a "Senior
Executive Abbreviated Mini- Trial," as described in this Section 10.12(c).
The Dispute shall be referred to senior executives of the parties who have
authority to settle the dispute. The senior executives shall meet at a time
and place in Chicago, Illinois (or such other place as the parties mutually
agree), mutually agreed upon within 15 calendar days after such notice
requesting a Senior Executive Abbreviated Mini-Trial. The claiming party
will make a presentation of its position to the senior executives. The
presentation will not exceed one hour in length. The responding party will
then make its presentation, not to exceed one hour in length. The claiming
party may make a rebuttal not to exceed 20 minutes in length. The
responding party may make an answer to the rebuttal not to exceed 20
minutes in length. The presentations of the parties may be made by
<PAGE> 114
counsel or other persons designated by the senior executives. When the
presentations have been concluded, the senior executives will discuss the
matter privately. In preparation for the meeting, a senior executive may
make a non-binding request to the other party to provide limited
information believed to be important and significant in achieving a
resolution. The senior executives may also involve a mediator if they
mutually agree. Unless the parties otherwise agree, any such mediator will
be appointed by the Center for Public Resources, New York, New York, a
not-for-profit dispute resolution organization.
(d) If any Dispute is not resolved by the foregoing
dispute resolution processes, the parties shall resolve such Dispute
exclusively by litigation; provided, however, that neither party shall
commence litigation until (i) Higher Level Executive Negotiations and the
Senior Executive Abbreviated Mini-Trial have been conducted in accordance
with this dispute resolution provision, (ii) the time specified for such
(together with any additional time the parties have agreed upon) has
expired or (iii) a party has breached its obligation to participate in the
pre-litigation dispute resolution process. The parties agree to use all
reasonable efforts to expedite any such litigation with respect to a
Dispute.
(e) For all claims that are resolved by litigation, the
prevailing party, to the extent it prevails on its claims, will be entitled
to its attorneys' and experts' fees and disbursements incurred in resolving
the dispute (including those of in-house counsel and experts) and any other
expense directly related to the dispute.
(f) For all claims that are resolved by litigation,
interest on any claim that is determined to be payable will accrue from the
time the claim is originally made at an interest rate per annum equal to
the Prime Rate in effect from time to time.
(g) For all claims that are resolved by litigation, the
parties consent to the exclusive jurisdiction of any state or federal court
located in Delaware and irrevocably agree that all such actions or
proceedings arising out of or related to this Agreement shall be litigated
in such courts. Each party accepts for itself and in connection with its
respective properties, generally and unconditionally, the exclusive
jurisdiction and venue of the aforesaid courts and waives any defense of
forum non conveniens, and irrevocably agrees to be bound by any
nonappealable judgement rendered in connection with this Agreement. THE
PARTIES EXPRESSLY WAIVE THEIR RIGHTS TO A TRIAL BY JURY.
<PAGE> 115
(h) Notwithstanding anything to the contrary contained
herein, and in addition to any other remedy available to such party,
Seller, Ball or Buyer may seek provisional or permanent equitable relief to
enforce the provisions of this Agreement and remedy any breach hereof,
including, without limitation, temporary restraining orders and preliminary
or permanent injunctions, in addition to the other remedies set forth
herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
BALL CORPORATION
By: /s/ R. David Hoover
______________________________
Name: R. David Hoover
Title: Vice Chairman and Chief
Financial Officer
BALL METAL BEVERAGE CONTAINER CORP.
By: /s/ George A. Matsik
___________________________________
Name: George A. Matsik
Title: Chairman and Chief Executive
Officer
REYNOLDS METALS COMPANY
By: /s/ D. Michael Jones
________________________________
Name: D. Michael Jones
Title: Senior Vice President and
General Counsel
<PAGE> A-1
ANNEX A
DEFINED TERMS
"Affiliate(s)" means, with respect to any Person, (i) an entity
of which such Person is a direct or indirect subsidiary, (ii) a direct or
indirect subsidiary of such Person or (iii) a Person that controls, is
controlled by or is under common control with such Person, provided that
Latasa shall not be deemed to be an Affiliate of Seller.
"Cleanup" means all actions required by any Authority or under
any Environmental Law to contain or otherwise ameliorate an Environmental
Condition, including preventing a Release and performing preremedial
studies and investigations and postremedial monitoring and care.
"Code" means the Internal Revenue Code of 1986, as amended.
"Copyrights" means all registered and unregistered copyrights
(including, without limitation, copyrights in software and databases) and
registrations and applications for copyright registration, all rights of
authorship therein, and all rights to sue for past infringement thereof.
"Designee" means a direct or indirect wholly-owned subsidiary
of Ball or Buyer whose specific obligations Ball guarantees in accordance
with Section 5.12.
"Environment" means ambient air, surface water, groundwater,
land surface or land subsurface.
"Environmental Condition" means any condition existing at any
Business Location (or at any nearby property as a result of migration
through the air, soil, groundwater or stormwater run-off from a Business
Location) to the extent (i) resulting from a Release of any Hazardous
Substance into the Environment or (ii) resulting from the violation of or
noncompliance with any Environmental Law.
"Environmental Laws" means all Laws and standards applicable to
Seller or the Business Locations relating to pollution or protection of the
Environment, including, without limitation, Laws relating to Releases or
threatened Releases of Hazardous Substances into the Environment or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, Release, transport or handling of Hazardous Sub-
<PAGE> A-2
stances and all Laws with regard to record keeping, notification, disclosure
and reporting requirements respecting Hazardous Substances.
"Environmental Permits" means licenses, permits, approvals,
applications and authorizations from any Authority, whether federal, state
or local, domestic or foreign, which are required under or issued under
Environmental Laws.
"Hazardous Substances" means pollutants, contaminants,
pesticides, petroleum and petroleum products, polychlorinated biphenyl
("PCBs"), asbestos, any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 41
U.S.C. ss. 9601, et seq., as amended and reauthorized ("CERCLA"), any
"hazardous waste" as defined in the Resource Conservation and Recovery Act
("RCRA").
"Knowledge of Seller" means the knowledge, both actual
knowledge and knowledge that should be known in the ordinary course of
their duties, of the following persons employed by Seller or its
Affiliates:
William E. Leahey, Jr.* Senior Vice President, Global Cans
D. Michael Jones Senior Vice President and General Counsel
Edmund H. Polonitza Vice President, Planning & Development
F. Robert Newman Vice President, Human Resources
Chuck D. McLane, Jr. Director, Financial Reporting & Analysis
C. S. Weidman Director, Employee Relations
Homer M. Cole Director, Health and Safety
Cathy C. Taylor Director, Environmental Quality
F. R. Ellsworth Director, Real Estate & Administrative
Services
Lucile J. Anutta Senior Employee Benefits Counsel
Donna C. Dabney Secretary and Assistant General Counsel
Edwin A. Harper Senior Division Counsel
Patrick R. Laden Chief Labor Counsel
Robert C. Lyne, Jr. Senior Patent Counsel
James E. McKinnon Chief Environmental Counsel
E. Michael Lewandowski* Director, Finance & Administration
C. Griffin Jones* Director, Manufacturing
Roger H. Donaldson* Director, Technology
Cornell D. Ward* Director, Human Resources
Paul G. Cobbledick* Director, Sales and Marketing
<PAGE> A-3
Paulo R. Rochet* Director, Business Development
Thomas P. Mackell* Director, Materials Management
Managers, Can and End Plants*
*Global Can Business employees
"Machinery Technology" means all technical information and
know-how, confidential or non-confidential, inventions, whether patented or
unpatented, and trade secrets, including, without limitation, all
information and know-how related to increasing manufacturing efficiency and
profitability, patterns, plans, designs, research data, formulae,
manufacturing, sales, service or other processes, operating manuals,
drawings, equipment and parts lists (with related descriptions and
instructions), manuals, data, records, procedures, packaging instructions,
product specifications, analytical methods, sources and specifications for
raw materials, manufacturing and quality control procedures, toxicity and
health and safety information, environmental compliance and regulatory
information, research and development records and reports and other
documents relating to the foregoing including the contents of any invention
disclosures and open invention dockets for which no patent application has
been filed, in each case to the extent the foregoing relates exclusively or
primarily to the Machinery Operations.
"Material Adverse Effect" means an individual or cumulative
adverse change in, or effect on, the business, customers, operations,
properties, condition (financial or otherwise), assets or liabilities of
the Business taken as a whole that is reasonably expected to be materially
adverse to the business, customers, operations, properties, condition
(financial or otherwise), assets or liabilities of the Business taken as a
whole.
"Patents" means all patents, patent applications and related
patent rights, including all reissues, divisionals, continuations and
continuations-in-part, extensions, all improvements thereon and all rights
to sue for past infringement thereof.
"Permits" means licenses, permits, consents, approvals,
applications, product registrations and authorizations from any Authority,
whether federal, state or local, domestic or foreign, other than
Environmental Permits, including, without limitation, licenses, permits or
approvals from, and registrations with, U.S. Equal Employment Opportunity
Commission ("EEOC"), U.S. Occupational Safety and Health Administra-
<PAGE> A-4
tion, U.S. Federal Trade Commission, U.S. Department of Justice, U.S.
Department of Commerce, U.S. Department of Transportation, U.S. Food and Drug
Administration, U.S. Department of Agriculture or Authorities responsible
for the administration of workers' compensation laws.
"Person" means an individual, corporation, partnership,
association, trust, limited liability company or other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the Environment of any Hazardous Substances not
including any such action which results in exposure to employees solely
within a work place or omissions from the engine or exhaust of a motor
vehicle, rolling stock or vessel.
"Section 338 Elections" means both a Section 338(g)
Election and a Section 338(h)(10) Election.
"Section 338(g) Election" means an election described in
section 338(g) of the Code or deemed election described in section 338(e)
of the Code. The Term "Section 338(g) Election" shall also include any
substantially similar elections under a state or local statute
corresponding to federal Laws.
"Section 338(h)(10) Election" means an election described in
section 338(h)(10) of the Code. The Term "Section 338(h)(10) Election"
shall also include any substantially similar election under a state or
local statute corresponding to federal Laws.
"Section 338 Forms" shall mean all returns, documents,
statements, and other forms that are required to be submitted to any
federal, state, county, or other local Taxing Authority in connection with
a Section 338(g) Election or a Section 338(h)(10) Election. Section 338
Forms shall include, without limitation, any "statement of section 338
election" and United States Internal Revenue Service Form 8023 (together
with any schedules or attachments thereto) that are required pursuant to
Treas. Reg. ss. 1.338-1 or Treas. Reg. ss. 1.338(h)(10)-1.
"Tax Laws" means the Code and any other Laws relating to Taxes
and any official administrative pronouncements released thereunder.
<PAGE> A-5
"Tax Return(s)" means any return, report, information return or
other document (including any related or supporting information and any
amendment to any of the foregoing) filed or required to be filed with any
Taxing Authority with respect to Taxes.
"Taxing Authority" means any domestic or foreign governmental
authority responsible for the imposition, collection or administration of
any Tax.
"Technology" means all technical information and know-how,
confidential or non-confidential, inventions, whether patented or
unpatented, and trade secrets, including, without limitation, all
information and know-how related to increasing manufacturing efficiency and
profitability, patterns, plans, designs, research data, formulae,
manufacturing, sales, service or other processes, operating manuals,
drawings, equipment and parts lists (with related descriptions and
instructions), manuals, data, records, procedures, packaging instructions,
product specifications, analytical methods, sources and specifications for
raw materials, manufacturing and quality control procedures, toxicity and
health and safety information, environmental compliance and regulatory
information, research and development records and reports and other
documents relating to the foregoing including the contents of any invention
disclosures and open invention dockets for which no patent application has
been filed, in each case to the extent the foregoing relates exclusively or
primarily to the Business.
"Trademarks" means all common law and registered trademarks,
service marks, logos, trade dress and trade names, the goodwill of the
business symbolized thereby, other business, product or service identifiers
and all registrations and applications for registration of the foregoing
and all rights to sue for past infringement or dilution thereof.
<PAGE. A-6
The following terms shall have the definitions contained in the
sections of the Asset Purchase Agreement identified below:
DEFINED TERM SECTION
Absent Nonrepresented Hourly Employees 5.5(b)
Absent Represented Employees 5.4(a)
Absent Salaried Employees 5.5(c)
Accounts Receivable 1.1(h)
Acquisition Proposal 4.5(a)(i)
Act 2.24(i)
Adverse Effect 4.4(b)
Affiliate(s) Annex A
Aggregate Deemed Sales Price 5.7(d)
Agreement Preamble
Agreement Regarding Performance of Technical Services 1.7(c)(viii)
Ancillary Agreements 1.7(d)
Article V Representations 6.4(i)
Assignment and Assumption Agreement 1.7(c)(ii)
Assignment and Assumption of Leases 1.7(b)(ix)
Assumed Benefit Plan(s) 5.4(g)(xii)
Assumed Liabilities 1.3(a)
Audited Balance Sheet 1.5(a)
Audited Financial Statements 5.13(a)
Audited Latasa 1997 Financial Statements 5.13(b)
Authority 2.5
Ball Preamble
Ball SEC Reports 3.5
Ball Shares 1.4
Bill of Sale 1.7(b)(ii)
Business Preamble
Business Assets 1.1
Business Information 1.1(d)
Business Locations 1.1(a)
Buyer Preamble
Buyer's SUB Plan 5.4(c)
Buyer's Welfare Plans 5.5(f)(ii)
Cade 2.6
Cash Price 1.4
<PAGE> A-7
DEFINED TERM SECTION
CERCLA Annex A
Cleanup Annex A
Closing 1.1
Closing Date 1.7(a)
Closing Period 5.7(g)
Closing Statement 1.5(a)
Code Annex A
Collective Bargaining Agreements 2.20(a)
Commitment Letter 3.9
Confidentiality Agreement 5.9(a)
Contracts 2.14(a)
Copyrights Annex A
Cross-License Agreement 1.7(d)(ix)
Data Processing Services Agreement 1.2(t)
Defined Benefit Single Location Plans 5.4(g)(i)
Defined Contribution Single Location Plans 5.4(g)(i)
Designated Value 1.4
Designee Annex A
Differential 1.10(b)
Disclosure Schedule 2.1
Dispute 10.12(a)
Documentation Condition 8.9
Domestic Subsidiary Securities 2.25(a)
Due Diligence Condition 8.9
EEOC Annex A
Employee Benefits Data 5.5(a)
Employee Lists 5.5(a)
employment loss 2.20(j)
Encumbrances 2.11
Environment Annex A
Environmental Condition Annex A
Environmental Laws Annex A
Environmental Loss 6.5(a)
Environmental Permits Annex A
<PAGE> A-8
DEFINED TERM SECTION
Equipment 1.1(b)
ERISA 2.21(a)
ERISA Affiliate 2.21(a)
Exchange Act 3.5
Excluded Assets 1.2
Excluded Liabilities 1.3(b)
Extended Seconded Employees 5.6(a)(i)
Extrusion Land 1.10(a)
Expiration Date 6.1
FICA 5.6(d)
Filed Intellectual Property 1.7(b)
Final Closing Statement 1.5(b)
Financing 3.9
FMLA 5.4(a)
FUTA 5.6(d)
GAAP 1.5(a)
Guaranteed Pension Asset Value 5.4(g)(vi)
Hazardous Substances Annex A
Headquarter Employees 5.5(c)
Higher Level Executive Negotiations 10.12(b)
HSR Act 2.6
Human Resources Services Agreement 1.7(d)(xi)
Inadvertently Retained Information 5.17
Incentive Loan Agreement 1.7(d)(iv)
Indemnified Party 6.4(c)
Indemnifying Party 6.4(c)
Initial Document Production 5.4(g)(ii)
Intellectual Property Rights 1.1(c)
Interim Financial Statements 2.7(b)
Interplant Transfer Provisions 5.4(b)
Inventory 1.1(g)
Inventory Carrying Value 1.5(d)
Knowledge of Seller Annex A
LAR Preamble
<PAGE> A-9
DEFINED TERM SECTION
Latasa Preamble
Latasa Agreements 1.1(f)
Latasa Offering Statement 2.27
Latasa Subsidiaries 2.25(c)
Law(s) 2.5
Leased Premises 1.1(a)
Loss(es) 6.2
Machinery Operations Preamble
Machinery Technology Annex A
Master Trust 5.4(g)(v)
Master Trustee 5.4(g)(v)
Material Adverse Effect Annex A
Modified Aggregate Deemed Sale Price 5.7(d)
Neutral Auditor 1.5(c)
Non-Exclusive Contract(s) 1.1(j)
Non-Exclusive Permit(s) 1.1(e)
Offset 5.4(f)
Offsite Obligations 1.3(b)(v)
Option 1.10(e)
Owned Real Property 1.1(a)
Parcel 1.10(a)
Patents Annex A
Payroll Services Agreement 1.7(d)(vi)
PCBs Annex A
Permanent Shutdown 5.4(h)
Permits Annex A
Permitted Exceptions 4.4(b)
Person Annex A
Plan(s) 2.21(a)
Plant Land 1.10(a)
Plant Salaried Employees 5.5(c)
Post-Retirement Eligible Employees 5.5(f)(i)
Pre-Closing Period 5.7(g)
Prime Rate 1.5(e)
<PAGE> A-10
DEFINED TERM SECTION
Purchase Price 1.4
RCAL Preamble
RCRA Annex A
Real Property Leases 1.1(a)
Release Annex A
Replacement Plan 5.4(f)
Represented Employees 5.4(a)
Resolution Period 1.5(b)
Retained Contracts 1.2(f)
Reynolds Marks 1.2(k)
RIB Preamble
RILA Preamble
RIND Preamble
SEC 3.5
Seconded Employees 5.6(a)(i)
Section 338 Elections Annex A
Section 338(g) Election Annex A
Section 338(h)(10) Election Annex A
Section 338 Forms Annex A
Selection Period 5.6(a)(i)
Seller Preamble
Seller Employee(s) 5.5(a)
Seller Nonrepresented Hourly Employees 5.5(b)
Seller Salaried Employees 5.5(c)
Seller's Plans 5.4(b)
Seller's Welfare Plans 5.5(f)
Senior Executive Abbreviated Mini-Trial 10.12(c)
Shares 1.1
Siberian Aluminum 5.8(a)(i)
Single Location Plans 5.4(g)(i)
Special Retirement Benefit 5.4(f)(ii)
Stockholder's Agreement Preamble
Subdivision 1.10(a)
Supply Program Agreement 1.7(d)(iii)
<PAGE> A-11
DEFINED TERM SECTION
SVE Preamble
SVE Technical Services Agreement 2.29
Tax Laws Annex A
Tax Return(s) Annex A
Taxes 1.3(b)(i)
Taxing Authority Annex A
Technology Annex A
Title Commitments 4.4(b)
Title Company 4.4(b)
Title Costs 4.4(b)
Title IV Plans 2.21(a)
Torrance Lease 1.10(a)
Trademarks Annex A
Trademark License Agreement 1.7(d)(viii)
Transferred Employee(s) 5.5(a)
Transferred Nonrepresented Hourly Employees 5.5(b)
Transferred Represented Employees 5.4(a)
Transferred Salaried Employees 5.5(c)
Transition Services Agreement 1.7(d)(v)
Transitional Trademark License Agreement 1.7(d)(ii)
Transportation Services Agreement 1.7(d)(x)
UAC Preamble
Unaudited Financial Statements 2.7(a)
Unaudited Latasa Financial Statements 2.28
Union Pension Plans 5.4(f)
Valuation Date 5.4(g)(vi)
WARN Act 2.20(j)
Welfare Benefits 5.5(f)(ii)
Working Capital 1.5(a)
EXHIBIT 3.2
By-Laws
of
REYNOLDS METALS COMPANY
(Incorporated under the Laws of Delaware)
<PAGE>
By-Laws
of
REYNOLDS METALS COMPANY
Table of Contents
Page
ARTICLE I - Stock
Section 1. Certificates for Stock 1
Section 2. Transfers of Stock 1
Section 3. Holders of Record 1
Section 4. Lost or Destroyed Certificates 2
ARTICLE II - Stockholders' Meetings
Section 1. Place of Meetings 2
Section 2. Annual Meetings 2
Section 3. Special Meetings 2
Section 4. Matters to be Brought Before
Stockholders Meetings 2-4
Section 5. Notice of Meetings 4
Section 6. Quorum 4
Section 7. Adjourned Meetings 4-5
Section 8. Inspectors of Election 5
Section 9. List of Stockholders 5
Section 10. Voting 5-6
Section 11. Consents in Writing 6
ARTICLE III - Board of Directors
Section 1. Number; Term of Office; Powers 6-7
Section 2. Resignations 7
Section 3. Vacancies 7
Section 4. Annual Meeting 7
Section 5. Regular Meetings 7
Section 6. Special Meetings 7-8
Section 7. Notice of Meetings 8
Section 8. Quorum; Adjourned Meetings; Required Vote 8
Section 9. Committees 8-9
Section 10. Compensation 9
Section 11. Consents in Writing 9
Section 12. Participation by Conference Telephone 9
<PAGE>
Table of Contents, Continued
ARTICLE IV - Officers
Section 1. Officers 9-10
Section 2. Chairman of the Board 10
Section 3. Vice Chairmen of the Board 10
Section 4. President 10
Section 5. Vice Presidents 10
Section 6. General Counsel 10-11
Section 7. Secretary 11
Section 8. Treasurer 11
Section 9. Controller 11
Section 10. Other Officers and Assistant Officers 11
Section 11. Term of Office; Vacancies 11
Section 12. Removal 12
ARTICLE V - Dividends and Finance
Section 1. Dividends 12
Section 2. Deposits; Withdrawals; Notes and Other
Instruments 12
Section 3. Fiscal Year 12
ARTICLE VI - Books and Records; Record Date
Section 1. Books and Records 12
Section 2. Record Date 12-13
ARTICLE VII - Notices
Section 1. Notices 14
Section 2. Waivers of Notice 14
ARTICLE VIII - Contracts
Section 1. Interested Directors or Officers 14-15
ARTICLE IX - Seal
Section 1. Seal 15
ARTICLE X - Indemnification
Section 1. Indemnification in Third Party
Actions 15-16
Section 2. Indemnification in an Action by or in
the Right of the Corporation 16
Section 3. Indemnification as of Right 17
Section 4. Determination of Indemnification 17
Section 5. Advance for Expenses 17
Section 6. General Provisions 17-18
ARTICLE XI - Amendments
Section 1. Amendments 18-19
<PAGE>
By-Laws
of
REYNOLDS METALS COMPANY
(Incorporated under the Laws of Delaware)
ARTICLE I - Stock
1. Certificates for Stock. Certificates of Stock shall be
issued in numerical order, be signed by the Chairman of the Board
of Directors, a Vice Chairman of the Board of Directors, the
President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer,
and sealed with the corporate seal; provided, that where any
Certificate of Stock is signed by a duly appointed and authorized
Transfer Agent or Registrar the signatures of the Chairman of the
Board of Directors, Vice Chairman of the Board of Directors, the
President, Vice President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer may be facsimile, engraved or
printed, and the seal of the corporation on any such Certificate
of Stock may be facsimile, engraved or printed. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation
with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
2. Transfers of Stock. Transfers of stock shall be made
only upon the books of the corporation, and only by the person
named in the certificate or by attorney, lawfully constituted in
writing, and only upon surrender of the certificate therefor.
The directors may by resolution make reasonable regulations for
the transfers of stock.
3. Holders of Record. Registered stockholders only shall
be entitled to be treated by the corporation as the holders in
fact of the stock standing in their respective names and the
corporation shall not be bound to recognize any equitable or
other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of Delaware.
4. Lost or Destroyed Certificates. In case of loss or
destruction of any certificate of stock another may be issued in
its place upon satisfactory proof of such loss or destruction and
upon the giving of a satisfactory bond of indemnity to the
corporation, all as determined either expressly by the directors
or pursuant to general authority granted by them.
<PAGE> 2
ARTICLE II - Stockholders' Meetings
1. Place of Meetings. Meetings of the stockholders shall
be held at such place, within or outside the State of Delaware,
as the Board of Directors may determine.
2. Annual Meeting. The annual meeting of the stockholders
of the corporation, for the election of directors to succeed
those whose terms expire, and for the transaction of such other
business as may come before the meeting, shall be held on the
Thursday preceding the third Friday of the month of May of each
year, if not a legal holiday, and if a legal holiday, then on the
first business day following, at 4:00 p.m., or on such other date
and at such other time as may be fixed by the Board of Directors.
The annual meeting of the stockholders may be postponed by the
Board of Directors upon public notice given before the date
previously scheduled for such meeting. If the annual meeting of
the stockholders be not held as herein prescribed, the election
of directors may be held at any meeting thereafter called
pursuant to these By-Laws.
3. Special Meetings. Special meetings of the stockholders
may be called by the Chairman of the Board of Directors, or a
Vice Chairman of the Board of Directors, or the President or by
the Board of Directors, and shall be called at any time by the
Board of Directors upon the request in writing of stockholders
entitled to cast a majority of the votes which all stockholders
are entitled to cast. Such request must state the purpose of the
meeting.
4. Matters to be Brought Before Stockholders Meetings.
Except as otherwise provided by law, at any annual or special
meeting of stockholders only such business shall be conducted as
shall have been properly brought before the meeting in accordance
with this Section.
In order to be properly brought before the meeting,
such business must have either been (i) specified in the written
notice of the meeting (or any supplement thereto) given to
stockholders of record on the record date for such meeting by or
at the direction of the Board of Directors, (ii) brought before
the meeting at the direction of the Board of Directors or the
officer presiding over the meeting, or (iii) specified in a
written notice given by or on behalf of a stockholder of record
on the record date for such meeting entitled to vote thereat or a
duly authorized proxy for such stockholder, in accordance with
all of the following requirements.
A notice referred to in clause (iii) hereof must be
delivered personally to, or mailed to and received at, the
principal executive office of the corporation, addressed to the
attention of the Secretary, not more than ten (10) days after the
date of the initial notice referred to in clause (i) hereof, in
the case of business to be brought before a special meeting of
stockholders, and not less than thirty (30) days prior to the
first anniversary date of the initial notice referred to in
clause (i) hereof of the previous year's annual meeting, in the
case of business to be brought before an annual meeting of
<PAGE> 3
stockholders, provided, however, that such notice shall not be
required to be given more than ninety (90) days prior to an
annual meeting of stockholders. Such notice referred to in
clause (iii) hereof shall set forth:
(a) a full description of each such item of business
proposed to be brought before the meeting;
(b) the name and address of the person proposing to bring
such business before the meeting;
(c) the class and number of shares held of record, held
beneficially and represented by proxy by such person as of the
record date for the meeting (if such date has then been made
publicly available) and as of the date of such notice;
(d) if any item of such business involves a nomination for
director, all information regarding each such nominee that would
be required to be set forth in a definitive proxy statement filed
with the Securities and Exchange Commission pursuant to Section
14 of the Securities Exchange Act of 1934, as amended, or any
successor thereto and the written consent of each such nominee to
serve if elected; and
(e) all other information that would be required to be
filed with the Securities and Exchange Commission if, with
respect to the business proposed to be brought before the meet
ing, the person proposing such business was a participant in a
solicitation subject to Section 14 of the Securities Exchange Act
of 1934, as amended, or any successor thereto.
No business shall be brought before any meeting of
stockholders of the corporation otherwise than as provided in
this Section.
5. Notice of Meetings. Written notice of the place, date
and hour of the annual and of all special meetings of the stock
holders and, in the case of special meetings, of the purpose or
purposes for which such special meeting is called, shall be given
in the manner specified in Section l of Article VII of these By-
Laws not less than ten (10) nor more than sixty (60) days prior
to the meeting, to each stockholder of record of the corporation
entitled to vote thereat. Business transacted at all special
meetings shall be confined to the purposes stated in the notice.
6. Quorum. A quorum at any annual or special meeting of
the stockholders shall consist of the presence, in person or by
proxy, of stockholders entitled to cast a majority of the votes
which all stockholders are entitled to cast, except as otherwise
specifically provided by law or in the Certificate of Incorpora-
tion.
7. Adjourned Meetings. Whether or not a quorum is present
at a properly called stockholders' meeting, the meeting may be
adjourned from time to time by the Chairman of the meeting or by
a majority in interest of those present in person or by proxy and
entitled to vote thereat. At any such adjourned meeting at which
a quorum
<PAGE> 4
shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting; otherwise,
no notice of such adjourned meeting need be given if the time and
place thereof are announced at the meeting at which the
adjournment is taken. The absence from any meeting of
stockholders holding the number of shares of stock of the corpora-
tion required by law, the Certificate of Incorporation or these
By-Laws for action upon any given matter shall not prevent action
at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present
thereat in person or by proxy stockholders holding the number of
shares of stock of the corporation required in respect of such
other matter or matters.
8. Inspectors of Election. In advance of any meeting of
stockholders or any corporate action to be taken by the stock
holders in writing without a meeting, the Chief Executive Offi
cer, Chief Operating Officer, Chief Financial Officer or Secre
tary of the corporation shall appoint one or more inspectors of
election to serve at such meeting or to examine such written
consents and to make a written report with respect thereto. In
addition, any such officer may, but shall not be required to,
designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is
able to act at a meeting of stockholders, the presiding officer
at such meeting shall appoint one or more inspectors to act at
the meeting. Each inspector shall discharge his or her duties in
accordance with applicable law and shall, before entering upon
the discharge of his or her duties, take and sign an oath faith
fully to execute the duties of inspector with strict impartiality
and according to the best of his or her ability.
9. List of Stockholders. A complete list of the stock
holders entitled to vote at each annual or special meeting of the
stockholders of the corporation, arranged in alphabetical order,
showing the address of record of each and the number of voting
shares held by each, shall be prepared by the Secretary, who
shall have charge of the stock ledger, and filed in the City (or,
if such meeting is to be held at a place not within any city,
then in the county) where the meeting is to be held, at a loca-
tion specified in the Notice of Meeting, or if no such location
is specified in such notice, at the place where the meeting is to
be held, at least ten (10) days before every such meeting, and
shall, during the usual hours for business, be open to the
examination of any stockholder for any purpose germane to the
meeting, and during the whole time of said meeting be open to the
examination of any stockholder.
10. Voting. Subject to the provisions of Article VI,
Section 2 of these By-Laws, and except where a different vote per
share is prescribed by the Certificate of Incorporation for a
class of stock, each holder of stock of a class which is entitled
to vote in any election or on any other questions at any annual
or special meeting of the stockholders shall be entitled to one
vote, in person or by written proxy, for each share of such class
held of record. Except where, and to the extent that, a differ-
ent percentage of votes and/or a different exercise of voting
power is prescribed by law, the
<PAGE> 5
Certificate of Incorporation or these By-Laws, all elections and
other questions shall be decided by the vote of stockholders,
present in person or by proxy and entitled to vote, representing
a majority of the votes cast. Abstentions shall be counted in
the tabulation of the votes cast. The votes for directors, and,
upon demand of any stockholder, or where required by law, the
votes upon any question before the meeting, shall be by ballot;
otherwise, the election shall be held as the presiding officer
prescribes.
11. Consents in Writing. Any action which might have been
taken under these By-Laws by a vote of the stockholders at a
meeting thereof may be taken by them without a meeting, without
prior notice and without a vote, if a consent in writing setting
forth the action so taken shall be signed by the holders of
outstanding shares of stock of the corporation having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be
delivered to the corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or the
Secretary. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return
receipt requested. Prompt notice of the taking of such corporate
action shall be given to those stockholders who have not
consented thereto if less than unanimous written consent is
obtained. Every written consent shall bear the date of signature
of each stockholder who signs the consent. No written consent
shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the date the earliest
dated written consent (executed and delivered in accordance with
this Section) was received by the corporation, written consents
signed by a sufficient number of holders (determined in
accordance with this Section) to take such action are delivered
to the corporation in the manner specified in this Section.
ARTICLE III - Board of Directors
1. Number; Term of Office; Powers. The business and
affairs of the corporation shall be under the direction of a
Board of Directors, consisting of eleven (11) persons. Directors
shall be elected for one year, and shall hold office until their
successors are elected and qualified. Directors need not be
stockholders. In addition to the power and authority expressly
conferred upon them by the By-Laws and the Certificate of
Incorporation, the Board of Directors may exercise all such
powers of the corporation and do all such lawful acts and things
as are not by law or by the Certificate of Incorporation or by
these By-Laws directed or required to be exercised or done by the
stockholders.
2. Resignations. Any director may resign at any time by
giving written notice of resignation to the Board of Directors,
to the Chief Executive Officer or to the Secretary of the corpo-
ration. Any such resignation shall take effect at the time
specified therein, or if the time be not specified therein, then
upon receipt thereof. The acceptance of such resignation shall
not be necessary to make it effective.
<PAGE> 6
3. Vacancies. Except as otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, all
vacancies in the Board of Directors, whether caused by resigna-
tion, death, increase in the number of authorized directors or
otherwise, may be filled by a majority of the Board of Directors
then in office, even though less than a quorum, or by the stock
holders at a special meeting. A director thus elected to fill
any vacancy shall hold office until the next annual meeting of
stockholders and until a successor is elected and qualified.
4. Annual Meeting. The annual meeting of the Board of
Directors, for the election of officers and the transaction of
other business, shall be held on the same day and at the same
place as, and as soon as practicable following, the annual
meeting of stockholders, or at such other date, time or place as
the directors may by resolution designate.
5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times, and at such place within
or outside the State of Delaware, as the Board of Directors may
from time to time by resolution designate.
6. Special Meetings. Special meetings of the directors
may be called at any time by the Chairman of the Board of Direc
tors, a Vice Chairman of the Board of Directors, the President or
an Executive Vice President, or by the Secretary upon written
request of one-third of the directors, such request stating the
purpose for which the meeting is to be called. Special meetings
shall be held at the principal office of the corporation or at
such office within or outside the State of Delaware as the
directors may from time to time designate.
7. Notice of Meetings. Except as otherwise required by
law, notice of special meetings of the Board of Directors or of
any committee of the Board of Directors shall be given to each
director or to each committee member, as the case may be, by mail
at least two days before the day on which the meeting is to be
held or by personal delivery, word-of-mouth, telephone, tele
graph, radio, cable or other comparable means at least six hours
before the time at which the meeting is to be held. Such notice
shall state the time and place of such meeting, but need not
state the purposes thereof unless otherwise required by law. No
notice need be given of the annual meeting of directors or of
regular meetings of directors or of committees of the Board of
Directors, provided that, whenever the time or place of such
meetings shall be fixed or changed, notice of such action shall
be given promptly to each director or to each committee member,
as the case may be, who shall not have been present at the
meeting at which such action was taken.
8. Quorum; Adjourned Meetings; Required Vote. A majority
of the Board of Directors as constituted from time to time shall
be necessary and sufficient at all meetings to constitute a
quorum for the transaction of business. In the absence of a
quorum, a majority of those present may adjourn the meeting from
time to time and the meeting may be held as adjourned without
further notice provided a quorum be present
<PAGE> 7
at such adjourned meeting. Unless otherwise specifically
provided by the Certificate of Incorporation or statute, the act
of a majority of the directors present at any properly convened
meeting at which there is a quorum, but in no case less than one-
third of all of the directors then in office, shall be the act of
the Board of Directors.
9. Committees. Standing or Temporary Committees may be
appointed from their own number by the Board of Directors from
time to time, and the directors may from time to time vest such
committees with such powers as the directors may see fit, subject
to such conditions as the directors may prescribe or as may be
prescribed by law. All committees shall consist of two or more
directors. The term of office of the members of each committee
shall be as fixed from time to time by the Board of Directors;
provided, however, that any committee member who ceases to be a
director shall ipso facto cease to be a committee member. Any
member of any committee may be removed at any time with or
without cause by the Board of Directors, and any vacancy in any
committee may be filled by the Board of Directors. All commit
tees shall keep regular minutes of their transactions and shall
cause them to be recorded in books kept for that purpose in the
office of the corporation, and shall report the same to the Board
of Directors at their regular meetings. Subject to this Section
9 and except as otherwise determined by the Board of Directors,
each committee may make rules for the conduct of its business.
10. Compensation. Directors, as such, may receive, pursu-
ant to resolution of the Board of Directors, fixed fees, other
compensation and expenses for their services as directors,
including, without limitation, services as chairmen or as members
of committees of the directors; provided, however, that nothing
herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor.
11. Consents in Writing. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members
of the Board of Directors or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or
committee.
12. Participation by Conference Telephone. Members of the
Board of Directors or of any committee may participate in a
meeting of such Board of Directors or committee, as the case may
be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by
such means shall constitute presence in person at the meeting.
ARTICLE IV - Officers
1. Officers. The corporation may have a Chairman of the
Board of Directors, one or more Vice Chairmen of the Board of
Directors, a President, one or more Vice Presidents, which may
include Executive and Senior Vice Presidents, a General
<PAGE> 8
Counsel, a Secretary, a Treasurer, a Controller and such other
officers and assistant officers as the Board of Directors shall deem
appropriate; provided, that the corporation shall have such
officers as are required by applicable law. Officers shall be
elected annually by the Board of Directors. One person may hold
more than one office.
The Board of Directors shall designate a Chief Execu-
tive Officer, and may designate a Chief Operating Officer and a
Chief Financial Officer from among the officers of the corpora-
tion.
The Chief Executive Officer shall have general supervi-
sion and management of the business and affairs of the corpora-
tion, subject to the control of the Board of Directors, and may
prescribe the duties to be performed by the officers of the
corporation in addition to the duties prescribed by these By-Laws
or by the Board of Directors. In the absence or disability of
the Chairman of the Board of Directors, the Chief Executive
Officer shall preside at all meetings of stockholders and direc-
tors. In the absence or disability of the Chief Executive
Officer, such officer of the corporation as the Chief Executive
Officer shall have designated in writing to the Board of Direc-
tors or to the Secretary of the corporation shall, subject to
further action by the Board of Directors, have the powers and
perform the duties of the Chief Executive Officer.
2. Chairman of the Board. The Chairman of the Board of
Directors shall preside at all meetings of stockholders and
directors.
3. Vice Chairmen of the Board. A Vice Chairman shall
perform such duties as are properly required by the Board of
Directors or the Chief Executive Officer.
4. President. The President shall perform such duties as
are properly required by the Board of Directors or the Chief
Executive Officer.
5. Vice Presidents. Each of the Executive Vice presi-
dents, Senior Vice Presidents and other Vice Presidents shall
perform such duties as are properly required by the Board of
Directors or the Chief Executive Officer.
6. General Counsel. The General Counsel shall advise the
corporation on legal matters affecting the corporation and its
activities, shall supervise and direct the handling of all such
legal matters and shall perform all such other duties as are
incident to the office of General Counsel.
7. Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders and of the Board of Directors, and,
when required, the minutes of the meetings of the committees, and
shall be responsible for the custody of all such minutes. The
Secretary shall be responsible for the custody of the stock
ledger and documents of the corporation. The Secretary shall
have custody of the corporate seal and may affix and attest such
seal to any instrument whose execution shall have been duly
authorized and shall perform all other duties incident to the
office of Secretary.
<PAGE> 9
8. Treasurer. The Treasurer shall have the custody of all
moneys and securities of the corporation and shall keep or cause
to be kept accurate accounts of all money received or payments
made in books kept for that purpose. The Treasurer shall deposit
or cause to be deposited funds of the corporation in accordance
with Article V, Section 2 of these By-Laws and shall disburse the
funds of the corporation by checks or vouchers as authorized by
the Board of Directors. The Treasurer shall also perform all
other duties incident to the office of Treasurer.
9. Controller. The Controller shall be the chief account
ing officer of the corporation. The Controller shall keep or
cause to be kept all books of accounts and accounting records of
the corporation and shall keep and maintain, or cause to be kept
and maintained, adequate and correct accounts of the properties
and business transactions of the corporation. The Controller
shall prepare or cause to be prepared appropriate financial
statements for the corporation and shall perform such other
duties as may be incident to the office of Controller.
10. Other Officers and Assistant Officers. All other
officers and assistant officers shall exercise such powers and
perform such duties as shall be determined from time to time by
the Board of Directors or the Chief Executive Officer.
11. Term of Office; Vacancies. Each officer shall hold
office until the annual meeting of the Board of Directors follow
ing the end of the term of the Board by which such officer is
elected, except in the case of earlier death, resignation or
removal. Vacancies in any office arising from any cause may be
filled by the directors at any regular or special meeting.
12. Removal. Any officer elected or appointed by the Board
of Directors may be removed at any time, with or without cause,
by the Board of Directors.
ARTICLE V - Dividends and Finance
1. Dividends. Dividends may be declared to the full
extent permitted by law at such times as the Board of Directors
shall direct.
2. Deposits; Withdrawals; Notes and Other Instruments.
The moneys of the corporation shall be deposited in the name of
the corporation in such banks or trust companies as shall be
designated by the Board of Directors, and shall be drawn out only
by persons designated from time to time by the Board of Directors
or by an officer of this corporation to whom the Board of
Directors has delegated such authority. All notes and other
instruments for the payment of money shall be signed or endorsed
by officers or other persons authorized from time to time by the
Board of Directors or by an officer of this corporation to whom
the Board of Directors has delegated such authority.
<PAGE> 10
3. Fiscal Year. The fiscal year of the corporation shall
date from the first day of January in each year.
ARTICLE VI - Books and Records; Record Date
1. Books and Records. The books, accounts and records of
the corporation, except as may be otherwise required by the laws
of the State of Delaware, may be kept within or outside of the
said State at such places as the Board of Directors may from time
to time appoint.
2. Record Date.
(a) The Board of Directors is authorized to fix in advance
a date, not exceeding sixty (60) days preceding the date of any
meeting of stockholders, or the date for the payment of any
dividend, or other distribution or allotment of any rights, or
the date when any change, conversion or exchange of capital stock
shall go into effect, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such
meeting and any adjournment thereof, or entitled to receive
payment of any such dividend or other distribution or allotment
of rights, or to exercise any rights in respect of any such
change, conversion or exchange of capital stock. Such stockhold-
ers and only such stockholders as shall be stockholders of record
on the record date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend or other distribution or allot-
ment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid. Any
such record date fixed in connection with a meeting of stockhold-
ers shall not be less than ten (10) days before the date of such
meeting.
(b) In order that the corporation may determine the stock-
holders entitled to consent to corporate action in writing
without a meeting, the Board of Directors is authorized to fix in
advance a record date, which record date shall not be more than
ten (10) days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. Any stockhold-
er of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to
the Secretary, request the Board of Directors to fix a record
date. If no record date has been fixed by the Board of Directors
within ten (10) days of the date on which such a request is
received, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors is required by applica-
ble law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or the
Secretary. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required
by applicable law, the record date for determining stockholders
entitled to consent to corporate action in
<PAGE> 11
writing without a meeting shall be at the close of business on
the date on which the Board of Directors adopts the resolution
taking such prior action. Such stockholders and only such
stockholders as shall be stockholders of record on the record
date so fixed shall be entitled to give such consent,
notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid.
ARTICLE VII - Notices
1. Notices. Whenever any provision of law or these By-
Laws requires notice to be given to any director, officer or
stockholder, such notice may be given in writing by mailing the
same to such director, officer or stockholder at his or her
address as the same appears in the books of the corporation,
unless such stockholder shall have filed with the Secretary a
written request that notices intended for him or her be mailed to
some other address, in which case it shall be mailed to the
address designated in such request. The time when the same shall
be mailed shall be deemed to be the time of the giving of such
notice. This section shall not be deemed to preclude the giving
of notice by other means if permitted by the applicable provision
of law or these By-Laws.
2. Waivers of Notice. A waiver of any notice in writing,
signed by a stockholder, director or officer, whether before or
after the time stated in said waiver for holding a meeting, shall
be deemed equivalent to a notice required to be given to any
stockholder, director or officer.
ARTICLE VIII - Contracts
1. Interested Directors or Officers. No contract or
transaction between the corporation and one or more of its
directors or officers, or between the corporation and any other
corporation, partnership, association or other organization in
which one or more of the directors or officers of the corporation
are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the
director or officer of the corporation is present at or partici-
pates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely
because his, her or their votes are counted for such purpose, if:
(i) The material facts as to the relationship or
interest of such person and as to the contract or transac-
tion are disclosed or are known to the Board of Directors or
the committee thereof, and the Board of Directors or commit-
tee in good faith authorizes the contract or transaction by
a vote sufficient for such purpose without counting the vote
of the interested director or directors of the
<PAGE> 12
corporation; provided, however, that common or interested
directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or committee;
or
(ii) The material facts as to the relationship or
interest of such person and as to the contract or transac-
tion are disclosed or are known to the stockholders of the
corporation entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote
of the stockholders of the corporation; or
(iii) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof or
the stockholders of the corporation.
ARTICLE IX - Seal
1. Seal. The corporate seal of the corporation shall
consist of two concentric circles, between which is the name of
the corporation, and in the center shall be inscribed the year of
its incorporation and the words, "Corporate Seal, Delaware."
ARTICLE X - Indemnification
1. Indemnification in Third Party Actions. The corpora-
tion shall indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such
person is or was a director, officer or employee of the
corporation, or is or was serving at the request of the corpora-
tion as a director, officer, employee or agent of another corpo-
ration, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against
all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties, and amounts
paid or to be paid in settlement) actually and reasonably in
curred by such person in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful, except that no indemnification shall be
made in respect of any proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was autho-
rized by the Board of Directors of the corporation. The termina-
tion of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the
person did
<PAGE> 13
not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
2. Indemnification in an Action by or in the Right of the
Corporation. The corporation shall indemnify each person who was
or is a party or is threatened to be made a party to any threat
ened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of
the fact that such person is or was a director, officer or
employee of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense
or settlement of such action or suit if the person acted in good
faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except
that no indemnification shall be made in respect of (a) any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem
proper, or (b) any proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized by
the Board of Directors of the corporation.
3. Indemnification as of Right. To the extent that a
director, officer or employee of the corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Sections l and 2 of this
Article X, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person
in connection therewith.
4. Determination of Indemnification. Any indemnification
under Sections 1 and 2 of this Article X (unless ordered by a
court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the
director, officer or employee is proper in the circumstances
because the person has met the applicable standard of conduct set
forth in such Sections l and 2. Such determination shall be
made, with respect to a person who is a director or officer at
the time of such determination, (a) by a majority vote of the
directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (b) by a committee of such
directors designated by majority vote of such directors, even
though less than a quorum, or (c) if there are no such directors,
or if such directors so direct, by independent legal counsel in a
written opinion, or (d) by the stockholders.
<PAGE> 14
5. Advance for Expenses. Expenses (including attorneys'
fees) incurred in defending any civil, criminal, administrative
or investigative action, suit or proceeding shall be paid by the
corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer or employee to repay such amount if it
shall ultimately be determined that he or she is not entitled to
be indemnified by the corporation as authorized in this Article
X, except that no advancement of expenses shall be made in
respect of any proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized by
the Board of Directors of the corporation.
6. General Provisions.
(a) All expenses (including attorneys' fees) incurred in
defending any civil, criminal, administrative or investigative
action, suit or proceeding which are advanced by the corporation
under Section 5 of this Article X shall be repaid (i) in case the
person receiving such advance is ultimately found, under the
procedure set forth in this Article X, not to be entitled to
indemnification, or (ii) where indemnification is granted, to the
extent that the expenses so advanced by the corporation exceed
the indemnification to which such person is entitled.
(b) The corporation may indemnify each person, though he or
she is not or was not a director, officer or employee of the
corporation, who served at the request of the corporation on a
committee created by the Board of Directors to consider and
report to it in respect of any matter. Any such indemnification
may be made under the preceding provisions of this Article X and
shall be subject to the limitations thereof except that (as
indicated) any such committee member need not be nor have been a
director, officer or employee of the corporation.
(c) The provisions of this Article X shall be applicable to
appeals. References to "serving at the request of the corpora-
tion" shall include without limitation any service as a director,
officer or employee of the corporation which imposes duties on,
or involves services by, such director, officer or employee with
respect to an employee benefit plan, its participants or
beneficiaries. A person who acted in good faith and in a manner
he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best
interests of the corporation."
(d) If any section, subsection, paragraph, sentence,
clause, phrase or word in this Article X shall be adjudicated
invalid or unenforceable, such adjudication shall not be deemed
to invalidate or otherwise affect any other section, subsection,
paragraph, sentence, clause, phrase or word of this Article.
(e) The indemnification and advancement of expenses provid
ed by, or granted pursuant to, this Article X shall not be deemed
exclusive of any other rights to which those seeking indemnifica-
tion or advancement of expenses may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors or
<PAGE> 15
otherwise, both as to action in their official capacities and as
to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE XI - Amendments
1. Amendments. Alterations or amendments of these By-Laws
may be made by the stockholders at any annual or special meeting
if the notice of such meeting contains a statement of the
proposed alteration or amendment, or by the Board of Directors at
any annual, regular or special meeting, provided notice of such
alteration or amendment has been given to each director in
writing at least five (5) days prior to said meeting or has been
waived by all the directors.
EXHIBIT 10.43
REYNOLDS METALS COMPANY
LONG-TERM PERFORMANCE SHARE PLAN
Effective January 1, 1998
<PAGE> 1
ARTICLE I
PURPOSE OF THE PLAN
The purpose of the Plan is to assist the Company in
attracting and retaining key employees by providing long-term
performance-based incentives.
ARTICLE II
DEFINITIONS
2.01 "Additional Income" shall have the meaning
specified in Section 5.01(c).
2.02 "Beneficiary" shall mean the individual or
entity designated by the Participant to receive any amounts
allocated to the Participant that remain in the Plan upon the
death of the Participant. If no such designation is made, or if
the designated individual predeceases the Participant or the
entity no longer exists, then the Beneficiary shall be the
Participant's estate.
2.03 "Board" shall mean the Board of Directors of
the Company.
2.04 "Company" shall mean Reynolds Metals Company,
a Delaware corporation.
2.05 "Company Stock" shall mean the Common Stock of
the Company, without par value.
2.06 "Effective Date" shall mean January 1, 1998.
<PAGE> 2
2.07 "Election Period" shall mean for each
Performance Cycle the September of the third year of the
Performance Cycle; provided, however, that for the initial two-
year Performance Cycle that begins January 1, 1998, and ends
December 31, 1999, the Election Period shall mean September of
1998; and further provided that the Plan Committee in its
discretion may designate a different period for any Performance
Cycle.
2.08 "Participant" shall mean each officer and
other key employee of the Company and its subsidiaries and
affiliates who is designated by the Plan Committee to receive a
grant for a Performance Cycle.
2.09 "Performance Cycle" shall mean initially the
cycle of two full calendar years beginning January 1, 1998, and
ending December 31, 1999, and otherwise shall mean a cycle of
four full calendar years. The initial four-year Performance
Cycle shall begin January 1, 1998, and end December 31, 2001. A
new four-year Performance Cycle shall begin January 1, 2000, and
every subsequent second January 1.
2.10 "Performance Share Units" shall mean the award
units granted by the Plan Committee for a Performance Cycle as
described in Article III.
2.11 "Phantom Stock" shall mean shares of Company
Stock credited to a Participant's account in accordance with this
Plan.
<PAGE> 3
2.12 "Plan" shall mean this Reynolds Metals Company
Long-Term Performance Share Plan, as amended from time to time.
2.13 "Plan Committee" shall mean the committee of
nonemployee directors appointed by the Board to administer the
Plan.
2.14 "Termination" or "Terminated" shall mean a
Participant's termination of employment with the Company and any
subsidiary or affiliate of the Company.
ARTICLE III
GRANTS OF PERFORMANCE SHARE UNITS
As soon as feasible after the beginning of each
Performance Cycle, the Plan Committee shall (1) designate the
officers and other key employees of the Company and its
subsidiaries and affiliates who will participate in the Plan for
the Performance Cycle, (2) determine the Performance Share Units
to be granted to each such Participant, and (3) establish the
performance goal or goals that must be reached by the end of the
Performance Cycle in order for Participants to receive an award
from the Plan at the end of the Performance Cycle.
<PAGE> 4
ARTICLE IV
CALCULATION AND PAYMENT OF AWARDS
4.01 (a) After the end of each Performance Cycle,
each Participant shall be entitled to receive an award for that
Performance Cycle if and to the extent the performance goals
established in accordance with Article III for that Performance
Cycle have been met. Except as otherwise specified herein, half
of the award shall be payable in cash to the Participant (the
"Cash Portion") and half of the award shall be in the form of
shares of Phantom Stock credited to the Participant's account
(the "Phantom Stock Portion").
(b) A Participant whose employment is Terminated
before the last day of the Performance Cycle shall not be
entitled to any award for the Performance Cycle unless the
Participant's employment was Terminated on account of (i)
disability or immediate retirement, in either case for purposes
of the Reynolds Metals Company New Retirement Program for
Salaried Employees, (ii) death, (iii) a reduction in force for
purposes of the Company's Termination Allowance Policy, or (iv)
such other reason as the Plan Committee may determine. A
Participant who terminates for one of the specified reasons shall
be entitled to a pro rata portion of any award that would
otherwise be due the Terminated Participant after the end of the
Performance Cycle. This pro rata portion shall be determined by
multiplying the award that would otherwise be due the Terminated
<PAGE> 5
Participant by a fraction, the numerator of which is equal to the
number of full calendar months the Participant worked before his
or her Termination and the denominator of which is the number of
months in the Performance Cycle. Any awards made in accordance
with this Section 4.01(b) shall be distributed to the Participant
(or the Participant's Beneficiary, in case of death) as soon as
feasible after the end of the Performance Cycle; except as
otherwise provided in Section 5.04 in case of the Participant's
death, no deferral or installment payment elections made with
respect to the Performance Cycle shall apply.
4.02 The amount of the cash to be paid to a
Participant for a Performance Cycle with respect to the Cash
Portion of an award shall be determined by multiplying the number
of Performance Share Units payable in cash by the average closing
price of Company Stock on New York Stock Exchange Composite
Transactions for the last twenty (20) trading days of the
Performance Cycle. Except in the case of a voluntary or
mandatory deferral hereunder, the Cash Portion shall be paid out
to the Participant as soon as feasible after the end of the
Performance Cycle.
4.03 (a) The number of shares of Phantom Stock to
be initially credited to a Participant's account for a
Performance Cycle with respect to the Phantom Stock Portion of an
award shall be equal to the number of Performance Share Units
payable in Phantom Stock for the Performance Cycle.
<PAGE> 6
(b) As of each date when cash dividends are paid
on Company Stock, each Participant's Phantom Stock account under
the Plan shall be adjusted to reflect dividend equivalents
computed in accordance with this Section 4.03(b). The dollar
amount of the dividend equivalent for each Participant shall
equal the cash dividends that would have been paid on the number
of shares of Phantom Stock credited to the Participant's account
as of the dividend record date if that number of shares of
Phantom Stock had actually been issued and outstanding on the
record date. This dividend equivalent for each Participant shall
be converted into a number representing additional shares of
Phantom Stock by dividing (i) the total dollar amount of the
Participant's dividend equivalent by (ii) the arithmetic average
of the high and low sales prices of Company Stock as reported on
New York Stock Exchange Composite Transactions on the date when
the cash dividends are paid. The Participant's account under the
Plan shall then be credited with the determined number of shares
of Phantom Stock, including fractional shares calculated to three
decimal places.
(c) If any stock dividend is declared upon Company
Stock, or if there is any stock split, stock distribution, or
other recapitalization of the Company with respect to its Company
Stock, resulting in a split-up or combination or exchange of
shares, or if any special distribution is made to holders of
Company Stock, the aggregate number and
<PAGE> 7
kind of shares of Phantom
Stock credited to the account of a Participant under the Plan
shall be proportionately adjusted as the Plan Committee may deem
appropriate.
(d) No Participant shall receive any distribution
relating to Phantom Stock while the Participant is still employed
by the Company or any of its subsidiaries or affiliates. If a
Participant's employment is Terminated during a calendar year,
the Participant's Phantom Stock account shall be maintained under
the Plan through January 15 of the following year. As of such
January 15, the total number of shares of Phantom Stock credited
to the Participant's account (representing both awards and
dividend equivalents) shall be computed and a distribution made
to the Participant as soon after January 15 as administratively
feasible. Distributions shall be in shares of Company Stock,
except that the cash value of any fractional share shall be paid
in cash. The cash value of the fractional share shall be based
on the arithmetic average of the high and low sales prices of
Company Stock as reported on New York Stock Exchange Composite
Transactions on January 15 (or on the preceding business day if
the New York Stock Exchange is not open on January 15). Unless
the Participant has elected to receive the distribution in
installments in accordance with Section 5.03, any distribution
relating to Phantom Stock shall be made in a single lump sum.
<PAGE> 8
ARTICLE V
DEFERRAL OF PAYMENTS
5.01 (a) Each Participant who has not Terminated
employment shall have the right to elect to defer the receipt of
up to 85% of the Cash Portion payable with respect to a
Performance Cycle in accordance with Article IV. At the election
of the Participant, the amount deferred may be expressed (i) as a
percentage of the Cash Portion payable under Article IV, in
multiples of 5%, (ii) as a dollar amount, in multiples of $100,
or (iii) as either a percentage of the Cash Portion or a dollar
amount, in each case, in excess of a floor amount specified by
the Participant. In no case, however, may the total amount
deferred be less than $2,000 nor more than 85% of the
Participant's Cash Portion for the Performance Cycle. Any
deferral election shall be made by the Participant during the
Election Period for the Performance Cycle to which the election
relates; once made, the election shall be irrevocable.
(b) Deferred amounts shall be increased by an
amount of additional income (hereinafter referred to as
"Additional Income") computed at a specified rate and compounded
Annually on December 31st from the date the amounts would have
been paid in accordance with Section 4.02 through the December
31st coincident with or next following the Participant's
Termination. The specified rate for Cash Portions with respect
to a Performance Cycle shall be equal to the rate established
<PAGE> 9
under the Reynolds Metals Company New Management Incentive
Deferral Plan for amounts deferred under that plan with respect
to the last year of the Performance Cycle.
(c) Unless the Participant has elected to receive
installment payments in accordance with Section 5.03, any amounts
deferred in accordance with this Section 5.01, including any
applicable Additional Income, shall be paid out to the
Participant as soon as feasible in the January following the
calendar year in which the Participant's employment Terminates.
5.02 The provisions of this Section 5.02 shall
apply only to a Participant who, at the time an election to defer
is made in accordance with Section 5.01, is subject to the
Company's Stock Ownership Guidelines for Officers (an "Officer").
Any such Officer electing to defer payment of a Cash Portion may
also elect to have a specified part or all of such deferred
amount subject to Phantom Stock Additional Income (as provided
herein) instead of having Additional Income computed at a
specified rate as set forth in Section 5.01(b). Phantom Stock
Additional Income shall be computed in accordance with the
following rules:
(a) As of the date when the Cash Portion would
have been paid but for the deferral election, each Officer
who elects to receive Phantom Stock Additional Income shall
have his or her account under this Plan credited with a
number of shares of Phantom Stock, equal to the number of
<PAGE> 10
Performance Share Units in the portion of the Cash Portion
to which the deferral election relates.
(b) As of each date when cash dividends are paid
on Company Stock, each Officer who elected to receive
Phantom Stock Additional Income shall also have the
appropriate portion of his or her account under this Plan
adjusted to reflect dividend equivalents as described in
Section 4.03(b).
(c) If any stock dividend is declared upon Company
Stock, or if there is any stock split, stock distribution,
or other recapitalization of the Company with respect to its
Company Stock, resulting in a split-up or combination or
exchange of shares, or if any special distribution is made
to holders of Company Stock, the aggregate number and kind
of shares of Phantom Stock credited to the appropriate
portion of the account of an Officer under the Plan shall be
proportionately adjusted as the Plan Committee may deem
appropriate.
(d) The election of Phantom Stock Additional
Income must be made at the same time as the election to
defer the Cash Portion in accordance with Section 5.01.
Once made, the election of Phantom Stock Additional Income
shall be irrevocable as to the Performance Cycle to which
such election applies.
<PAGE> 11
(e) Distribution of any amounts to which this
Section 5.02 applies shall be in shares of Company Stock and
shall be subject to the provisions of Section 4.03(d).
5.03 (a) All of a Participant's deferred amounts,
including any Phantom Stock Portion and any Additional Income and
dividend equivalents, shall be distributed to the Participant in
the January following the calendar year in which the
Participant's employment Terminates unless the Participant has
elected with respect to a Performance Cycle to receive the
distribution in annual installments over a period of five (5)
years. An election to receive installment payments shall be made
by the Participant during the Election Period for the Performance
Cycle to which the election relates, and if the installment
payment election relates to a Cash Portion, the installment
payment election shall be made at the same time as the election
to defer the Cash Portion. Once made, the installment payment
election shall be irrevocable.
(b) Annual installments of amounts paid in cash
shall be in equal amounts, shall consist of the deferred amounts
and the Additional Income applicable thereto, and shall be paid
as soon as administratively feasible at the beginning of each
calendar year following the year in which the Participant
Terminates employment. If the Participant has elected to receive
distributions of Phantom Stock (whether arising from the
Participant's Phantom Stock Portion, a voluntary deferral, or a
<PAGE> 12
mandatory deferral, and including in any event applicable
dividend equivalents) in five (5) annual installments, the
initial installment shall be distributed as soon as
administratively feasible after January 15 of the year following
the year of the Participant's Termination of employment and shall
equal one-fifth of the number of shares of Phantom Stock subject
to installment payments. The subsequent four annual installments
shall be paid as soon as administratively feasible after the next
four January 15 dates and shall equal in each case (i) the
remaining number of shares of Phantom Stock subject to
installment payments divided by (ii) the number of installment
payments remaining, including the installment about to be paid.
5.04 Any Participant may also irrevocably elect
during an Election Period that if the Participant dies before
receiving full distribution of all amounts for the Performance
Cycle to which the election relates, distribution to the
Beneficiary of any amounts remaining after the Participant's
death shall be made in five (5) annual installments. Such
installments shall be computed and distributed as described in
Section 5.03(b).
5.05 Anything herein to the contrary
notwithstanding, the Plan Committee may direct that all unpaid
deferred amounts, including any Phantom Stock Portion and any
applicable Additional Income and dividend equivalents, be
accelerated and distributed in a lump sum if it finds, in its
<PAGE> 13
sole discretion, that a major challenge to the control of the
Company exists or if, in conjunction with the termination of the
Plan, the Plan Committee finds, in its sole discretion, that
other extraordinary circumstances make such acceleration of
payments in the best interest of the Company; provided, however,
that the Plan Committee shall not accelerate any payment with
respect to Phantom Stock unless the Plan Committee determines
that such accelerated payment will be exempt from short-swing
profit liability pursuant to the rules promulgated under Section
16(b) of the Securities Exchange Act of 1934, as amended.
5.06 (a) The provisions of this Section 5.06 shall
apply each calendar year to each Participant who is a Top
Executive (as defined below) at the time the Cash Portion of an
award is to be paid under the Plan in that year. To the extent a
Top Executive's Estimated Annual Compensation (as defined below)
would exceed One Million Dollars ($1,000,000) for the year,
payment of any Cash Portion shall be automatically deferred in
accordance with this Section 5.06 to the extent necessary to
bring the top Executive's Estimated Annual Compensation below One
Million Dollars ($1,000,000). If necessary, all of a
Participant's Cash Portion shall be deferred, in which case any
applicable payroll taxes shall be deducted and paid from such Top
Executive's regular salary checks unless the Top Executive
reimburses the Company separately for such payroll taxes.
<PAGE> 14
(b) Any mandatory deferral in accordance with this
Section 5.06 shall be subject to the following terms and
conditions:
(i) Except as otherwise provided in
subsection (ii) below, amounts deferred under this Section
5.06 shall earn Additional Income as described in Section
5.01(b). All amounts shall be distributed to the Top
Executive in a single lump sum in the January following the
calendar year in which the Top Executive's employment
Terminates unless the Top Executive has elected to have any
amounts deferred in accordance with this Section 5.06 paid
in annual installments over a period of five (5) years as
described in, and in accordance with, Section 5.03.
(ii) A Participant who anticipates being a Top
Executive subject to a mandatory deferral in accordance with
this Section 5.06 may elect to have any amounts subject to a
mandatory deferral earn Phantom Stock Additional Income in
accordance with the provisions of Section 5.02.
(iii) A Participant who anticipates being a Top
Executive subject to a mandatory deferral in accordance with
this Section 5.06 may elect in accordance with Section 5.04
that in case of such Top Executive's death before all
amounts subject to the mandatory deferral are distributed,
distribution to the Beneficiary of any amounts remaining
after the Participant's death shall be made in five (5)
<PAGE> 15
annual installments. Such installments shall be computed
and distributed as described in Section 5.03(b).
(iv) Any elections made under subsections (i),
(ii) and (iii) above shall be made at the same time, which
time shall be no later than the December 31st of the last
year of the Performance Cycle to which the Cash Portion
relates. Once made, any such election shall be irrevocable.
(v) Anything in this Section 5.06(b) to the
contrary notwithstanding, if and to the extent a Participant
who is a Top Executive has already made a deferral election,
a Phantom Stock Additional Income election, or an
installment payment election with respect to the Cash
Portion of an award affected by this Section 5.06, the prior
election(s) shall automatically apply to all amounts subject
to the mandatory deferral provisions of this Section 5.06,
and the Top Executive shall not be permitted to make any
different or additional elections under subsections (i),
(ii) and/or (iii) above.
(c) For purposes of this Section 5.06, a Top
Executive's "Estimated Annual Compensation" for a given year
shall be equal to (i) the Top Executive's anticipated salary for
the year as approved by the Compensation Committee in January of
the year (taking into account any approved increase to become
effective during the year), less any amounts the Top Executive
has voluntarily elected to defer under the Reynolds Metals
<PAGE> 16
Company Salary Deferral Plan for Executives for the year, plus
(ii) the anticipated incentive compensation to be paid to the Top
Executive under the Reynolds Metals Company Supplemental
Incentive Plan, less any amounts the Top Executive has
voluntarily elected to defer under the Reynolds Metals Company
New Management Incentive Deferral Plan, plus (iii) the amount of
any previously deferred incentive compensation payable to the Top
Executive during the year that will count as compensation in the
year for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended, plus (iv) the amount of miscellaneous or
imputed income (for items such as the imputed value of life
insurance and the use of a car or plane) that the Top Executive
had for the immediately preceding calendar year.
(d) "Top Executive" shall mean for any calendar
year any individual who may reasonably be expected to be a
"covered employee" for the year for purposes of Section 162(m) of
the Internal Revenue Code of 1986, as amended.
ARTICLE VI
ADMINISTRATION
The Plan Committee shall have full responsibility and
authority to interpret and administer the Plan, including the
power to promulgate rules of Plan administration, the power to
settle any disputes as to rights or benefits arising from the
Plan, the power to appoint agents and delegate its duties, and
<PAGE> 17
the power to make such decisions or take such actions as the Plan
Committee, in its sole discretion, deems necessary or advisable
to aid in the proper administration of the Plan. Actions and
determinations by the Plan Committee shall be final, binding and
conclusive for all purposes of this Plan.
ARTICLE VII
AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN
The Board may from time to time amend, suspend or
terminate the Plan, in whole or in part, except that no such
amendment, suspension or termination shall materially adversely
affect the rights of any Participant in respect of any awards
previously earned by such Participant and not yet paid.
ARTICLE VIII
FUNDING
No promises under this Plan shall be secured by any
specific assets of the Company, nor shall any assets of the
Company be designated as attributable or allocated to the
satisfaction of such promises. Benefit payments shall be made
from the Company's general assets.
<PAGE> 18
ARTICLE IX
COMPANY STOCK
Shares of Company Stock distributed under the Plan
shall be shares purchased by the Company on the open market or
shares held in the Company's treasury from time to time, or a
combination of both, as the Board may from time to time
determine.
ARTICLE X
GENERAL PROVISIONS
10.01 All elections by a Participant hereunder shall
be made in writing by the completion and delivery to the Company
of forms prescribed for such purpose within the time limits
established with respect to such election.
10.02 Neither the establishment of the Plan nor the
payment of any benefits hereunder nor any action of the Company,
including its Board, in connection therewith shall be held or
construed to confer upon any individual any legal right to remain
an officer or an employee of the Company.
10.03 No benefit under the Plan shall be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, except by will or the
laws of descent and distribution, and any attempt thereat shall
be void. No such benefit shall, prior to receipt thereof, be in
<PAGE> 19
any manner liable for or subject to the recipient's debts,
contracts, liabilities, engagements, or torts.
10.04 This Plan shall inure to the benefit of, and
be binding upon, the Company and each Participant, and upon the
successors and assigns of the Company and of each Participant.
10.05 The Company shall not be required to deliver
any fractional share of Common Stock but shall pay, in lieu
thereof, the cash value (measured as of the January 15
immediately preceding the distribution) of such fractional share
to the Participant (or the Participant's Beneficiary, if
applicable). The cash value of a fractional share shall be
computed as described in Section 4.03(d).
10.06 The Company shall either (a) deduct from the
amount of any payments hereunder all taxes required to be
withheld by applicable laws or (b) make such other arrangements
as may be necessary or appropriate to meet its withholding
obligations.
10.07 This Plan shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Virginia.
<PAGE> 20
Executed and adopted as of May 15, 1998, pursuant to
action taken by the Board of Directors of Reynolds Metals Company
at its meeting on that date.
REYNOLDS METALS COMPANY
By ___________________________
Title: Vice President,
Human Resources
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Reynolds
Metals Company Condensed Balance Sheet (Unaudited) for June 30, 1998 and
Consolidated Statement of Income (Unaudited) for the Six Months ended June 30,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 200
<SECURITIES> 0
<RECEIVABLES> 909<F1>
<ALLOWANCES> 14
<INVENTORY> 551
<CURRENT-ASSETS> 1813
<PP&E> 5873
<DEPRECIATION> 3366
<TOTAL-ASSETS> 6733
<CURRENT-LIABILITIES> 1181
<BONDS> 1465
0
0
<COMMON> 1533
<OTHER-SE> 935
<TOTAL-LIABILITY-AND-EQUITY> 6733
<SALES> 3111
<TOTAL-REVENUES> 3111
<CGS> 2526
<TOTAL-COSTS> 2526
<OTHER-EXPENSES> 440
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> (111)
<INCOME-TAX> (46)
<INCOME-CONTINUING> (65)
<DISCONTINUED> 0
<EXTRAORDINARY> (3)
<CHANGES> (23)
<NET-INCOME> (91)
<EPS-PRIMARY> (1.25)
<EPS-DILUTED> (1.25)
<FN>
<F1>This amount represents total receivables since trade receivables are not broken
out separately at interim dates, in accordance with S-X 10-01 (2).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Restated Financial Data Schedule.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 47
<SECURITIES> 0
<RECEIVABLES> 1031<F1>
<ALLOWANCES> 17
<INVENTORY> 731
<CURRENT-ASSETS> 1963
<PP&E> 6494
<DEPRECIATION> 3585
<TOTAL-ASSETS> 7173
<CURRENT-LIABILITIES> 1266
<BONDS> 1595
0
0
<COMMON> 1523
<OTHER-SE> 1093
<TOTAL-LIABILITY-AND-EQUITY> 7173
<SALES> 1532
<TOTAL-REVENUES> 1532
<CGS> 1251
<TOTAL-COSTS> 1251
<OTHER-EXPENSES> 70
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 84
<INCOME-TAX> 26
<INCOME-CONTINUING> 58
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (23)
<NET-INCOME> 35
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<FN>
<F1>This amount represents total receivables since trade receivables are not broken
out separately at interim dates, in accordance with S-X 10-01(2).
</FN>
</TABLE>
