-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ELfNltgIraInYPPeMM/hNgXhKEQFqLDe5zCydcSSzWRMElA6ozgh6CF/zHB8Q3Eb buOdqIQD1xWCw/eGyJrhpg== 0000083604-97-000004.txt : 19970327 0000083604-97-000004.hdr.sgml : 19970327 ACCESSION NUMBER: 0000083604-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970321 DATE AS OF CHANGE: 19970326 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REYNOLDS METALS CO CENTRAL INDEX KEY: 0000083604 STANDARD INDUSTRIAL CLASSIFICATION: 3334 IRS NUMBER: 540355135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01430 FILM NUMBER: 97561038 BUSINESS ADDRESS: STREET 1: 6601 W BROAD ST STREET 2: PO BOX 27003 CITY: RICHMOND STATE: VA ZIP: 23261 BUSINESS PHONE: 8042812000 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission File Number 1-1430 REYNOLDS METALS COMPANY A Delaware Corporation (IRS Employer Identification No. 54-0355135) 6601 West Broad Street, P. O. Box 27003, Richmond, Virginia 23261-7003 Telephone: (804) 281-2000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - - ------------------- ----------------------- Common Stock, no par value New York Stock Exchange Chicago Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Chicago Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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, and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of February 25, 1997: (a) the aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $3.9 billion*. (b) the Registrant had 72,901,274 shares of Common Stock outstanding and entitled to vote. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on April 16, 1997 - Part III __________________ * For this purpose, "nonaffiliates" are deemed to be persons other than directors, officers and persons owning beneficially more than five percent of the voting stock. NOTE In accordance with the Securities and Exchange Commission's requirements, we will furnish copies of the remaining exhibits listed below upon payment of a fee of 10 cents per page. Please remit the proper amount with your request to: Secretary Reynolds Metals Company P.O. Box 27003 Richmond, Virginia 23261-7003 Exhibits have the following number of pages: EXHIBIT 3.1 87 EXHIBIT 10.14 2 EXHIBIT 3.2 21 EXHIBIT 10.15 1 EXHIBIT 4.1 71 EXHIBIT 10.16 1 EXHIBIT 4.2 16 EXHIBIT 10.17 4 EXHIBIT 4.3 165 EXHIBIT 10.18 3 EXHIBIT 4.4 6 EXHIBIT 10.19 3 EXHIBIT 4.5 74 EXHIBIT 10.20 3 EXHIBIT 4.6 2 EXHIBIT 10.21 3 EXHIBIT 4.7 2 EXHIBIT 10.22 2 EXHIBIT 4.8 2 EXHIBIT 10.23 1 EXHIBIT 4.9 2 EXHIBIT 10.24 10 EXHIBIT 4.10 10 EXHIBIT 10.25 10 EXHIBIT 4.11 14 EXHIBIT 10.26 13 EXHIBIT 4.12 9 EXHIBIT 10.27 6 EXHIBIT 4.13 36 EXHIBIT 10.28 2 EXHIBIT 4.14 24 EXHIBIT 10.29 2 EXHIBIT 4.15 18 EXHIBIT 10.30 1 EXHIBIT 4.16 24 EXHIBIT 10.31 3 EXHIBIT 4.17 89 EXHIBIT 10.32 3 EXHIBIT 4.18 7 EXHIBIT 10.33 2 EXHIBIT 4.19 12 EXHIBIT 10.34 10 EXHIBIT 10.1 21 EXHIBIT 10.35 10 EXHIBIT 10.2 16 EXHIBIT 10.35 10 EXHIBIT 10.3 19 EXHIBIT 10.37 10 EXHIBIT 10.4 7 EXHIBIT 10.38 1 EXHIBIT 10.5 2 EXHIBIT 10.39 2 EXHIBIT 10.6 7 EXHIBIT 10.40 5 EXHIBIT 10.7 6 EXHIBIT 10.41 9 EXHIBIT 10.8 10 EXHIBIT 10.42 1 EXHIBIT 10.9 14 EXHIBIT 10.43 1 EXHIBIT 10.10 7 EXHIBIT 21 1 EXHIBIT 10.11 7 EXHIBIT 23 1 EXHIBIT 10.12 12 EXHIBIT 24 31 EXHIBIT 10.13 13 EXHIBIT 27 1 TABLE OF CONTENTS PART I ITEM PAGE 1. BUSINESS................................................ 1 GENERAL............................................... 1 COMPETITION........................................... 5 RAW MATERIALS......................................... 5 ALUMINUM PRODUCTION................................... 6 FABRICATING OPERATIONS................................ 7 ENERGY................................................ 9 ENVIRONMENTAL COMPLIANCE.............................. 10 RESEARCH AND DEVELOPMENT.............................. 11 EMPLOYEES............................................. 12 2. PROPERTIES.............................................. 15 3. LEGAL PROCEEDINGS....................................... 18 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..... 18 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.................... 19 PART II 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................... 21 6. SELECTED FINANCIAL DATA................................. 22 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................... 23 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............. 35 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................. 56 PART III 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...... 56 11. EXECUTIVE COMPENSATION.................................. 56 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................... 56 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... 56 PART IV 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............................................. 57 PART I Item 1. BUSINESS Reynolds Metals Company (the "Registrant") was incorporated in 1928 under the laws of the State of Delaware. In this report, "Reynolds" and "Company" each means the Registrant and its consolidated subsidiaries unless otherwise indicated. GENERAL Nature of Operations - - -------------------- Reynolds is a leading global aluminum and packaging company. Reynolds serves global markets as a supplier and recycler of aluminum and other products, with its core business being as a vertically integrated producer of a wide variety of value-added aluminum products. Reynolds produces alumina, carbon products and primary and reclaimed aluminum, principally to supply the needs of its fabricating operations. These fabricating operations produce aluminum foil, sheet, plate, beverage cans, extruded products (including heat exchanger tubing, drive shafts, bumpers and window systems), flexible packaging and wheels, among other items. Reynolds also produces a broad range of plastic products, including film, bags, containers and lids, for consumer products, foodservice and packaging uses. The Company markets an extensive line of consumer products under the Reynolds brand name, including the well-known Reynolds Wrap aluminum foil. Reynolds' largest market for its products is the packaging and containers market, which includes consumer products. The Company also is engaged in the distribution of aluminum and stainless steel and other non-aluminum industrial products to a variety of markets. To better describe the nature of its operations, Reynolds has separated its vertically integrated operations into two groups -- (1) Finished Products and Other Sales and (2) Production and Processing. Finished Products and Other Sales includes: - - - the manufacture and distribution of various finished aluminum products, such as beverage cans; containers; flexible packaging products; foodservice and household foils (including Reynolds Wrap); laminated and printed foil; and aluminum building products; - - - the distribution of aluminum and stainless steel and other non-aluminum industrial products; and - - - the manufacture and sale of plastic bags and food wraps (for example, Reynolds Plastic Wrap, Reynolds Crystal Color Plastic Wrap, Reynolds Oven Bags and Presto disposer bags); plastic lidding and container products; plastic film packaging; Reynolds Freezer Paper; Reynolds baking cups; Reynolds Cut-Rite wax paper and wax paper sandwich bags; composite building products; printing cylinders; plates and engravings for the rotogravure, flexographic and lithographic printing industries; and flexographic printed film and film laminations. Production and Processing includes: - - - the refining of bauxite into alumina, calcination of petroleum coke and production of prebaked carbon anodes (all of such activities being vertically integrated with aluminum production and processing plants); - - - the production and sale of primary and reclaimed aluminum; - - - the production and sale of a wide range of semifinished aluminum mill products, including flat rolled products (e.g., aluminum can sheet and machined plate); extruded and drawn products (such as heat exchanger tubing, drive shafts and bumpers); cast products (wheels, for example); and other products; and - - - the sale of non-aluminum products, technology and various licensing, engineering and other services related to the production and processing of aluminum. Recent Developments - - ------------------- In April 1996, Reynolds acquired an interest in an operation in China that produces aluminum foil and extrusions. The operation, Bohai Aluminium Industries, Ltd., runs a fabricating facility 180 miles east of Beijing. The facility manufactures aluminum foil primarily for the food, pharmaceutical and tobacco industries, and extrusions for the automotive and construction products markets. In June 1996, Reynolds announced plans to build a $34 million facility in Lebanon, Virginia to manufacture aluminum wheels. The new facility, Reynolds' second U.S. wheel plant, features a manufacturing process that combines Reynolds' computer- controlled, flow-formed casting technology with forging to produce lightweight wheels with added styling flexibility. The Company expects to start production at the 55,000-square-foot facility in the second quarter of 1997. Reynolds closed its aluminum beverage can manufacturing plant in Houston, Texas in December 1996. Continued operations at the Houston plant would have been uneconomical because of its high costs, lack of a local customer base and modernizations and productivity improvements at other Reynolds facilities. In February 1997, Reynolds and Philip Environmental, Inc. announced they have signed a letter of intent for the purchase by Philip of Reynolds' aluminum reclamation plant in Chesterfield County, Virginia. The plant is a secondary recycling plant that processes scrap aluminum into a deoxidizing agent used by the steel industry. The transaction, which is subject to certain conditions, is expected to close in the second quarter of 1997. Reynolds announced in March 1997 that it has signed a letter of intent for the William L. Bonnell subsidiary of Tredegar Industries to buy Reynolds' aluminum extrusion plant in El Campo, Texas. The plant produces standard and specialty extrusions for various markets and performs fabricating operations required by customers. The transaction, which is subject to certain conditions, is expected to close in the second quarter of 1997. Also in March 1997, Reynolds concluded the sale of its residential construction products operations in the U.S. to AmeriMark Building Products, Inc. Included in the sale were Reynolds' construction products plants located in Ashville, Ohio, Bourbon, Indiana and Lynchburg, Virginia; the manufactured housing operations at its Eastman, Georgia, facility; a plant in Chesterfield County, Virginia that supplies aluminum building sheet to the construction industry; and 54 service centers. Reynolds has retained the Reynobond aluminum composite operations at its Eastman facility. Net Sales and Shipments; Principal Markets - - ------------------------------------------ Table 1 shows information on shipments and net sales by classes of similar products. Net sales are in millions of dollars; shipments are in thousands of metric tons. TABLE 1 Net Sales and Shipments
1996 1995 1994 ------------------------------------------------------------------ Net Net Net Shipments Sales Shipments Sales Shipments Sales --------- ----- --------- ------ --------- ----- Finished Products and Other Sales - - --------------------------------- Packaging and containers Aluminum 355 $1,850 368 $1,871 359 $1,583 Nonaluminum 603 556 529 Other aluminum 163 552 163 580 151 449 Other nonaluminum 533 528 479 ------------------------------------------------------------------ 518 3,538 531 3,535 510 3,040 ------------------------------------------------------------------ Production and Processing - - ------------------------- Primary aluminum 386 634 346 684 277 440 Sheet and plate 381 1,168 409 1,350 418 1,003 Extrusions 204 706 200 765 211 627 Other aluminum 164 481 179 494 157 391 Other nonaluminum 445 385 378 ------------------------------------------------------------------ 1,135 3,434 1,134 3,678 1,063 2,839 ------------------------------------------------------------------ Total 1,653 $6,972 1,665 $7,213 1,573 $5,879 ================================================================== Average realized price per pound: - - --------------------------------- Fabricated aluminum products $1.79 $1.84 $1.48 Primary aluminum 0.74 0.90 0.72
Financial information relating to Reynolds' operations and identifiable assets by major operating and geographic areas is presented in Note 12 to the consolidated financial statements in Item 8 of this report. Reynolds generally sells its products to producers and distributors of industrial and consumer products in various markets. Tables 2 and 3 show information on sales of products by principal geographic and business markets. TABLE 2 Principal Geographic Markets
Approximate Percentage of Sales ---------------------- 1996 1995 1994 ---- ---- ---- United States 78% 77% 77% Canada 7 7 6 Other (Principally Europe) 15 16 17 ---- ---- ---- Total 100% 100% 100%
TABLE 3 Principal Business Markets
Approximate Percentage of Sales --------------------- 1996 1995 1994 ---- ---- ---- Packaging and Containers 44% 44% 45% Automotive and Transportation 13 13 12 Building and Construction* 13 13 13 Distributors and Fabricators 12 13 13 Other 18 17 17 ---- ---- ---- Total 100% 100% 100% _______________________ *Reynolds sold its residential construction products operations in the U.S. in March 1997. See "General-Recent Developments".
COMPETITION Reynolds' principal competitors in North American and worldwide sales of products derived from primary aluminum are ten other domestic companies, a Canadian company and other foreign producers. Reynolds and many other companies produce reclaimed aluminum. In the sale of semifinished and finished products, Reynolds competes with (i) other producers of primary and reclaimed aluminum, which are also engaged in fabrication, (ii) other fabricators of aluminum and other products, (iii) other producers of plastic products and (iv) metals service center companies engaged in the distribution of aluminum and other products. Reynolds' principal competitors in Europe are seven major multinational producers and a number of smaller European producers of aluminum semifabricated products. In the aluminum beverage can business, Reynolds competes worldwide with four major producers and a number of smaller ones. Aluminum and related products compete with various products, including those made of iron, steel, copper, zinc, tin, titanium, lead, glass, wood, plastic, magnesium and paper. Plastic products compete with products made of glass, aluminum, steel, paper, wood and ceramics, among others. Competition is based upon price, quality and service. RAW MATERIALS Bauxite, the principal raw material used in the production of aluminum, is refined into alumina, which is then reduced by an electrolytic process into primary aluminum. Most of Reynolds' bauxite requirements and a portion of its alumina requirements are met from sources outside the United States. Reynolds has long-term arrangements to obtain bauxite at negotiated prices from sources in Australia, Brazil, Guinea, Guyana and Jamaica. Reynolds also has an arrangement with the U.S. government under which Reynolds has agreed to buy at a negotiated price an aggregate of approximately 600,000 long dry tons of Jamaican bauxite stored next to Reynolds' Sherwin alumina plant near Corpus Christi, Texas, for the period 1997 through 1998. Reynolds refines bauxite into alumina at its Sherwin alumina plant. Reynolds also acquires alumina from two joint ventures in which it has interests, one located in Western Australia, known as the Worsley Joint Venture ("Worsley"), and the other located in Stade, Germany, known as Aluminium Oxid Stade ("Stade"). See Table 4 under this Item and the discussion of Worsley under "Australia". In addition, Reynolds has a long-term third-party arrangement to obtain Australian alumina at a negotiated price and another third-party arrangement under which it will buy approximately 120,000 metric tons of alumina at a negotiated price through 1998. The Company adjusts purchases of bauxite and production of alumina from time to time in response to changes in demand for primary aluminum and other factors. Reynolds has reduced production at its Sherwin plant in connection with the curtailment of operations at its U.S. primary aluminum production plants. See "Aluminum Production". Reynolds restarted the idle alumina capacity at the Sherwin plant late in 1995 due to strong demand in the alumina market, but again temporarily curtailed 15% of the plant's capacity in the third quarter of 1996 due to deteriorating market conditions. Australia Worsley has a rated capacity of 1,700,000 metric tons of alumina per year (expandable to 3,200,000 metric tons per year). Worsley has proven bauxite reserves sufficient to operate the alumina plant at its rated capacity (taking into account future expansions to increase rated capacity to up to 3,200,000 metric tons per year) for at least the next 35 years. The joint venture has no specified termination date. Australia -- continued Reynolds has a long-term purchase arrangement under which it may buy from a third party an aggregate of approximately 18,800,000 dry metric tons of Australian bauxite through 2021. Reynolds has a long-term purchase arrangement under which it will buy from a third party an aggregate of approximately 480,000 metric tons of Australian alumina through 2000. Brazil Reynolds and various other companies are participants in the Trombetas bauxite mining project in Brazil. Reynolds has a 5% equity interest in the project and has agreed to buy an aggregate of approximately 1,000,000 dry metric tons of Brazilian bauxite from the project for the period 1997 through 1999. Reynolds also maintains an interest in other, undeveloped bauxite deposits in Brazil. Guinea Reynolds owns a 6% interest in Halco (Mining), Inc. ("Halco"). Halco owns 51% and the Guinean government owns 49% of Compagnie des Bauxites de Guinee ("CBG"), which has the exclusive right through 2038 to develop and mine bauxite in a 10,000 square-mile area in northwestern Guinea. Reynolds has a bauxite purchase contract with CBG which will provide Reynolds with an aggregate of approximately 7,550,000 dry metric tons of Guinean bauxite for the period 1997 through 2011. Guyana Reynolds and the Guyanese government each owns a 50% interest in a bauxite mining project in the Berbice region of Guyana. Reynolds has a bauxite purchase contract running through 1998 under which it will buy approximately 1,200,000 dry metric tons of Guyanese bauxite from the project in 1997. The parties will agree upon quantities to be purchased in 1998 at the beginning of the contract year. Jamaica Reynolds has a purchase arrangement under which it will buy from a third party an aggregate of up to 9,000,000 dry metric tons of Jamaican bauxite for the period 1997 through 2001. Reynolds' present sources of bauxite and alumina are more than adequate to meet the forecasted requirements of its primary aluminum production operations for the foreseeable future. To utilize excess alumina capacity, Reynolds enters into third-party sales arrangements. Reynolds also enters into arrangements to sell bauxite in excess of its needs to third parties. Other materials used in making aluminum are either purchased from others or supplied from Reynolds' carbon products plants in Baton Rouge and Lake Charles, Louisiana. ALUMINUM PRODUCTION Reynolds owns and operates three primary aluminum production plants in the United States and one located at Baie Comeau, Quebec, Canada. Reynolds is also entitled to a share of the primary aluminum produced at three joint ventures in which it participates, one located in Quebec, Canada, known as the Becancour joint venture ("Becancour"), one located in Hamburg, Germany, known as Hamburger Aluminium-Werk GmbH ("Hamburg"), and the third in Ghana, Africa, known as Volta Aluminium Company Limited ("Ghana"). See Table 5 (and related notes) under this Item for information on these primary aluminum production plants. Reynolds also buys primary aluminum on the open market. Production at the primary aluminum plants listed in Table 5 can vary due to a number of factors, including changes in worldwide supply and demand. Due to the worldwide aluminum supply-demand imbalance, Reynolds has idled a total of 209,000 metric tons, or 19%, of its 1,094,000 metric tons of primary aluminum production capacity. Reynolds temporarily shut down 88,000 metric tons of primary aluminum production capacity at its Massena, New York (41,000 metric tons) and Longview, Washington (47,000 metric tons) plants, effective in the fourth quarter of 1993, and its Troutdale, Oregon plant, with a capacity of 121,000 metric tons, has been idle since 1991. At December 31, 1996, the U.S. plants listed in Table 5 were operating collectively at a rate of 53% of capacity; Ghana (in which Reynolds has a 10% equity interest), where production has been curtailed by drought (see "Energy") since September 1994, was operating at 70% of capacity; and all other plants listed in Table 5 were operating at full capacity. See Table 6 under this Item. In order to balance its alumina supply system, Reynolds has temporarily reduced production at its Sherwin alumina plant in Texas in connection with the curtailments. See "Raw Materials". Reynolds has an 8% equity interest in C.V.G. Aluminio del Caroni, S.A., which produces primary aluminum in Venezuela. Reynolds has agreed to acquire a 10% equity interest in the Aluminum Smelter Company of Nigeria (ALSCON), with the Nigerian government and private interests holding the remaining equity. As part of the arrangement, Reynolds will buy at market-related prices 140,000 metric tons of primary aluminum annually from a 180,000 metric ton smelter ALSCON is building in Nigeria. Reynolds produces reclaimed aluminum from aluminum scrap at its facilities located in Bellwood, Virginia and Sheffield, Alabama, and at a facility in which it has a 99.8% equity interest located in Isernia, Italy. See Table 6 under this Item. Reynolds obtains scrap for the U.S. facilities through its nationwide recycling network, other scrap purchases and its manufacturing operations. Scrap for the Italian facility is obtained through scrap purchases. In 1996, Reynolds obtained approximately 308,010 metric tons of recycled aluminum from its recycling network and other scrap purchases. In response to a regulation proposed by the U.S. Environmental Protection Agency (the "EPA") that would require treatment of spent potliner to reduce its hazardous properties, Reynolds built a new facility in Arkansas to convert spent potliner from Reynolds' and other producers' North American aluminum smelting operations into an environmentally safe material with potential for recycling. The facility began operations in 1993 and has the capacity to treat an estimated 120,000 short tons of spent potliner annually. The EPA has delayed implementing a final regulation requiring treatment of spent potliner pending its resolution of questions concerning the effectiveness of the process Reynolds uses at the facility. Reynolds is currently developing process modifications and analytical procedures that are intended to address EPA's concerns. The facility currently is operating at 50% of capacity. FABRICATING OPERATIONS Reynolds' semifinished and finished aluminum products and non- aluminum products are produced at numerous domestic and foreign plants wholly or partly owned by Reynolds. These plants are included in Table 7 under Item 2 of this report. The annual capacity of these plants depends upon the variety and type of products manufactured. With a view to better serving its principal business markets, Reynolds has over the past three years continued to upgrade and modernize its manufacturing facilities, particularly facilities for production of such value-added products as cans, can sheet, packaging, household foil and components for the transportation industry. Specific actions the Company has taken include the following: Packaging and Containers - - ------------------------ - - - acquired in 1994 assets to expand its printing cylinder and engraving business and, in 1995, acquired Wilson Engraving Company Inc., strengthening the Company's ability to meet the needs of flexographic and lithographic printers and extending the Company's geographic reach by adding plants in Louisiana and Texas; - - - began in 1995 an expansion at its Grottoes, Virginia plastics manufacturing plant that will increase capacity by approximately 20%; - - - began in 1995 a major, multi-year capital program to build a new aluminum foil rolling mill at its Louisville, Kentucky plant that will increase annual plant capacity by about 25%; - - - acquired in 1995 a laminated foil plant in Louisville, Kentucky, strengthening the Company's ability to serve the flexible packaging needs of the tobacco and pharmaceutical industries; - - - acquired in 1995 the flexible packaging manufacturing operations of Hargro Flexible Packaging Corp. in Boyertown, Pennsylvania, establishing a major position in flexographic printing and increasing the Company's capacity to produce printed film and film laminations; - - - developed new types of, and applications for, aluminum cans; - - - acquired in 1994 Bev-Pak, Inc. and its aluminum can and end manufacturing facility in Monticello, Indiana, increasing the Company's U.S. aluminum can- and end-making capacity by approximately 15% and 20%, respectively; - - - completed in 1994 a 70% expansion of its Tampa can plant; - - - participated in a number of jointly-owned aluminum can facilities, (i) completing in 1995 an expansion of a can plant in Brazil and beginning operations at another can plant in Brazil and one in Chile; (ii) beginning operations in 1996 at can plants in Brazil (the third in that country) and Argentina and, in the same year, putting into operation two production lines at a new can end plant in Brazil and beginning construction of a fourth can plant in that country; and (iii) starting up in 1997 a can plant in Saudi Arabia; - - - substantially completed in 1996 modernization of its Torrance can plant, replacing six slow-speed production lines with three high-speed lines with a marginal increase in capacity; - - - commercialized in 1996 large-opening ends in various diameters for the enhanced and expanded use of aluminum can packaging; - - - substantially increased marketing support behind its Reynolds Wrap aluminum foil and Reynolds Plastic Wrap brands; - - - acquired in 1995 the Canadian Cut-Rite brand from Scott Paper Company, and other wax paper brands from Scott Paper Company's Canadian affiliate, Scott Paper Limited, enabling the Company to market Cut-Rite wax paper throughout Canada, a key market for Reynolds consumer products; - - - introduced in 1995 a 50-foot Heavy Duty line extension of its Reynolds Wrap brand, two printed plastic wrap products and several new Reynolds baking cup products; - - - in 1995 expanded its consumer products business in Latin America, the Middle East and the Far East; and Packaging and Containers -- continued - - ------------------------ - - - acquired in 1996 (i) selected assets of a Canadian company engaged in spooling and packaging aluminum foil products and paper products and (ii) James River Paper Company, Inc.'s retail Paper Maid and 20 Below product lines, consisting of bake cup, freezer paper and kitchen parchment businesses. Automotive and Transportation - - ----------------------------- - - - restructured in 1994 its McCook plant in Illinois, exiting common alloy sheet products and emphasizing plate and automotive sheet; - - - began production in 1994 of aluminum automotive extruded components at a new fabricating plant in Auburn, Indiana and completed an expansion of the plant in 1996; - - - commercialized in 1995, for aerospace applications, aluminum- lithium plate products manufactured at its McCook plant in Illinois and aluminum-lithium extrusions manufactured by its Extrusion Division; - - - began manufacturing in 1995 aluminum wheels at a facility in Beloit, Wisconsin, which it purchased in 1994 and modified and equipped for that purpose; - - - purchased in 1995 the aluminum extrusion operations of AMAG Austria's wholly owned subsidiary, Wexal International Ltd., in Ireland; and - - - began construction in 1996 of a facility in Lebanon, Virginia to manufacture aluminum wheels using a manufacturing process that combines Reynolds' computer-controlled, flow-formed casting technology with forging to produce lightweight wheels with added styling flexibility. Distributors and Fabricators - - ---------------------------- - - - acquired in 1994 the metals distribution business of Prime Metals, Inc., allowing the Company to broaden the geographic processing and service capabilities of its Reynolds Aluminum Supply Company metals distribution business. ENERGY Reynolds consumes substantial amounts of energy in refining bauxite into alumina and in reducing alumina to aluminum. Alumina is produced by a process requiring high temperatures at various stages. These temperatures are achieved by burning natural gas or coal at the alumina plants. Natural gas and coal are purchased under long- and short-term contracts. See Table 4 under this Item. Primary aluminum is produced from alumina by an electrolytic process requiring large amounts of electric power. Electricity required for Reynolds' primary aluminum production plants generally is purchased under long-term contracts. See Table 5 under this Item. Reynolds expects generally to meet its energy requirements for primary aluminum production for the foreseeable future under long- term contracts. Under these contracts, however, Reynolds may experience shortages of interruptible power from time to time at its New York and Ghana reduction plants. That portion of power supplied to the New York plant that is interruptible (approximately 15%) can be offset with purchased power. Production at Ghana is dependent on hydroelectric power and has from time to time been curtailed by drought. Rates for electricity charged by the Bonneville Power Administration ("BPA"), which serves the Company's Troutdale, Oregon and Longview, Washington primary aluminum production plants, are established under a new five-year contract that runs through September 2001. The new contract establishes a fixed rate which is 16% less than rates previously in effect. These rates are, however, subject to review and approval in a process being conducted by the Federal Energy Regulatory Commission ("FERC"). Third parties are challenging the contract in the U.S. Court of Appeals for the Ninth Circuit, and the contract's rates are subject to further appeal in the courts by third parties following FERC review. Should the new contract be rejected in any of these processes, the Company could renegotiate with BPA or seek service from third parties. ENVIRONMENTAL COMPLIANCE Reynolds has spent and will spend substantial capital and operating amounts relating to ongoing compliance with environmental laws. The area of environmental management, including environmental controls, continues to be in a state of scientific, technological and regulatory evolution. Consequently, it is not possible for Reynolds to predict accurately the total expenditures necessary to meet all future environmental requirements. Reynolds expects, however, to add or modify environmental control facilities at a number of its worldwide locations to meet existing and certain anticipated regulatory requirements, including regulations to be implemented under the Clean Air Act Amendments of 1990 (the "Clean Air Act"). Based on information currently available, Reynolds estimates that compliance with the Clean Air Act's hazardous air pollutant standards would require in excess of $250 million of capital expenditures (including a portion of the expenditures at Reynolds' Massena plant referred to below), primarily at Reynolds' U.S. primary aluminum production plants. The ultimate effect of the Clean Air Act on such plants and Reynolds' other operations (and the actual amount of any such capital expenditures) will depend on how the Clean Air Act is interpreted and implemented pursuant to regulations that are currently being developed and on such additional factors as the evolution of environmental control technologies and the economic viability of such operations at the time. Based on an August 1995 memorandum of understanding with the State of New York to resolve environmental issues at its Massena, New York primary aluminum production plant, Reynolds has undertaken a five-year capital spending program of an estimated $185 million to modernize the Massena plant and significantly reduce air emissions from the plant. Pursuant to the memorandum of understanding, Reynolds is accelerating certain expenditures believed necessary to achieve compliance with the Clean Air Act's proposed Maximum Achievable Control Technology standards. Capital expenditures for equipment designed for environmental control purposes were approximately $34 million in 1994, $39 million in 1995 and $24 million in 1996. The portion of such amounts expended in the United States was $15 million in 1994, $18 million in 1995 and $16 million in 1996. Reynolds estimates that annual capital expenditures for environmental control facilities will be approximately $65 million in 1997, $105 million in 1998 and $70 million in 1999. The majority of these estimated expenditures are associated with the capital spending program referred to above at Reynolds' Massena plant. Future capital expenditures for environmental control facilities cannot be predicted with accuracy for the reasons cited above; however, one may expect that environmental control standards will become increasingly stringent and that the expenditures necessary to comply with them could increase substantially. Reynolds has been identified as a potentially responsible party ("PRP") and is involved in remedial investigations and remedial actions under the Comprehensive Environmental Response, Compensation and Liability Act ("Superfund") and similar state laws regarding the past disposal of wastes at approximately 44 sites in the United States. Such statutes may impose joint and several liability for the costs of such remedial investigations and actions on the entities that arranged for disposal of the wastes, the waste transporters that selected the disposal sites and the owners and operators of such sites. Responsible parties (or any one of them) may be required to bear all of such costs regardless of fault, legality of the original disposal or ownership of the disposal site. In addition, Reynolds is investigating possible environmental contamination, which may also require remedial action, at certain of its present and former United States manufacturing facilities, including contamination by polychlorinated biphenyls ("PCBs") at its Massena, New York primary aluminum production plant which requires remediation. In 1994, the U.S. Environmental Protection Agency (the "EPA") added Reynolds' Troutdale, Oregon primary aluminum production plant to the National Priorities List of Superfund sites. The Company is cooperating with the EPA and, under a September 1995 consent order, is working with the EPA in investigating potential environmental contamination at the Troutdale site and to promote more efficient cleanup at the site. At most of the 44 sites referred to above where Reynolds has been identified as a PRP, it is one of many PRPs, and its share of the anticipated cleanup costs is expected to be small. With respect to certain other sites (not included in the foregoing number) where Reynolds has been identified as a PRP, Reynolds has either fully or substantially settled or resolved actions related to such sites at minimal cost or believes that it has no responsibility with regard to them. Reynolds has been notified that it may be a PRP at certain sites in addition to those already referred to in this paragraph. Reynolds' policy is to accrue remediation costs when it is probable that remedial efforts will be required and the related costs can be reasonably estimated. On a quarterly basis, Reynolds evaluates the status of all sites, develops or revises estimates of costs to satisfy known remediation requirements and adjusts its accruals accordingly. At December 31, 1996, the accrual for known remediation requirements was $197 million. This amount reflects management's best estimate of Reynolds' ultimate liability for such costs. Potential insurance recoveries are uncertain and therefore have not been considered. As a result of such factors as the developing nature of administrative standards promulgated under Superfund and other environmental laws; the unavailability of information regarding the condition of potential sites; the lack of standards and information for use in the apportionment of remedial responsibilities; the numerous choices and costs associated with diverse technologies that may be used in remedial actions at such sites; the availability of insurance coverage; the ability to recover indemnification or contribution from third parties; and the time periods over which eventual remediation may occur, estimated costs for future environmental compliance and remediation are necessarily imprecise. It is not possible to predict the amount or timing of future costs of environmental remediation which may subsequently be determined. Based on information currently available, it is management's opinion that such future costs are not likely to have a material adverse effect on Reynolds' competitive or financial position or its ongoing results of operations. However, such costs could be material to future quarterly or annual results of operations. See the discussion under "Environmental" in Item 7, and under Note 11 to the consolidated financial statements in Item 8, of this report regarding the Company's anticipated costs of environmental compliance. RESEARCH AND DEVELOPMENT Reynolds engages in a continuous program of basic and applied research and development. This program deals with new and improved materials, products, processes and related environmental compliance technologies. It includes development and expansion of products and markets that benefit from aluminum's light weight, strength, resistance to corrosion, ease of fabrication, high heat and electrical conductivity, recyclability and other properties. Materials and core competencies involving aluminum, ceramics, composites and various polymers and their processing, fabrication and applications are also included in the scope of Reynolds' research and development activity. Expenditures for Reynolds-sponsored research and development activities were approximately $38 million in 1994, $43 million in 1995, and $49 million in 1996. In January 1996, Reynolds completed the purchase of Brown & Williamson Tobacco Corp.'s administrative and research and development facilities in Enon, Virginia, near the Company's headquarters in Richmond, Virginia. Reynolds is consolidating four Richmond-area research and development facilities and its corporate engineering group at the complex. The new Corporate Technology Center consists of two buildings that Reynolds has modified to meet its needs for developing and testing new and improved materials, products and processes and for providing the full array of corporate engineering services, and a new building Reynolds built to house an experimental casting operation. Reynolds owns numerous patents relating to its products and processes based predominantly on its in-house research and development activities. The patents owned by Reynolds, or under which it is licensed, generally concern particular products or manufacturing techniques. Reynolds' business is not, however, materially dependent on patents. EMPLOYEES At December 31, 1996, Reynolds had approximately 29,000 employees. In the second quarter of 1996, Reynolds and the United Steelworkers of America and the Aluminum, Brick and Glass Workers International Union agreed to new six-year labor contracts. The contracts involve approximately 7,000 employees. Major provisions of the new contracts include wage increases of $1.15 an hour over the first five years (plus incremental increases in 1997 and 1999) and enhanced pension and other benefits. At the end of the fifth year, the economic provisions of the contracts will be reopened. If agreement cannot be reached, the economic provisions will be submitted to arbitration for one additional year. Reynolds and the unions also agreed to work cooperatively on customer requirements, business objectives and shareholder and union interests. In addition, the contracts contain broad, new provisions for employee safety, job security and employee participation in the work environment. In January 1997, the Aluminum, Brick and Glass Workers International Union merged with the United Steelworkers of America. Reynolds does not expect the merger to have a material impact on the Company. TABLE 4 Alumina Plants and Energy Supply
Rated Capacity(a) at Principal December 31, 1996 Energy Energy Contract Plant Metric Tons Purchased(b) Expiration Date - - ----- ----------------- ------------ --------------- Corpus Christi, Texas 1,600,000(c) Natural Gas (d) Worsley, Australia 952,000(e) Coal 2002 Stade, Germany 375,000(e) Natural Gas 2008
TABLE 5 Primary Aluminum Production Plants and Energy Supply
Rated Capacity(a) at Principal December 31, 1996 Energy Energy Contract Plant Metric Tons Purchased(b) Expiration Date - - ----- ----------------- ------------ --------------- Baie Comeau, Canada 400,000 Electricity 2011 and 2014 Longview, Washington 204,000(f) Electricity 2001 Massena, New York 123,000(f) Electricity 2013(g) Troutdale, Oregon 121,000(f) Electricity 2001 Becancour, Canada 186,000(h) Electricity 2014 Hamburg, Germany 40,000(h) Electricity 2000 Ghana, Africa 20,000(h) Electricity 1997(i)
TABLE 6 Aluminum Capacity and Production (Metric Tons)
Primary Aluminum(j) Reclaimed Aluminum(k) ------------------------------- ------------------------- Rated Rated Year Capacity(a),(f) Production(f) Capacity(a) Production - - ---- --------------- ------------- ----------- ---------- 1994 998,000 792,000 491,000 409,000 1995 1,094,000(h) 814,500 485,500 396,500 1996 1,094,000(h) 893,500 492,600 401,500
NOTES TO TABLES 4, 5, and 6. (a) Ratings are estimates at the end of the period based on designed capacity and normal operating efficiencies and do not necessarily represent maximum possible production. (b) See "Energy". (c) In order to balance its alumina supply system, Reynolds has reduced production at its Sherwin alumina plant near Corpus Christi, Texas in connection with the curtailment of operations at its U.S. primary aluminum plants. See "Aluminum Production". Reynolds restarted the idle alumina capacity at the Sherwin plant late in 1995 due to strong demand in the alumina market, but again temporarily curtailed 15% of the plant's capacity in the third quarter of 1996 due to deteriorating market conditions. (d) Approximately 25% of the plant's natural gas requirements is purchased under a two-year contract, 25% is purchased under a three-year contract and the remainder is purchased under short-term contracts. The base term of the two-year contract and three-year contract expires in October 1998 and October 1999, respectively, but will extend from month to month unless one of the parties terminates it. (e) Reynolds is entitled to 56% of the production of Worsley and 50% of the production of Stade. Capacity figures reflect Reynolds' share. (f) Reynolds curtailed 70,500 metric tons of production at its Troutdale primary aluminum plant in the third quarter of 1991 and the remainder of the plant's capacity in the fourth quarter of 1991. The Troutdale plant remains idle. Reynolds curtailed an aggregate of 88,000 metric tons of primary aluminum production capacity at its Massena (41,000 metric tons) and Longview (47,000 metric tons) plants effective in the fourth quarter of 1993. In October 1995, Reynolds acquired an additional 24.95% interest in Becancour, increasing Reynolds' share to 50%. At current production levels, the acquisition provides Reynolds an additional 93,000 metric tons of Becancour's annual primary aluminum output for a total of 186,000 metric tons, and increases its worldwide primary aluminum capacity to 1,094,000 metric tons per year. See "Aluminum Production". (g) The power contract terminates in 2013, subject to earlier termination by the supplier in 2003 if its federal license for its hydroelectric project is not renewed. (h) Reynolds is entitled to 50% of the production of Becancour, 33-1/3% of the production of Hamburg, and 10% of the production of Ghana. Capacity figures reflect Reynolds' share. Production at Ghana has been curtailed since September 1994 by drought. See "Aluminum Production" and "Energy". At December 31, 1996, Ghana was operating at 70% of capacity. (i) The power contract provides for a 20-year extension at the option of the smelter owners. (j) Production is from Reynolds' primary aluminum production operations listed in Table 5. (k) Production is from Reynolds' Bellwood, Virginia and Sheffield, Alabama reclamation facilities, and the Isernia, Italy reclamation facility, in which Reynolds has a 99.8% equity interest. Item 2. PROPERTIES For information on the location and general nature of Reynolds' principal domestic and foreign properties, see Item 1 of this report. Table 7 lists as of February 15, 1997 Reynolds' wholly owned domestic and foreign operations and shows the domestic and foreign locations of operations in which Reynolds has interests. Facilities that are under construction or for other reasons have not begun production are not listed. The properties listed are held in fee except as otherwise indicated. Properties held other than in fee are not, individually or in the aggregate, material to Reynolds' operations and the arrangements under which such properties are held are not expected to limit their use. Reynolds believes that its facilities are suitable and adequate for its operations. With the exception of the Longview, Massena, Troutdale and Ghana primary aluminum production plants, the Sherwin alumina plant and the Arkansas spent potliner treatment facility, as explained in Item 1, there is no significant surplus or idle capacity at any of Reynolds' major manufacturing facilities. TABLE 7 Wholly Owned Operations Manufacturing, Mining and Distribution Alumina: Recycling: ------- --------- Corpus Christi, Texas Recycling Plants and Centers (U.S.)(565)** Malakoff, Texas Calcined Coke: Reclamation: ------------- ----------- Baton Rouge, Louisiana Sheffield, Alabama (2) Lake Charles, Louisiana Bellwood, Virginia# Carbon Anodes: Mill Products***: ------------- ---------------- Lake Charles, Louisiana Sheffield, Alabama McCook, Illinois Primary Aluminum: Cap-de-la-Madeleine, Quebec, Canada ---------------- Hamburg, Germany## Massena, New York Latina, Italy Troutdale, Oregon Longview, Washington Baie Comeau, Quebec, Canada Spent Potliner Treatment: Aluminum Beverage Cans: ------------------------ ---------------------- Gum Springs, Arkansas San Francisco, California Torrance, California Extruded Products: Tampa, Florida ----------------- Moultrie, Georgia Auburn, Indiana Honolulu, Hawaii Louisville, Kentucky Monticello, Indiana (cans and ends) El Campo, Texas# Kansas City, Missouri Ashland, Virginia* Middletown, New York Bellwood, Virginia Reidsville, North Carolina (cans and ends) Richmond Hill, Ontario, Canada Salisbury, North Carolina Ste. Therese, Quebec, Canada Fort Worth, Texas Nachrodt, Germany Seattle, Washington Wexford, Ireland Milwaukee, Wisconsin Harderwijk, Netherlands Rocklin, California (ends) Lelystad, Netherlands Bristol, Virginia (ends) Maracay, Venezuela Guayama, Puerto Rico Powder and Paste: Printing Cylinders: ---------------- ------------------ Louisville, Kentucky Longmont, Colorado* Atlanta, Georgia* Electrical Rod: Clarksville, Indiana* -------------- Louisville, Kentucky (2) Becancour, Quebec, Canada Newport, Kentucky* West Monroe, Louisiana Foil Feed Stock: Battle Creek, Michigan* --------------- St. Louis, Missouri Hot Springs, Arkansas Fulton, New York* Wilmington, North Carolina* Packaging and Consumer Exton, Pennsylvania* Products: Franklin, Tennessee* ---------------------- Dallas, Texas Beacon Falls, Connecticut Richmond, Virginia (2) Louisville, Kentucky (2) Ontario, Canada (2) Mt. Vernon, Kentucky Sparks, Nevada* Boyertown, Pennsylvania Downingtown, Pennsylvania Reynolds Aluminum Supply Lewiston, Utah Company: Bellwood, Virginia ------------------------ Grottoes, Virginia Service Centers (U.S.)(24)** Richmond, Virginia Processing Centers (U.S.)(3)** South Boston, Virginia Appleton, Wisconsin (2) Research and Development Little Chute, Wisconsin Weyauwega, Wisconsin Richmond, Virginia: Rexdale, Ontario, Canada* ------------------ Cap-de-la-Madeleine, Can Division Headquarters Quebec, Canada Corporate Technology Center Latina, Italy Packaging Technology Building and Construction Corpus Christi, Texas: Products***: --------------------- ------------------------- Alumina Technology Eastman, Georgia Weston, Ontario, Canada Sheffield, Alabama: Merxheim, France* ------------------ Nachrodt, Germany Manufacturing Technology Dublin, Ireland* Laboratory Wexford, Ireland Harderwijk, Netherlands Lisburn, Northern Ireland* Service Centers (Canada)(10)* Wheels: ------ Beloit, Wisconsin Ferrara, Italy Can Machinery and Systems: ------------------------- Richmond, Virginia Other Operations In Which Reynolds Has Interests Argentina: Germany: Aluminum cans, recycling Alumina, primary aluminum* Australia: Ghana: Bauxite, alumina Primary aluminum* Belgium: Guinea: Building products, extrusions Bauxite Brazil: Guyana: Bauxite, aluminum cans Bauxite* and ends, recycling, reclamation India: Canada: Extrusions Primary aluminum, electric power generation, aluminum Italy: wheels Reclamation Chile: Russia: Aluminum cans, recycling Foil China: Spain: Foil, extrusions Mill products, extrusions, foil, packaging, printing cylinders Colombia: Mill products, extrusions, Venezuela: foil Primary aluminum, mill products, foil, aluminum cans and ends, Egypt: recycling, aluminum wheels Extrusions ____________________________ * Leased. ** Recycling Plants and Centers - 565 leased. Reynolds Aluminum Supply Company Service Centers - 18 leased. Reynolds Aluminum Supply Company Processing Centers - 1 leased. *** In March 1997, Reynolds concluded the sale of its residential construction products operations in the U.S. to AmeriMark Building Products, Inc. Included in the sale were Reynolds' construction products plants located in Ashville, Ohio, Bourbon, Indiana and Lynchburg, Virginia; the manufactured housing operations at its Eastman, Georgia, facility; a Mill Products Division plant in Chesterfield County, Virginia that supplies aluminum building sheet to the construction industry; and 54 service centers. # In February 1997, Reynolds and Philip Environmental, Inc. announced they have signed a letter of intent for the purchase by Philip of Reynolds' Bellwood aluminum reclamation plant. Reynolds announced in March 1997 that it has signed a letter of intent for the William L. Bonnell subsidiary of Tredegar Industries to buy Reynolds' El Campo aluminum extrusion plant. Both transactions, which are subject to certain conditions, are expected to close in the second quarter of 1997. ## Held under an installment purchase arrangement. The titles to Reynolds' various properties were not examined specifically for this report. Item 3. LEGAL PROCEEDINGS On June 10, 1988, the Atlantic States Legal Foundation ("Atlantic States") filed suit against the Registrant in the U.S. District Court for the Western District of New York (the "Court") under the "citizen suit" provision of the federal Clean Water Act. The State of New York intervened in the case on December 1, 1989. The suit involved the discharge of substances from the Registrant's Massena, New York primary aluminum production plant. An agreement of the parties to settle the suit for payments by the Registrant aggregating $515,000, resolving claims for penalties and other costs, was approved by the Court on May 12, 1992; however, the Court retained jurisdiction of the matter. In a letter dated April 12, 1993, Atlantic States informed the Registrant that it has withdrawn its waiver of enforcement, citing violations at the Massena plant of interim effluent limits contained in the settlement agreement and other effluent limit violations. The Registrant received from the U.S. Department of Justice on August 29, 1994 a civil investigative demand relating to production of primary aluminum. The Registrant is cooperating with this inquiry and is confident that its conduct has been in compliance with U.S. antitrust laws. The Registrant received from the U.S. Department of Justice on March 30, 1995 a civil investigative demand relating to the pricing of aluminum can stock. The Justice Department advised the Registrant on November 25, 1996 that this civil investigation had been concluded and closed. 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 alleges a conspiracy to reduce worldwide and U.S. aluminum production. Estimated damages of approximately $26 billion were sought in the lawsuit, which claims class action status. Defendants removed the case to the U.S. District Court for the Central District of California (the "District Court"). On July 1, 1996, the District Court granted summary judgment for defendants. Plaintiff filed a motion for reconsideration with the District Court, which was denied on July 16, 1996. On July 18, 1996, plaintiff filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit. As noted above, the Registrant is confident that its conduct has been in compliance with the antitrust laws. The Registrant has made, and will make, its decisions regarding production levels independently. In December 1995, an oil tank failed at the Registrant's Massena, New York primary aluminum production plant, resulting in an oil spill at the plant. The Registrant promptly reported the matter to the New York Department of Environmental Conservation (the "NYDEC"). On January 8, 1997, NYDEC notified the Registrant that it is seeking a civil penalty of $120,000 in connection with the matter for the Registrant's failure to comply with State tank management regulations. The Registrant has responded to the demand, stating that it believes the proposed penalty is excessive under the circumstances. Various other suits, claims and actions are pending against Reynolds. In the opinion of Reynolds' management, after consultation with legal counsel, disposition of these proceedings and those referred to in the preceding paragraphs, either individually or in the aggregate, will not have a material adverse effect on Reynolds' competitive or financial position or its ongoing results of operations. No assurance can be given, however, that the disposition of one or more of such suits, claims or actions in a particular reporting period will not be material in relation to the reported results for such period. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Registrant's security holders during the fourth quarter of 1996. Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Registrant are as follows: Name Age* Positions Held During Past Five Years - - ---- ---- ------------------------------------- Jeremiah J. Sheehan 58 Chairman of the Board and Chief Executive Officer since October 1996. President and Chief Operating Officer 1994-1996. Executive Vice President, Fabricated Products 1993-1994. Executive Vice President, Consumer and Packaging Products 1990-1993. Director since 1994. Randolph N. Reynolds** 55 Vice Chairman and Executive Officer since October 1996. Vice Chairman 1994- 1996. Executive Vice President, International 1990-1994. President, Reynolds International, Inc. ("RII"), a subsidiary of the Company, since November 1980, and Chief Executive Officer of RII since November 1981. Director since 1984. J. Wilt Wagner 55 Vice Chairman and Executive Officer since October 1996. Executive Vice President, Raw Materials, Metals and Industrial Products 1993-1996. Executive Vice President, Fabricated Industrial Products 1992-1993. Director since 1996. Henry S. Savedge, Jr. 63 Executive Vice President and Chief Financial Officer since May 1992. Vice President, Finance 1990-1992. Director since 1992. D. Michael Jones 43 Senior Vice President and General Counsel since October 1996. Vice President, General Counsel and Secretary 1993-1996. Associate General Counsel and Assistant Secretary 1990-1993. James R. Aitken 62 Vice President since April 1994. Executive Vice President, RII since March 1993. Vice President, Europe of RII and President, Reynolds (Europe) Ltd., a subsidiary of RII, 1987-1993. Thomas P. Christino 57 Vice President, Flexible Packaging Division since November 1993. Flexible Packaging Division General Manager 1992- 1993. Donald T. Cowles 49 Vice President and Reynolds Aluminum Supply Company Division General Manager since August 1995. Executive Vice President, Human Resources and External Affairs 1993-1995. Vice President, General Counsel and Secretary 1989-1993. Eugene M. Desvernine 55 Vice President since April 1994. Executive Vice President, RII since March 1993. Vice President, Latin America of RII 1982-1993. Allen M. Earehart 54 Vice President, Controller since April 1994. Controller 1993-1994. Director, Corporate Accounting 1982-1993. E. Jack Gates 55 Vice President, Raw Materials and Carbon Products Division since April 1993. Raw Materials and Precious Metals Division General Manager 1993. Reduction Division General Manager 1990-1993. Rodney E. Hanneman 60 Vice President, Quality Assurance and Technology Operations since March 1985. Paul S. Hayden 54 Vice President, Recycling Division since April 1995. Recycling Division General Manager 1991-1995. Douglas M. Jerrold 46 Vice President, Tax Affairs since April 1990. John B. Kelzer 60 Vice President, Extrusion Division since April 1993. Extrusion Division General Manager 1990-1993. William E. Leahey, Jr. 47 Vice President, Can Division since April 1993. Can Division General Manager 1992-1993. John M. Lowrie 56 Vice President, Consumer Products Division since October 1988. F. Robert Newman 53 Vice President, Human Resources since October 1995. Corporate Director, Human Resources 1993-1995. Corporate Director, Industrial Relations 1992-1993. John M. Noonan 63 Vice President, Construction Products and Properties Divisions since January 1984. Paul Ratki 57 Vice President, Metals Division since April 1994. Reduction and Reclamation Division General Manager 1993- 1994. Reduction and Reclamation Division Operations Manager 1991-1993. William G. Reynolds, Jr.** 57 Vice President, Government Relations and Public Affairs since October 1980. John F. Rudin 51 Vice President, Chief Information Officer since August 1995. Vice President since April 1995. Reynolds Aluminum Supply Company Division General Manager 1989-1995. Julian H. Taylor 53 Vice President, Treasurer since April 1988. C. Stephen Thomas 57 Vice President, Mill Products Division since May 1992. Vice President, Can Division 1990-1992. Donna C. Dabney 49 Secretary and Assistant General Counsel since October 1996. Associate General Counsel 1993-1996. Chief Real Estate Counsel 1990-1993. Assistant Secretary 1987-1996. _______________ * As of February 15, 1997 ** Randolph N. Reynolds and William G. Reynolds, Jr. are brothers. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Registrant's Common Stock is listed on the New York Stock Exchange and the Chicago Stock Exchange. At February 25, 1997, there were 9,126 holders of record of the Registrant's Common Stock. The high and low sales prices for shares of the Registrant's Common Stock as reported on the New York Stock Exchange Composite Transactions Tape and the dividends declared per share during the periods indicated are set forth below:
High Low Dividends ---- --- --------- 1996 First Quarter $ 61-3/8 $ 49 $.35 Second Quarter 61-5/8 51-3/4 .35 Third Quarter 55-1/2 48-3/4 .35 Fourth Quarter 60-1/2 50-3/8 .35 1995 First Quarter $ 56-1/2 $ 46-1/4 $.25 Second Quarter 52-3/8 46-3/4 .30 Third Quarter 64-3/4 51-5/8 .30 Fourth Quarter 58-5/8 48-1/2 .35
On February 21, 1997, the Board of Directors declared a dividend of $.35 per share of Common Stock, payable April 1, 1997 to stockholders of record on March 3, 1997. Item 6. SELECTED FINANCIAL DATA - - ------------------------------------------------------------------------ Consolidated Income Statement (In millions, except per share amounts) - - ----------------------------------------------------------------------
1996 1995 1994 1993 1992 --------------------------------------------- Net sales $6,972 $7,213 $5,879 $5,269 $5,593 Equity, interest and other income 44 39 46 25 28 Gains on sales of assets - - 88 - 36 --------------------------------------------- 7,016 7,252 6,013 5,294 5,657 --------------------------------------------- Cost of products sold 5,856 5,739 4,950 4,604 4,716 Selling, administrative and general expenses 445 449 376 358 369 Depreciation and amortization 365 344 341 340 330 Interest 160 172 156 159 167 Operational restructuring and asset revaluation costs 37 - - 348 106 Provision for estimated environmental costs - - - - 164 --------------------------------------------- 6,863 6,704 5,823 5,809 5,852 --------------------------------------------- Income (loss) before income taxes and cumulative effects of accounting changes 153 548 190 (515) (195) Taxes on income (credit) 49 159 68 (193) (86) --------------------------------------------- Income (loss) before cumulative effects of accounting changes 104 389 122 (322) (109) Cumulative effects of accounting changes (15) - - - (640) --------------------------------------------- Net income (loss) $ 89 $ 389 $ 122 ($322) ($749) ============================================= Earnings per share Income (loss) before cumulative effects of accounting changes $1.06 $5.35 $1.42 $(5.38) $(1.83) Cumulative effects of accounting changes (0.24) - - - (10.73) --------------------------------------------- Net income (loss) $0.82 $5.35 $1.42 $(5.38) $(12.56) ============================================= Cash dividends declared ============================================= per common share $1.40 $1.20 $1.00 $1.20 $1.80 ============================================= Other items: - - ----------- Total assets $7,516 $7,740 $7,461 $6,709 $6,897 ============================================= Long-term debt $1,793 $1,853 $1,848 $1,990 $1,798 ============================================= See Item 8. Financial Statements and Supplementary Data - Note 1 for a discussion of the 1996 change in accounting principle. In 1992, the Company adopted FAS No. 106, requiring accrual accounting for postretirement benefits other than pensions, and FAS No. 109, which requires use of the liability method of determining deferred income taxes. Charges of $610 million (FAS No. 106) and $30 million (FAS No. 109) were recognized in 1992 for the cumulative effects of these accounting changes. The adoption of FAS No. 109 enabled the Company to fully recognize the deferred tax benefits associated with the adoption of FAS No. 106.
Item 7. 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, related notes and other sections of this report. In the tables, dollars are in millions, except per share and per pound 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 33, 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 The Company's results in 1996 were adversely affected by lower realized prices for primary aluminum (approximately 18% lower than 1995), as well as price declines for a number of our fabricated aluminum products. The results reflect softness in the overall global aluminum market, primarily attributable to slower economic growth that has caused end users to liquidate excess inventories. Other factors affecting results include higher costs for certain raw materials, reduced shipping and manufacturing levels in the can and can sheet businesses due to weaker demand, and severe winter weather conditions early in the year that resulted in facility curtailments and lower volumes.
1996 1995 1994 ---------------------- Net income $89 $389 $122 Special items included in net income: LIFO inventory liquidations (see Note 1) 19 - - Operational restructuring costs (see Note 3) (23) - - Cumulative effect of accounting change (see Note 1) (15) - - Gains on sales of assets (see Note 2) - - 57 Earnings per share $0.82 $5.35 $1.42 Special items included in earnings per share: LIFO inventory liquidations 0.29 - - Operational restructuring costs (0.36) - - Cumulative effect of accounting change (0.24) - - Gains on sales of assets - - 0.92
ALUMINUM INDUSTRY The aluminum industry entered 1996 facing carryover effects of the prior year and weakness in key economies. The aluminum industry had a strong performance in 1995, particularly in the first half of the year, because of improved aluminum supply/demand fundamentals. Prices for both primary and fabricated aluminum products improved significantly. Industry shipments increased in late 1994 and early 1995, largely as a result of hedge buying by end users who were anticipating price increases. This created a customer inventory buildup, which resulted in lower shipments in the latter part of 1995 and in 1996 as end users reduced their excess inventories. Demand for aluminum products was further weakened by the soft landing of the U.S. economy and weakness in European and other ALUMINUM INDUSTRY -- continued economies in late 1995 and 1996. In addition, higher worldwide production and higher exports from Russia affected aluminum industry fundamentals in 1996. SHIPMENTS AND NET SALES
1996 1995 1994 ---------------------------------------------------------------- Net Net Net Shipments Sales Shipments Sales Shipments Sales --------- ----- --------- ----- --------- ----- Finished Products and Other Sales - - --------------------------------- Packaging and containers Aluminum 355 $1,850 368 $1,871 359 $1,583 Nonaluminum 603 556 529 Other aluminum 163 552 163 580 151 449 Other nonaluminum 533 528 479 ---------------------------------------------------------------- 518 3,538 531 3,535 510 3,040 ---------------------------------------------------------------- Production and Processing - - ------------------------- Primary aluminum 386 634 346 684 277 440 Sheet and plate 381 1,168 409 1,350 418 1,003 Extrusions 204 706 200 765 211 627 Other aluminum 164 481 179 494 157 391 Other nonaluminum 445 385 378 ---------------------------------------------------------------- 1,135 3,434 1,134 3,678 1,063 2,839 ---------------------------------------------------------------- Total 1,653 $6,972 1,665 $7,213 1,573 $5,879 ================================================================ Average realized price per pound: - - -------------------------------- Fabricated aluminum products $1.79 $1.84 $1.48 Primary aluminum 0.74 0.90 0.72
Finished Products and Other Sales - - --------------------------------- Aluminum packaging and container shipments decreased in 1996 due to lower can shipments. Can shipments decreased because of reduced beer can volumes and lower export sales to Latin America as our partially owned can operations there added capacity. We realized higher shipments of laminated aluminum foil in 1996 as a result of acquiring a laminated aluminum products plant in mid- 1995. Higher aluminum packaging and container shipments in 1995 resulted primarily from our acquisition of a can operation in mid- 1994. Shipments of other aluminum products were relatively flat in 1996 after increasing in 1995. Severe winter weather conditions in early 1996 adversely affected our distribution and construction products businesses. Lower activity in the transportation market, especially for trucks and trailers, also negatively affected our distribution business. Both of these businesses continually strengthened during the year as weather and business conditions improved. Other aluminum shipments increased in 1995 due to our acquisition of a metals distribution company in the third quarter of 1994. Net sales were slightly higher in 1996, with higher nonaluminum sales offsetting the effect of lower aluminum shipments. Nonaluminum sales increased for a broad range of products including plastic packaging, printing cylinders, construction products and can machinery. The effect of slightly higher prices for cans was offset by lower prices for aluminum distribution products. Higher net sales in 1995 as compared to 1994 reflected higher aluminum shipments, higher nonaluminum sales (principally stainless steel) and improved prices for aluminum products. Production and Processing Primary aluminum shipments fluctuate from year to year because of variations in internal requirements and changes in customer demand for value-added foundry ingot and billet. Our 1995 acquisition of an additional interest in a Canadian primary aluminum plant contributed to the higher shipments in 1995 and 1996. Sheet and plate shipments decreased in 1996 due mainly to lower demand for can sheet. Can sheet shipments in 1995 were higher because of strong demand and higher shipments to the Latin American operations. The increase in can sheet shipments in 1995 was more than offset by a decrease in shipments of other sheet products resulting from a conversion of a portion of the other sheet business to tolling. The increase in other aluminum shipments in 1995 reflected strong demand for deoxidization products used in the steel industry. Wheel shipments were up sharply in both years due to strong demand and the additional capacity in 1996 at our new plant in Wisconsin. Year-to-year changes in net sales primarily reflect changes in demand for aluminum products over the past two years as explained earlier under "Aluminum Industry". The increases in nonaluminum sales in both years resulted from strong demand for alumina and carbon products, although the alumina market slowed later in 1996. OPERATING PROFIT
1996 1995 1994 -------------------------- Finished Products and Other Sales $185 $232 $256 Production and Processing 86 492 2
Operating results generally reflect the contrast in the aluminum industry during the past two years. Lower aluminum prices, weaker volumes and lower capacity utilization in fabricating operations affected 1996 results. Generally, the opposite was true for 1995 with higher prices and volumes. The year 1996 was also impacted by lower shipping levels in our can and can sheet businesses, higher labor costs (as discussed below), the favorable effects of LIFO liquidations and benefits from a reduction in primary aluminum purchases (due to our 1995 purchase of an additional interest in a Canadian primary aluminum plant). Both years also were affected by higher costs for materials used to produce alumina and the favorable effects of continuous improvement efforts. Selling, administrative and general expenses increased in 1995 primarily due to the higher level of business activity. Results for all three periods were negatively affected by unused capacity at our primary aluminum plants. U.S. production capacity of 209,000 metric tons remains temporarily curtailed. In response to strong demand in the alumina market in 1995, we returned our Texas alumina refinery to full production. In 1996, because of slowing market conditions, we temporarily curtailed 15% of the capacity at this refinery. We do not expect this temporary curtailment to have a material impact on future operating results or affect our ability to meet the requirements of our primary aluminum operations. In 1996, we entered into new six-year labor contracts with the unions that represent a majority of our domestic hourly employees. Major provisions of the new agreements include wage increases of $1.15 an hour over the first five years (plus incremental increases in 1997 and 1999) and enhanced pension OPERATING PROFIT -- continued and other benefits. At the end of the fifth year, the economic provisions of the contracts will be reopened. If agreement cannot be reached, the economic provisions will be submitted to arbitration for one additional year. The Company and the unions also agreed to work cooperatively on customer requirements, business objectives and shareholder and union interests. In addition, the agreements contain broad, new provisions for employee safety, job security and employee participation in the work environment. In 1996, we closed a can plant in Texas. Operational restructuring costs of $37 million (pre-tax) were recognized. These costs related principally to employee termination costs at the Texas plant (see Note 3 to the consolidated financial statements). In 1995, we closed a can plant in New York. Costs of $25 million were recognized in 1995 for the closing of the New York plant and for asset revaluations at certain foreign entities. This amount was offset by the reversal of existing reserves in 1995 resulting from changes in estimated requirements for previously restructured operations. Our current strategy for the U.S. can business is to aggressively reduce costs and increase production efficiencies through modernization programs and new technologies. GEOGRAPHIC AREA ANALYSIS The Company has operations in the U.S., Canada and other foreign areas including Europe, Latin America and Australia. Certain of these operations, especially in Latin America, consist of equity interests, whose sales are not included in our consolidated net sales. We also participate in an unincorporated joint venture that mines bauxite and produces alumina in Australia. Year-to-year changes in net sales and operating profits in our three geographic areas (domestic, Canada and other foreign) primarily reflect the previously discussed changes in aluminum industry fundamentals. INTEREST EXPENSE Interest expense declined in 1996 because of lower effective interest rates and higher amounts of capitalized interest. These benefits were partially offset by an increase in the amount of debt outstanding. Interest expense increased in 1995 due to higher rates. We use interest rate swap agreements to manage exposure to interest rate fluctuations after considering market conditions and levels of variable-rate and fixed-rate debt outstanding (see Note 6). Our strategy is to provide for lower interest expense during economic downturns, with the potential for higher interest expense during periods of economic growth. TAXES ON INCOME The Company pays U.S. federal, state and foreign taxes based on the laws of the various jurisdictions in which it operates. The effective tax rates reflected in the income statement differ from the U.S. federal statutory rate principally because of foreign taxes at different rates, the effects of percentage depletion allowances and, in 1995, the effect of a non-recurring foreign tax benefit. A reconciliation of the effective rates is included in Note 9. TAXES ON INCOME -- continued The Company has worldwide operations in many tax jurisdictions that generate deferred tax assets and/or liabilities. Deferred tax assets and liabilities have been netted by jurisdiction, resulting in both a deferred tax asset and a deferred tax liability on the balance sheet. At December 31, 1996, we had $890 million of deferred tax assets that relate primarily to U.S. tax positions. The most significant portions of these assets relate to tax carryforward benefits and accrued costs for employee health care, environmental and restructuring costs. A major portion of these assets will be realized in the future through the reversal of temporary differences, principally depreciation. To the extent that these assets are not covered by reversals of depreciation, we expect the remainder to be realized through U.S. income earned in future periods. The Company has a strong history of sustainable earnings. However, even without considering projections of income, certain tax planning strategies, such as changing the method of valuing inventories from LIFO to FIFO and/or entering into sale-leaseback transactions, would generate sufficient taxable income to realize the portion of the deferred tax asset related to U.S. operations. In addition, we can indefinitely carry forward the majority of our U.S. tax carryforward benefits. Based on our evaluation of these matters, we expect that the deferred tax assets will be realized. We are not aware of any events or uncertainties that could significantly affect our conclusions regarding realization. We reassess the realization of deferred tax assets quarterly and, if necessary, adjust the valuation allowance accordingly. ENVIRONMENTAL The Company is involved in remedial investigations and actions at various locations, including Environmental Protection Agency Superfund sites where we and, in most cases, others have been designated as potentially responsible parties (PRPs). We accrue remediation costs when it becomes probable that such efforts will be required and the costs can be reasonably estimated. We evaluate the status of all significant existing or potential environmental issues quarterly, develop or revise cost estimates to satisfy known remediation requirements, and adjust the accrual accordingly. At December 31, 1996, the accrual was $197 million ($242 million at December 31, 1995). The accrual reflects our best estimate of the ultimate liability for known remediation costs. In estimating anticipated costs, we consider the extent of our involvement at each site, joint and several liability provisions under applicable law, and the likelihood of obtaining contributions from other PRPs. Potential insurance recoveries are uncertain and therefore have not been considered. Based on information currently available, we expect to make remediation expenditures relating to costs currently accrued over the next 15 to 20 years with the majority spent by the year 2002. We expect cash flows from operations to provide the funds for environmental capital, operating and remediation expenditures. Annual capital expenditures for equipment designed for environmental control purposes averaged approximately $32 million over the past three years. Ongoing environmental operating costs for the same period averaged approximately $78 million per year. We estimate that operating expenditures for 1997 through 1999 will remain at approximately these same levels. We estimate that annual capital expenditures for environmental control facilities will be approximately $65 million in 1997, $105 million in 1998 and $70 million in 1999. The majority of these expenditures are for the capital spending program referred to below at our primary aluminum plant in New York. ENVIRONMENTAL -- continued Our spending on environmental compliance will be influenced by future environmental regulations, including those issued and to be issued under the Clean Air Act Amendments of 1990. We have begun a five-year capital spending program of an estimated $185 million at our primary aluminum plant in New York. The project includes new air emissions controls and a phased modernization of the plant's production lines. We are accelerating certain expenditures believed necessary to achieve compliance with the Clean Air Act's proposed Maximum Achievable Control Technology standards. Based on current information, we estimate that compliance with the Clean Air Act's hazardous air pollutant standards will require in excess of $250 million of capital expenditures (including a portion of the expenditures at the New York plant referred to above), principally at our U.S. primary aluminum plants. For additional information concerning environmental expenditures, see Note 11. OTHER INFORMATION Rates for electricity charged by the Bonneville Power Administration (BPA), which serves our primary aluminum plants in Oregon and Washington, are established under a new contract that expires in 2001. The new contract establishes fixed rates which are 16% less than rates previously in effect. These rates, however, are subject to review and approval in a process being conducted by the Federal Energy Regulatory Commission (FERC). Third parties are challenging the contract in the U.S. Court of Appeals for the Ninth Circuit, and the contract's rates are subject to further appeal in the courts by third parties following FERC review. Should the new contract be rejected in any of these processes, we could renegotiate with BPA or seek service from third parties. In December 1996, the Aluminum, Brick and Glass Workers International Union voted to merge with the United Steelworkers of America. This merger was completed in January 1997. We do not expect the merger to have a material impact on the Company. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL
December 31 ---------------- 1996 1995 ---- ---- Working capital $540 $647 Ratio of current assets to current liabilities 1.4/1 1.5/1
The decrease in working capital resulted primarily from the success of our inventory management program. OPERATING ACTIVITIES
1996 1995 1994 ---- ---- ---- Cash provided from operations $520 $489 $493
Cash provided from operating activities over the past three years was used mainly to fund investing activities. INVESTING ACTIVITIES Substantial investments have been aimed at providing us with low- cost operations in most of our raw materials, industrial and finished products businesses. We have also focused on strategic areas for expansion and on further quality and efficiency enhancements. The following table shows actual and projected capital expenditures in the following categories: operational (replacement equipment, environmental control projects, etc.) and strategic (performance improvement, acquisitions and investments).
Projected 1997 1996 1995 1994 ---- ---- ---- ---- Operational $222 $195 $219 $151 Strategic 128 237 626 253 ----------------------------------------- Total capital investments $350 $432 $845 $404 =========================================
In Finished Products and Other Sales, strategic projects that have been completed in the past three years or that are underway include: - - - expansions and modernizations of can, foil and plastic film plants - - - the participation in the construction of can plants in Argentina, Brazil, Chile and Saudi Arabia - - - the acquisitions of a can plant and a metals distribution business in 1994; and a printing cylinder engraving company, foil laminating plant, and flexible packaging operation in 1995 In Production and Processing, strategic projects that have been completed in the past three years or that are underway include: - - - the acquisitions of additional interests in an Australian alumina refinery (6%) in 1994 and a Canadian primary aluminum plant (24.95%) in 1995 - - - the expansion of a plant in Indiana to produce bumpers and other automotive components (completed in 1996) INVESTING ACTIVITIES - continued - - - the modification and equipping of a purchased facility in Wisconsin to produce aluminum wheels (completed in 1996) - - - a quality improvement program and equipment upgrades at a can sheet operation in Alabama - - - the modernization of a primary aluminum plant in New York - - - the construction of a forged wheel plant in Virginia (as discussed below) - - - the participation in a foil and extrusion plant in China (as discussed below) In addition to these major projects, capacity expansions, equipment upgrades and/or improvement programs have been completed or are currently underway at a number of other facilities. In 1996, we began construction of a $34-million facility in Virginia to manufacture aluminum wheels. Production is expected to start in 1997. The facility will use a manufacturing process that combines our computer-controlled, flow-formed casting technology with forging to produce lightweight wheels with added styling flexibility. Also in 1996, we acquired a partial interest in an operation in China that produces aluminum foil and extrusions. The operation includes a large aluminum fabricating facility that was built in the mid-1980s and expanded later that decade. The facility manufactures aluminum foil, primarily for the food, pharmaceutical and tobacco industries, and extrusions for the automotive and construction products markets. Capital investments planned for 1997 include amounts for those projects now underway and continuing operating requirements. We expect to fund these capital investments with internally generated funds. While the planned 1997 capital investments do not include amounts for acquisitions, we will evaluate any opportunities that arise. A part of our strategy is to sell non-core assets and use the proceeds in our strategic businesses. Sales over the past three years included: 1996 - - - real estate (principally, developed commercial investment properties) 1995 - - - remaining gold mining assets in Australia - - - real estate (principally, developed commercial investment properties) 1994 - - - Austrian can plant - - - a subsidiary that held a 40% investment in an Australian gold mine - - - timberland in the Pacific Northwest FINANCING ACTIVITIES We believe our available financial resources, together with internally generated funds, are sufficient to meet our present and future business needs. We continue to exceed the financial ratio requirements contained in our financing arrangements and expect to do so in the future. At December 31, 1996, $113 million of our $1.65-billion shelf registration remained available for the issuance of debt securities. We also have a $500-million revolving credit facility. A summary of significant financing activities over the past three years follows: FINANCING ACTIVITIES -- continued 1994: - - - Issued 11 million shares of 7% PRIDES(SM), Convertible Preferred Stock (PRIDES) for $47.25 (stated value) per share, generating $505 million of net proceeds - - - Voluntarily prepaid the remaining balance ($72 million) of a term-loan agreement - - - Repaid the balance ($50 million) of commercial paper outstanding - - - Contributed 1.5 million shares (valued at $77 million) of the Company's common stock to pension plans We used proceeds from the PRIDES issue for capital investments in 1994 and 1995 and to repay obligations incurred in the fourth quarter of 1993 to acquire Miller Brewing Company's can plants. 1995: - - - Borrowed $22 million through the issuance of tax-exempt bonds that require a single repayment in 2025 and bear interest at a variable rate - - - Issued $72 million of medium-term notes, which bear interest at an average rate of 6% and mature in 1996 and 1997 - - - Contributed 0.9 million shares (valued at $45 million) of the Company's common stock to pension plans We used proceeds from the tax-exempt bonds to finance a portion of the costs of acquiring, constructing and installing environmental control facilities at our primary aluminum plant in New York. Proceeds from the medium-term notes were supplemented with cash on hand and cash generated from operations to acquire the additional interest in the Canadian primary aluminum plant for approximately $390 million, plus associated working capital. 1996: - - - Called for redemption of all outstanding shares of PRIDES (see Note 7), which will reduce annual dividend requirements by approximately $24 million based on the current common stock dividend - - - Substantially met our goal to fully fund our pension plans - - - Entered into $400 million of interest rate swap agreements (see Note 6) - - - Amended the $500-million revolving credit facility arranged in 1994 to extend the term and lower the cost (see Note 6) OUTLOOK In 1997, we expect to show improvement over 1996 operating results. This expectation is based primarily on our performance improvement program discussed below. We also anticipate improvements in aluminum industry fundamentals and are encouraged by increases in primary aluminum prices in early 1997. Looking forward, we believe the outlook for aluminum is strong. We are forecasting a 4-5% increase in U.S. industry shipments and a 5-6% increase in global aluminum consumption for 1997, with especially strong transportation and packaging markets. Generally, order rates are increasing in all of our businesses. OUTLOOK -- continued Programs are in place to improve operating performance in 1997 by at least $100 million pre-tax, exclusive of price changes and in excess of inflation. These programs include: - - - significant cost reductions in our U.S. can business, including the closing of our Houston, Texas can plant (completed at the end of 1996) and the start-up of our modernized and more efficient Torrance, California can plant - - - aggressive cost reductions at our Alabama rolling mill (including reducing the workforce, principally through attrition) - - - benefits from a new power contract for our primary aluminum plants in the Pacific Northwest (approximately $12 million annually at our current production levels) We also expect the following factors to contribute to improved results in 1997: - - - additional soft drink can business - - - improved results from partially owned can operations in Latin America and Saudi Arabia - - - stronger can sheet volume - - - improved demand for alumina - - - anticipated lower costs for natural gas and caustic soda (used in the production of alumina) We expect to strengthen our balance sheet in 1997 by: - - - managing our capital expenditures to $350 million - - - continuing to lower our inventory days of supply - - - realizing cash savings from our PRIDES redemption - - - reducing debt by more than $200 million - - - selling non-core assets PORTFOLIO REVIEW We are conducting a review of all our operations and businesses. We are considering a number of alternatives that include, among other things, asset sales, spin-offs and the forming of strategic alliances to increase scale. No decisions will be made until later in 1997. In March 1997 we concluded the sale of our residential construction products business in the U.S. Included in the sale were four plants that make various aluminum and vinyl construction products, a mini-mill in Virginia that makes building sheet from recycled aluminum, and 54 service centers. We have retained our non-residential building operations in Georgia that produce Reynobond aluminum composite panels. The disposition of this portion of our construction products business will not materially affect the Company. We continue to negotiate the sale of our coal properties in western Kentucky. The properties include surface and mineral rights on about 16,000 acres, mineral rights on an additional 32,000 acres (approximately) and varying percentages of oil and gas rights on about 6,700 acres. We have also signed letters of intent for the sale of an aluminum reclamation plant in Virginia and an aluminum extrusion plant in Texas. We expect both of these transactions, which are subject to certain conditions, to close in the second quarter of 1997. Proceeds from these transactions, together with proceeds from the sale of certain real estate assets scheduled to close through mid- April 1997, are expected to total approximately $240 million. We will use these proceeds to reduce current debt. We expect the sale of our U.S. residential construction products business to result in a modest gain which we will announce with our first quarter 1997 results. RISK FACTORS This section should be read in conjunction with Items 1 and 3 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. 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. Consensus expectations for 1997 indicate global economic growth of 3%. The Company is forecasting a 4-5% increase in U.S. aluminum industry shipments and a 5-6% increase in global aluminum consumption for the year, with especially strong transportation and packaging markets. Barring a recession in any major world economy, the Company expects the improved conditions in aluminum industry supply/demand fundamentals that are becoming evident at the beginning of 1997 to continue for the next several years. The Company's outlook for growth in aluminum consumption for the remainder of this decade is an average of 4% per year. The Company expects greater use of aluminum around the world in automobiles and other light vehicles. The Company also expects U.S. aluminum beverage can shipments to grow at about 2% per year and global shipments to grow 5% annually, with rapid growth of the aluminum beverage can market in Latin America, Asia, the Middle East and other developing economies. Economic and/or market conditions other than as forecast by the Company in the preceding paragraph, particularly in the U.S., Japan and Germany (which are large consumers of aluminum) and in Latin America, 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 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 current strategy of being a vertically integrated producer of value-added aluminum products, and its 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. RISK FACTORS -- continued - - - 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. 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. - - - 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. A new five-year contract with the Bonneville Power Administration for the period October 1996 - September 2001 will provide a fixed rate for electrical power that is 16% less than rates previously in effect for the Company's Washington and Oregon primary aluminum production plants. These rates are subject to regulatory review and approval. In addition, third parties are challenging the contract in court, and the rates are subject to further appeal in the courts by third parties following regulatory review. - - - The Company's key transportation market is cyclical, and sales to that market in particular 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. - - - The Company is conducting a portfolio review of all its operations and businesses. The Company is considering alternatives that include, among other things, asset sales, spin- offs and formation of strategic alliances. The timing, nature and magnitude of the actions, if any, that will be taken are not certain. Such actions, if taken, could affect the Company's results and ongoing operating performance. 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 economies and markets in which the Company operates will not change significantly overall. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (millions, except per share amounts) =============================================================================
- - ----------------------------------------------------------------------------- Years ended December 31 1996 1995 1994 - - ----------------------------------------------------------------------------- REVENUES Net sales $6,972 $7,213 $5,879 Equity, interest and other income 44 39 46 Gains on sales of assets - - 88 - - ----------------------------------------------------------------------------- 7,016 7,252 6,013 - - ----------------------------------------------------------------------------- COSTS AND EXPENSES Cost of products sold 5,856 5,739 4,950 Selling, administrative and general expenses 445 449 376 Depreciation and amortization 365 344 341 Interest 160 172 156 Operational restructuring costs 37 - - - - ----------------------------------------------------------------------------- 6,863 6,704 5,823 - - ----------------------------------------------------------------------------- EARNINGS Income before income taxes and cumulative effect of accounting change 153 548 190 Taxes on income 49 159 68 - - ----------------------------------------------------------------------------- Income before cumulative effect of accounting change 104 389 122 Cumulative effect of accounting change (15) - - - - ----------------------------------------------------------------------------- NET INCOME 89 389 122 Preferred stock dividends 36 36 34 - - ----------------------------------------------------------------------------- NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 53 353 88 RETAINED EARNINGS Balance at beginning of year 1,256 980 954 Cash dividends on common stock 89 77 62 - - ----------------------------------------------------------------------------- Retained earnings at end of year $1,220 $1,256 $ 980 ============================================================================= EARNINGS PER SHARE Average shares outstanding 64 73 62 Income before cumulative effect of accounting change $1.06 $5.35 $1.42 Cumulative effect of accounting change (0.24) - - - - ----------------------------------------------------------------------------- Net income $0.82 $5.35 $1.42 ============================================================================= CASH DIVIDENDS PER COMMON SHARE $1.40 $1.20 $1.00 ============================================================================= See notes beginning on page 38.
CONSOLIDATED BALANCE SHEET (millions) =============================================================================
December 31 1996 1995 - - ----------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 38 $ 39 Receivables Customers, less allowances of $18 (1995 - $20) 811 889 Other 150 154 - - ----------------------------------------------------------------------------- Total receivables 961 1,043 Inventories 787 891 Prepaid expenses and other 87 41 - - ----------------------------------------------------------------------------- Total current assets 1,873 2,014 Unincorporated joint ventures and associated companies 1,337 1,286 Property, plant and equipment - net 3,237 3,223 Deferred taxes 296 376 Other assets 773 841 - - ----------------------------------------------------------------------------- Total assets $7,516 $7,740 ============================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade payables $ 499 $ 527 Accrued compensation and related amounts 209 252 Payables to unincorporated joint ventures and associated companies 97 102 Commercial paper 79 - Notes payable to banks 138 111 Long-term debt 96 101 Other liabilities 215 274 - - ----------------------------------------------------------------------------- Total current liabilities 1,333 1,367 Long-term debt 1,793 1,853 Postretirement benefits 1,087 1,213 Environmental 179 178 Deferred taxes 262 236 Other liabilities 228 276 Stockholders' equity Preferred stock - 505 Common stock 1,451 941 Retained earnings 1,220 1,256 Cumulative currency translation adjustments (37) (22) Pension liability adjustment - (63) - - ----------------------------------------------------------------------------- Total stockholders' equity 2,634 2,617 Contingent liabilities and commitments (Notes 10 and 11) - - ----------------------------------------------------------------------------- Total liabilities and stockholders' equity $7,516 $7,740 ============================================================================= See notes beginning on page 38.
CONSOLIDATED STATEMENT OF CASH FLOWS (millions) =============================================================================
Years ended December 31 1996 1995 1994 - - ----------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 89 $ 389 $ 122 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 365 344 341 Gains on sales of assets - - (88) Operational restructuring costs 37 - - Cumulative effect of accounting change 15 - - Other 26 18 3 Changes in operating assets and liabilities net of effects from acquisitions and dispositions: Accounts payable, accrued and other liabilities (110) (173) 272 Receivables 67 (59) (173) Inventories 93 17 (106) Other (62) (47) 122 - - ----------------------------------------------------------------------------- Net cash provided by operating activities 520 489 493 INVESTING ACTIVITIES Capital investments Operational (195) (219) (151) Strategic (237) (626) (253) Purchases of debt securities - - (139) Maturities of investments in debt securities - 125 14 Proceeds from sales of assets 12 28 162 Other (17) (48) (71) - - ----------------------------------------------------------------------------- Net cash used in investing activities (437) (740) (438) FINANCING ACTIVITIES Proceeds from long-term debt 40 106 - Proceeds from preferred stock issue - - 505 Reduction of long-term debt and other financing liabilities (105) (22) (165) Increase (decrease) in short-term borrowings 111 (18) (37) Cash dividends paid (135) (106) (71) Other 5 22 2 - - ----------------------------------------------------------------------------- Net cash provided by (used in) financing activities (84) (18) 234 CASH AND CASH EQUIVALENTS Net increase (decrease) (1) (269) 289 At beginning of year 39 308 19 - - ----------------------------------------------------------------------------- At end of year $ 38 $ 39 $ 308 ============================================================================= Supplemental disclosure of cash flow information: Cash paid (received) during the year for: Income taxes $ 2 $ 56 $ (17) Interest (net of capitalized interest) 163 172 152 See notes beginning on page 38.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - - ------------------------------------------ (In the tables, dollars are in millions, except per share amounts. Certain amounts have been reclassified to conform to the 1996 presentation.) 1. ACCOUNTING POLICIES - - ----------------------- General - - ------- The consolidated financial statements are prepared in conformity with generally accepted accounting principles. As a result, management is required to make estimates and assumptions that affect the following: - - - reported amounts of revenues and expenses during the reporting period - - - reported amounts of assets and liabilities at the date of the financial statements - - - disclosure of contingent assets and liabilities at the date of the financial statements Actual results could differ from those estimates. Principles of Consolidation - - --------------------------- The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after eliminating inter-company transactions, profits and losses. The investments in unincorporated joint ventures are accounted for on an investment cost basis adjusted for the Company's share of the non- cash production charges of the operation. Unincorporated joint ventures are production facilities without marketing or sales activities. Investments in associated companies (20-to-50% owned) are carried at cost, which is adjusted for the Company's equity in undistributed net income. Revenue Recognition - - ------------------- Revenues are recognized when products are shipped and ownership risk and title pass to the customer. Inventories - - ----------- Inventories are stated at the lower of cost or market. Inventory costs were determined by the last-in, first-out (LIFO), first-in, first-out (FIFO) and average-cost methods. LIFO method inventories were $279 million at the end of 1996 (1995 - $312 million). FIFO and average-cost method inventories were $508 million at the end of 1996 (1995 - $579 million). Inventories would increase by $470 million at the end of 1996 (1995 - $508 million), if the FIFO method were applied to LIFO method inventories. In 1996, the liquidation of certain LIFO layers decreased cost of products sold by $30 million. The inventories in these LIFO layers were acquired at lower costs in prior years. Since inventories are sold at various stages of processing, there is no practical distinction between finished products, in-process products and other materials. Inventories are therefore presented as a single classification. Depreciation and Amortization - - ----------------------------- The straight-line method is used to depreciate plant and equipment over their estimated useful lives (buildings and leasehold improvements - 10 to 40 years, machinery and equipment - - - 5 to 20 years). Improvements to leased properties are generally amortized over the shorter of the terms of the respective leases or the estimated useful life of the improvement. Environmental Expenditures - - -------------------------- Remediation costs are accrued when it is probable that such efforts will be required and the related costs can be reasonably estimated. 1. ACCOUNTING POLICIES -- continued - - ------------------------------------ Postemployment Benefits - - ----------------------- The expected cost of postemployment benefits is accrued when it becomes probable that such benefits will be paid. Hedging - - ------- 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. These instruments, which are not held for trading purposes, are effective in minimizing such risks by creating equal and offsetting exposures. Unrealized gains and losses are deferred and recorded as a component of the underlying hedged transaction when it occurs. Realized gains or losses from matured and terminated hedge contracts are recorded in other assets or liabilities until the underlying hedged transaction is consummated. Realized and unrealized gains or losses on hedge contracts relating to transactions that are subsequently not expected to occur are recognized in results currently. None of these instruments contains multiplier or leverage features. There is exposure to credit risk if the other parties to these instruments do not meet their obligations. Creditworthiness of the other parties is closely monitored, and they are expected to fulfill their obligations. Contracts used to manage risks in these markets are not material. Cumulative Effect of Accounting Change - - -------------------------------------- In 1996, Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of," was adopted. The cumulative effect of adopting the standard was an after-tax loss of $15 million. The loss was for the impairment of assets held for sale, principally undeveloped land. Earnings Per Share - - ------------------ For 1996 and 1994, earnings per share equals net income, minus dividends on the Company's 7% PRIDES(SM), Convertible Preferred Stock (PRIDES), divided by the weighted-average number of common shares outstanding during the year. For 1995, earnings per share equals net income divided by the weighted-average number of common shares and common share equivalents outstanding during the year. The number of common share equivalents outstanding for 1995 was based on the assumed conversion of the PRIDES. For the purpose of this computation, the conversion rate (0.88 per share) of common stock for each share of PRIDES was based on the average market value of common stock during 1995 ($53.56 per share). Common share equivalents relating to the PRIDES were not included in 1996 and 1994 since their effect would have been anti- dilutive. All of the outstanding shares of PRIDES were redeemed for or converted into shares of common stock in late 1996 (see Note 7). If this exchange had occurred on January 1, 1996, earnings per share (net income) would have been $1.22 for 1996. Stock Options - - ------------- Stock options are accounted for using the intrinsic value method. Compensation expense is not recognized because the exercise price of the stock options equals the market price of the underlying stock on the date of grant. Compensation expense is recognized for performance-based stock options if and when the performance condition is satisfied. Compensation expense is the difference between the market price of the common stock when the performance condition is satisfied and the exercise price of the stock options. Statement of Cash Flows - - ----------------------- In preparing the Statement of Cash Flows, all highly liquid, short-term investments purchased with an original maturity of three months or less are considered to be cash equivalents. 2. GAINS ON SALES OF ASSETS - - ---------------------------- In 1994, a pre-tax gain of $63 million was recognized on the sale of a subsidiary that held a 40% interest in an Australian gold mine. Also in 1994, a pre-tax gain of $25 million was recognized on the sale of timberland. 3. OPERATIONAL RESTRUCTURING COSTS - - ----------------------------------- Operational restructuring costs of $37 million (pre-tax) were recognized in 1996. These costs consisted principally of employee termination benefits relating to the closing of a can plant in Texas. The plant's annual capacity of 1.4-billion cans was in excess of the Company's domestic customer needs. Productivity gains within the Company's can-making system and slower overall growth in the domestic can market permitted this rationalization of operations. Certain equipment at the plant will be transferred to the Company's other domestic and international operations. The plant and property are expected to be sold. Approximately one-half of the cash requirements relating to these costs was paid in 1996. Most of the remainder is expected to be paid in 1997. 4. UNINCORPORATED JOINT VENTURES AND ASSOCIATED COMPANIES - - ---------------------------------------------------------- Investments in unincorporated joint ventures that produce alumina and primary aluminum consist of the following:
December 31 ------------------ 1996 1995 ------------------ Current assets $63 $67 Current liabilities (55) (54) Property, plant and equipment and other assets 1,047 1,032 ------------------ Net investment $1,055 $1,045 ==================
Foreign-based associated companies produce bauxite, alumina, primary aluminum, hydroelectric power and fabricated aluminum products. Investments in these companies were $282 million at the end of 1996 (1995 - $241 million), including advances of $46 million (1995 - $46 million). Equity income (pre-tax) of $21 million was recognized during 1996 (1995 - $17 million, 1994 - $24 million). Summarized financial information related to these entities follows:
Years ended December 31 ---------------------------- 1996 1995 1994 ---------------------------- Net sales $950 $709 $476 Cost of products sold 814 602 410 Net income 31 37 33
December 31 ------------------ 1996 1995 ------------------ Current assets $599 $533 Noncurrent assets 917 575 Current liabilities 458 384 Noncurrent liabilities 469 265 Stockholders' equity 589 459
5. PROPERTY, PLANT AND EQUIPMENT (AT COST) - - -------------------------------------------
December 31 ------------------- 1996 1995 ------------------- Land, land improvements and mineral properties $303 $302 Buildings and leasehold improvements 1,092 1,057 Machinery and equipment 5,211 4,972 Construction in progress 207 269 ------------------- $6,813 $6,600 Less allowances for depreciation and amortization 3,576 3,377 ------------------- Net property, plant and equipment $3,237 $3,223 ===================
6. FINANCING ARRANGEMENTS - - --------------------------
December 31 ------------------ 1996 1995 ------------------ Public debt securities: Medium-term notes $997 $1,046 9% debentures due 2003 100 100 9-3/8% debentures due 1999 100 100 6-5/8% amortizing notes 284 284 Industrial and environmental control revenue bonds 237 242 Other arrangements: Bank credit agreement 150 150 Mortgages and other notes payable 21 32 ------------------ 1,889 1,954 Amounts due within one year 96 101 ------------------ Long-term debt $1,793 $1,853 ==================
Long-term debt at December 31, 1996 matures as follows: 1997 $96 1998 291 1999 197 2000 154 2001 169 2002-2025 982 The medium-term notes, 9% debentures and 9-3/8% debentures were issued under a $1.65-billion shelf registration. The medium-term notes bear interest at an average fixed rate of 8.8% and have maturities ranging from 1997 to 2013. At December 31, 1996, $113 million of debt securities remained unissued under the shelf registration. The 6-5/8% amortizing notes were issued at a discount (99.48%) and have an effective interest rate of 6.7%. The notes require annual principal repayments of $57 million between 1998 and 2002. Industrial and environmental control revenue bonds consist of variable-rate debt with interest rates averaging approximately 3.6% at December 31, 1996. These bonds require principal repayment periodically or in a lump sum through 2025. Letters of credit issued by banks support these bonds. The bank credit agreement has a variable interest rate (5.9% at December 31, 1996) and matures in 1998. 6. FINANCING ARRANGEMENTS -- continued - - --------------------------------------- Mortgages and other notes payable consist of fixed-rate debt with an average rate of 6.4%. They require principal repayment through 2009. The Company has a $500-million revolving credit facility that expires in 2001. No amounts were outstanding under the facility at December 31, 1996. The annual commitment fee on the facility is .10%. Certain financing arrangements contain restrictions that primarily consist of requirements to maintain specified financial ratios. These restrictions do not inhibit operations or the use of fixed assets. At December 31, 1996, the Company exceeded all such requirements. The fair value of long-term debt was approximately $2.0 billion at the end of 1996 (1995 - $2.1 billion). The fair value was determined by using discounted cash flow analysis. Interest rate swap agreements are designated to manage a portion of the exposure to interest rate fluctuations after considering outstanding levels of variable-rate and fixed-rate debt. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment of interest expense. The fair values of these agreements (which at the end of 1996 and 1995 were not material) are not recognized in the financial statements. At December 31, 1996, the Company had $625 million of these agreements (1995 - $742 million), which effectively convert a portion of its debt (principally medium-term notes) from fixed-rate to variable-rate. Payments are received based on a fixed rate (5.9%) and made based on a variable rate (5.7% at December 31, 1996). These agreements mature in 1997 ($125 million), 1998 ($100 million) and 2001 ($400 million). The Company also had $175 million of agreements (1995 - $175 million), which effectively convert a portion of its debt (principally the bank credit agreement and industrial and environmental control revenue bonds) from variable-rate to fixed-rate. Payments are received based on a variable rate (5.9% at December 31, 1996) and made based on a fixed rate (6.0%). These agreements mature in 1998. The variable rates in these agreements are based on the London Interbank Offer Rate. Interest capitalized was $13 million during 1996 (1995 - $7 million, 1994 - $5 million). The weighted-average interest rate on commercial paper was 5.9% at the end of 1996. The weighted-average interest rate on other short-term borrowings was 4.6% at the end of 1996 (1995 - 7.0%). 7. STOCKHOLDERS' EQUITY - - ------------------------ Preferred stock - - --------------- The Company has 21,000,000 shares of preferred stock authorized. Two million shares have been designated Series A Junior Participating Preferred. On December 31, 1996, the Company called for redemption of all its outstanding PRIDES. As a result of the call, the Company issued a total of 9,019,990 shares of common stock upon the redemption or conversion of all of the PRIDES. A total of 4,673,800 shares of common stock were issued in redemption of 5,699,756 shares of PRIDES. The redemption rate of .82 of a share of common stock for each share of PRIDES was based on a call price of $48.077 per share and a common stock market price of $58.79 per share (determined as provided in the PRIDES governing documents). In lieu of redemption, holders of 5,300,244 shares of PRIDES elected to convert their shares of PRIDES (on or before the redemption date) into 4,346,190 shares of common stock (at a conversion rate of .82 of a share of common stock for each share of PRIDES). Dividends declared on each share of PRIDES were $3.31 in 1996 (1995 - $3.31). 7. STOCKHOLDERS' EQUITY -- continued - - -------------------------------------
Common stock - - ------------ Shares Amount ----------------------- Authorized, without par value 200,000,000 Outstanding: At beginning of 1994 60,488,863 $784 Shares issued under employee benefit plans: 1994 1,679,792 86 1995 1,429,822 71 1996 100,132 5 Shares issued for the redemption or conversion of PRIDES in 1996 9,019,990 505 ----------------------- At end of 1996 72,718,599 $1,451 =======================
Cash dividends declared 1996 1995 1994 ------------------------ PRIDES $36 $36 $34 Common stock 89 77 62 ------------------------ $125 $113 $96 ========================
Stock options - - ------------- The Company has a non-qualified stock option plan under which key employees may be granted stock options at a price equal to the fair market value at the date of grant. Other than the performance-based options discussed below, the stock options currently outstanding vest in one year and are exercisable between one year and 10 years from the date of grant. A summary of stock option activity and related information follows (options are in thousands):
1996 1995 1994 ---- ---- ---- Outstanding at January 1 4,680 4,404 3,756 Granted 750 755 728 Exercised (103) (453) (55) Canceled (9) (26) (25) ------------------------------ Outstanding at December 31 5,318 4,680 4,404 Exercisable at December 31 4,569 3,931 3,681 Available for grant (increased on January 1, 1996 by 2 million shares) 1,630 520 1,260 Weighted-average prices: Outstanding at January 1 $52 $51 $52 Granted 55 52 45 Exercised 39 43 31 Canceled 52 53 56 Outstanding at December 31 52 52 51 Exercisable at December 31 52 52 52
7. STOCKHOLDERS' EQUITY -- continued - - ------------------------------------- Stock options-continued - - ----------------------- The following table summarizes information about stock options outstanding at December 31, 1996 (options are in thousands and remaining contractual life and exercise prices are weighted- averages):
Options Outstanding Options Exercisable -------------------------------- ------------------- Range of Remaining Exercise Contractual Exercise Exercise Prices Options Life Price Options Price ------ ------- ---- ----- ------- ----- $35 to $49 1,518 6 Years $44 1,518 $44 $52 to $60 3,800 6 Years 56 3,051 56 ------- ------- $35 to $60 5,318 6 Years 52 4,569 52 ======= =======
In 1996, the Company also granted 150,000 performance-based stock options at an exercise price of $53.50 per share. The stock options will not be exercisable unless, on or before September 30, 1999, the closing price of the common stock equals or exceeds $80.25 per share for 30 consecutive days. If this condition is satisfied, the options may be exercised any time between August 30, 1997 and March 31, 2000. Pro forma net income and earnings per share have been prepared based on expensing (after tax) the estimated fair value of stock options granted during 1996 and 1995. The estimated fair value of the stock options was determined by using a Black-Scholes option pricing model. The estimated fair values and the weighted- average assumptions used to estimate those values follow:
Performance- Stock Options Based Options ----------------- ------------- 1996 1995 1996 ---- ---- ---- Risk-free interest rate 6.9% 6.5% 6.5% Dividend yield 2.6% 3.0% 2.1% Volatility factor of the expected market price of the Company's common stock .278 .270 .262 Expected life of the option 6 years 6 years 3 years Estimated fair value of each stock option granted $16.97 $14.30 $11.73
The Black-Scholes option pricing model was not developed for use in valuing employee stock options. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, it requires the input of highly subjective assumptions including expectations of future dividends and stock price volatility. The assumptions are only used for making the required fair value estimate and should not be considered as indicators of future dividend policy or stock price appreciation. Because changes in the subjective input assumptions can materially affect the fair value estimate and because the employee stock options have characteristics significantly different from those of traded options, the use of the Black-Scholes option pricing model may not provide a reliable single measure of the employee stock options. The pro forma information follows:
1996 1995 ---- ---- Pro forma net income $79 $ 382 Pro forma earnings per share $0.67 $5.25
7. STOCKHOLDERS' EQUITY -- continued - - ------------------------------------- Shareholder rights plan - - ----------------------- Each share of common stock has one right attached and the rights trade with the common stock. The rights are exercisable only if a person or group buys 20% or more of the Company's common stock, or announces a tender offer for 30% or more of the outstanding common stock. Each right will entitle a holder to buy one- hundredth of one share of the Company's Series A Junior Participating Preferred Stock at an exercise price of $125. If at any time after the rights become exercisable, the Company is acquired in a merger or other business combination, or if there is a sale or transfer of 50% of its assets or earning power, each right would enable its holder to buy common stock of the acquiring company at a 50% discount. In addition, if a person or group acquires 30% or more of the common stock, or if certain other events occur, each right would enable its holder to buy common stock of the Company at a 50% discount. The rights, which do not have voting privileges, expire in late 1997. The Board of Directors may redeem the rights before expiration, under certain circumstances, for $0.05 per right. Until the rights become exercisable, they have no dilutive effect on earnings per share. These rights should not interfere with a business combination approved by the Board of Directors. However, they will cause substantial dilution to a person or group that attempts to acquire the Company without conditioning the offer on redemption of the rights or acquiring a substantial number of the rights.
Cumulative currency translation adjustments - - ------------------------------------------- 1996 1995 1994 ----------------------- At beginning of year $(22) $(43) $(50) Currency translation adjustments (16) 23 7 Income taxes 1 (2) - ----------------------- At end of year $(37) $(22) $(43) =======================
8. POSTRETIREMENT BENEFITS - - --------------------------- Pensions - - -------- The Company has several noncontributory defined benefit pension plans that cover substantially all employees. Plans covering salaried employees provide pension benefits based on a formula. The formula considers length of service and earnings during years of service. Plans covering hourly employees generally provide a specific amount of benefits for each year of service. Net pension costs were:
1996 1995 1994 ------------------------ Service cost $38 $27 $32 Interest cost 138 133 127 Actual return on plan assets -- (gain) loss (212) (308) 3 Net amortization and deferrals 94 192 (92) Other 14 12 12 ------------------------ Total $72 $56 $82 ========================
8. POSTRETIREMENT BENEFITS -- continued - - ---------------------------------------- Pensions-continued - - ------------------ The following table sets forth information on the principal pension plans:
December 31 ------------------- 1996 1995 ------------------- Actuarial present value of pension benefit obligation: Vested $1,593 $1,546 Nonvested 192 177 ------------------- Accumulated $1,785 $1,723 =================== Projected $1,916 $1,858 Plan assets at fair value 1,876 1,692 ------------------- Plan assets less than projected benefit obligation (40) (166) Items not yet recognized: Unrecognized net loss 95 271 Unamortized plan change benefits 156 98 Recognition of minimum liability (18) (151) ------------------- Net pension asset $193 $52 ===================
Assumptions used in accounting for the principal pension plans were:
1996 1995 1994 ------------------------- Discount rate 7.75% 7.25% 8.75% Approximate weighted-average rate of increase in compensation levels (salaried plan only) 4.5% 4.5% 4.5% Expected long-term rate of return on assets 9.25% 9.25% 9.25%
At December 31, 1996, the accumulated benefit obligations of the pension plans were substantially fully funded. In the future, the Company expects to keep the plans fully funded absent significant plan changes and/or deviations in actuarial assumptions. Absent these changes and/or deviations, funding levels will approximate pension costs in future years. Cash for the contributions is expected to be generated from operations. Contributions totaled $87 million in 1996 and $127 million (including 0.9 million shares of common stock of the Company valued at $45 million) in 1995. 8. POSTRETIREMENT BENEFITS -- continued - - ---------------------------------------- At December 31, 1996, the plans' assets consisted of the following: Corporate equity securities 59% Corporate bonds 26 Government debt securities and cash equivalents 10 Real estate 5 Corporate equity securities include 1.5 million shares of the Company's common stock. These shares had a market value of $85 million at the end of 1996. Dividends paid on the Company's common stock held by the plans during 1996 totaled $2 million. Other postretirement benefits - - ----------------------------- The Company provides most domestic retired employees with health care and life insurance benefits. Substantially all domestic employees may become eligible for these benefits if they work for the Company until retirement age. The cost of these benefits is funded when actual expenses are incurred. Net periodic postretirement benefit cost was:
1996 1995 1994 ---------------------------- Service cost $8 $6 $8 Interest cost 62 74 74 Net amortization (19) (19) (16) ---------------------------- Total $51 $61 $66 ============================
The accumulated postretirement benefit obligation consists of the following:
December 31 ------------------- 1996 1995 ------------------- Retirees $625 $694 Active employees fully eligible 81 71 Active employees not fully eligible 146 165 Unamortized plan change benefits 145 178 Unrecognized net gain (loss) 75 (46) ------------------- Total $1,072 $1,062 ===================
The health care cost trend rate has a significant effect on the amounts reported. The annual assumed rate of increase for the principal plans is 6.5% for 1997 (7% in 1996 and 10% in 1995) and is assumed to decrease gradually to 5% for 2002 and beyond. Each 1% change in the rate would change the accumulated postretirement benefit obligation by $52 million at December 31, 1996 and net periodic postretirement benefit cost for 1996 by $4 million. The discount rate used in determining the accumulated postretirement benefit obligation for the principal plans was 7.75% at December 31, 1996 (1995 - 7.25%). 9. TAXES ON INCOME - - ------------------- The significant components of the provision for income taxes were:
1996 1995 1994 ---------------------- Current: Federal $3 $10 $30 Foreign 3 10 15 State 1 3 1 ---------------------- Total current 7 23 46 ---------------------- Deferred: Federal 2 66 (13) Foreign 28 62 32 State (2) - (8) ---------------------- Total deferred 28 128 11 ---------------------- Equity income 14 8 11 ---------------------- Total $49 $159 $68 ======================
The deferred tax provision includes domestic carryforward benefits of $28 million (1995 - $9 million, 1994 -$14 million). The effective income tax rate varied from the U.S. statutory rate as follows:
1996 1995 1994 ---------------------- U.S. rate 35% 35% 35% Income taxed at other than the U.S. rate 2 (5) 2 Percentage depletion (3) (1) (3) State income taxes and other (2) - 2 ---------------------- Effective rate 32% 29% 36% ======================
Income taxed at other than the U.S. rate includes a non-recurring foreign tax benefit of 3% in 1995. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 1996, the Company had $890 million (1995 - $902 million) of deferred tax assets and $826 million (1995 - $759 million) of deferred tax liabilities that have been netted with respect to tax jurisdictions for presentation purposes. The significant components of these amounts were:
1996 1995 ------------------------------------ Asset Liability Asset Liability ------------------------------------ Retiree health benefits $ 412 $- $415 $- Tax carryforward benefits 225 - 213 (1) Environmental and restructuring costs 110 (2) 121 (2) Other 5 54 44 39 Tax over book depreciation (380) 210 (369) 200 Valuation reserve relating to tax carryforward benefits (46) - (45) - ------------------------------------ Total deferred tax assets and liabilities 326 262 379 236 Amount included as current in balance sheet 30 - 3 - ------------------------------------ Noncurrent deferred tax assets and liabilities $296 $262 $376 $236 ====================================
9. TAXES ON INCOME -- continued - - -------------------------------- The tax carryforward benefits can be carried forward indefinitely except for $61 million that will expire primarily between 2001 and 2011. A valuation reserve of $46 million relating to certain of these benefits has been recorded. Alternatives continue to be evaluated that may result in the ultimate realization of a portion of these reserved assets. Income taxes have not been provided on the undistributed earnings ($1,015 million) of foreign subsidiaries. The Company intends to use such earnings to finance foreign expansion, reduce foreign debt or support foreign operating requirements. 10. CONTINGENT LIABILITIES AND COMMITMENTS - - ------------------------------------------- Various suits, claims and actions are pending against the Company. In the opinion of management, after consultation with legal counsel, disposition of these suits, claims and actions, either individually or in the aggregate, will not have a material adverse effect on the Company's competitive or financial position or its ongoing results of operations. No assurance can be given, however, that the disposition of one or more of such suits, claims or actions in a particular reporting period will not be material in relation to the reported results for such period. The Company is committed to paying its proportionate share of annual primary aluminum production charges (including debt service) relating to its interests in an unincorporated joint venture and an associated company. These arrangements include minimum commitments of approximately $45 million annually through 1999. The present value of these commitments at December 31, 1996 was $122 million, after excluding interest of $13 million. The Company purchased approximately $150 million of primary aluminum in each of the last three years under these arrangements. Certain items of property, plant and equipment are leased under long-term operating leases. Lease expense was approximately $48 million per year for the years 1994 to 1996. Lease commitments at December 31, 1996, were approximately $80 million. Leases covering major items contain renewal and/or purchase options that may be exercised. 11. ENVIRONMENTAL EXPENDITURES - - ------------------------------- 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. Amounts have been recorded (on an undiscounted basis) which, in management's best estimate, will be sufficient to satisfy anticipated costs of known remediation requirements. At December 31, 1996, the accrual for environmental remediation costs was $197 million. This amount is expected to be spent over the next 15 to 20 years with the majority to be spent by the year 2002. Estimated environmental remediation costs are developed after considering, among other things, the following: - - - currently available technological solutions - - - alternative cleanup methods - - - risk-based assessments of the contamination - - - estimated proportionate share of remediation costs (if applicable) 11. ENVIRONMENTAL EXPENDITURES -- continued - - -------------------------------------------- The Company may also use external consultants, and consider, when available, estimates by other PRPs and governmental agencies and information regarding the financial viability of other PRPs. Based on information currently available, the Company believes it is unlikely that it will incur substantial additional costs as a result of failure by other PRPs to satisfy their responsibilities for remediation costs. 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. 12. COMPANY OPERATIONS - - ----------------------- The Company serves global markets as a supplier and recycler of aluminum and other products, with its core business being as a vertically integrated producer of a wide variety of value-added aluminum products. The Company produces alumina, carbon products and primary and reclaimed aluminum, principally to supply the needs of its fabricating operations. These fabricating operations produce aluminum foil, sheet, plate, cans, extruded products (including heat exchanger tubing, drive shafts, bumpers and window systems), flexible packaging and wheels, among other items. The Company also produces a broad range of plastic products, including film, bags, containers and lids, for consumer products, foodservice and packaging uses. The Company markets an extensive line of consumer products under the Reynolds brand name, including the well-known Reynolds Wrap aluminum foil. The Company's principal markets for its products are the aluminum beverage can, packaging, consumer products, transportation, and building and construction markets. The Company also is engaged in the distribution of aluminum and stainless steel and other nonaluminum industrial products to a variety of markets. 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 and fluctuations influence the Company's operating results. The Company's current strategy of being a vertically integrated producer of value-added aluminum products and its 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. Through these activities, the Company's risk profile is managed in a manner consistent with management's operational strategies. The Company continues to manage its global operations in order to mitigate its exposure to general financial, political, economic and business risks. In order to more fully describe the nature of its operations and to supplement the foregoing, the Company has separated its vertically integrated operations into two groups referred to as Finished Products and Other Sales, and Production and Processing. Summarized financial information relating to the Company's operations and investments is as follows: 12. COMPANY OPERATIONS -- continued - - ------------------------------------ Operating Data
Finished Production Products and and Eliminations, 1996 Other Sales Processing etc. Consolidated - - -------------------------------------------------------------------------------------------------- Sales to customers $3,538 $3,434 $- $6,972 Internal transfers 6 785 (791) - - - -------------------------------------------------------------------------------------------------- Total sales $3,544 $4,219 $(791) $6,972 - - -------------------------------------------------------------------------------------------------- Operating income $185 $86 $(2) $269 Equity income 19 9 (7) 21 Interest and other income 23 Interest expense (160) ------------- Income before income taxes and cumulative effect of accounting change $153 - - -------------------------------------------------------------------------------------------------- Depreciation and amortization 102 263 365 Identifiable assets 1,546 3,966 (51) 5,461 Capital investments 131 301 432 - - -------------------------------------------------------------------------------------------------- 1995 - - -------------------------------------------------------------------------------------------------- Sales to customers $3,535 $3,678 $- $7,213 Internal transfers 9 809 (818) - - - -------------------------------------------------------------------------------------------------- Total sales $3,544 $4,487 $(818) $7,213 - - -------------------------------------------------------------------------------------------------- Operating income $232 $492 $(43) $681 Equity income 14 11 (8) 17 Interest and other income 22 Interest expense (172) ------------- Income before income taxes $548 - - -------------------------------------------------------------------------------------------------- Depreciation and amortization 99 245 344 Identifiable assets 1,558 4,121 (83) 5,596 Capital investments $157 $688 845 - - -------------------------------------------------------------------------------------------------- 1994 - - -------------------------------------------------------------------------------------------------- Sales to customers $3,040 $2,839 $- $5,879 Internal transfers 4 706 (710) - - - -------------------------------------------------------------------------------------------------- Total sales $3,044 $3,545 $(710) $5,879 - - -------------------------------------------------------------------------------------------------- Operating income $256 $2 $(46) $212 Equity income 23 10 (9) 24 Interest and other income 110 Interest expense (156) ------------- Income before income taxes $190 - - -------------------------------------------------------------------------------------------------- Depreciation and amortization 91 250 341 Identifiable assets 1,452 3,963 (84) 5,331 Capital investments $183 $221 404 - - --------------------------------------------------------------------------------------------------
12. COMPANY OPERATIONS -- continued - - ------------------------------------ Geographic Data
Other Foreign (Principally 1996 Domestic Canada Europe) Eliminations Consolidated - - ----------------------------------------------------------------------------------------- Sales to customers $5,450 $509 $1,013 $6,972 Transfers between areas 380 677 203 $(1,260) - - - ----------------------------------------------------------------------------------------- Total sales $5,830 $1,186 $1,216 $(1,260) $6,972 - - ----------------------------------------------------------------------------------------- Operating income (loss) $148 $154 $(18) $(15) $269 Identifiable assets $4,220 $1,332 $798 $(171) $6,179 - - ----------------------------------------------------------------------------------------- 1995 - - ----------------------------------------------------------------------------------------- Sales to customers $5,524 $529 $1,160 $7,213 Transfers between areas 484 726 176 (1,386) - - - ----------------------------------------------------------------------------------------- Total sales $6,008 $1,255 $1,336 $(1,386) $7,213 - - ----------------------------------------------------------------------------------------- Operating income $230 $351 $87 $13 $681 Identifiable assets $4,360 $1,326 $981 $(213) $6,454 - - ----------------------------------------------------------------------------------------- 1994 - - ----------------------------------------------------------------------------------------- Sales to customers $4,506 $375 $998 $5,879 Transfers between areas 404 576 178 (1,158) - - - ----------------------------------------------------------------------------------------- Total sales $4,910 $951 $1,176 $(1,158) $5,879 - - ----------------------------------------------------------------------------------------- Operating income $27 $133 $63 $(11) $212 Identifiable assets $4,578 $1,288 $975 $(236) $6,605 - - -----------------------------------------------------------------------------------------
Approximately 30% of products transferred between operating groups is reflected at cost-related prices. The remaining transfers between operating areas and transfers among Canada, other foreign and domestic areas are reflected at market-related prices. Operating profit is after allocation of selling, administrative and general expenses. It does not reflect interest expense or other items of income or expense considered to be general corporate in nature. Investments in and advances to associated companies and unincorporated joint ventures not consolidated totaled $1,337 million at the end of 1996 (1995 - $1,286 million, 1994 - $856 million). These investments and advances relate principally to Australian and Canadian entities in the Production and Processing group. Corporate assets of $718 million at the end of 1996 (1995 - - - $858 million, 1994 - $1,274 million) consist principally of cash, investments, deferred taxes and other assets. Research and development expenditures were $49 million in 1996 (1995 - $43 million, 1994 - $38 million). We are conducting a review of all our operations and businesses. We are considering a number of alternatives that include, among other things, asset sales, spin-offs, and the forming of strategic alliances to increase scale. Such actions, if taken, could affect the Company's results and ongoing operating performance. No decisions will be made until later in 1997. 13. CANADIAN REYNOLDS METALS COMPANY, LTD. AND REYNOLDS ALUMINUM COMPANY OF CANADA, LTD. - - ----------------------------------------------------------------- Financial statements 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 notes to the financial statements of Reynolds Metals Company. Summarized financial information is as follows: Canadian Reynolds Metals Company, Ltd.
Years ended December 31 -------------------------- 1996 1995 1994 -------------------------- Net Sales: Customers $202 $226 $111 Parent company 599 690 576 -------------------------- 801 916 687 Cost of products sold 677 651 603 Net income (loss) $65 $176 $38
December 31 ---------------- 1996 1995 ---------------- Current assets $189 $112 Noncurrent assets 1,225 1,266 Current liabilities (50) (91) Noncurrent liabilities (624) (617)
Reynolds Aluminum Company of Canada, Ltd.
Years ended December 31 ------------------------- 1996 1995 1994 ------------------------- Net Sales: Customers $509 $522 $373 Parent company 517 619 498 ------------------------- 1,026 1,141 871 Cost of products sold 884 849 755 Net income (loss) $59 $188 $50
December 31 ------------------ 1996 1995 ------------------ Current assets $240 $221 Noncurrent assets 1,370 1,407 Current liabilities (95) (199) Noncurrent liabilities (656) (632)
Quarterly Results of Operations (Unaudited) (millions, except per share amounts)
- - -------------------------------------------------------------------------------------------------------- 1996 1995 - - -------------------------------------------------------------------------------------------------------- Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th - - -------------------------------------------------------------------------------------------------------- Net sales $1,662 $1,823 $1,751 $1,736 $1,651 $1,864 $1,841 $1,857 Gross profit 205 227 180 151 259 304 307 272 Income before cumulative effect of accounting change 17 60 26 1 82 111 112 84 Cumulative effect of accounting change (See Note 1) (15) - - - - - - - - - -------------------------------------------------------------------------------------------------------- Net income $2 $60 $26 $1 $82 $111 $112 $84 ======================================================================================================== Earnings per common share Income (loss) before cumulative effect of accounting change $0.12 $0.81 $0.26 $(0.13) $1.13 $1.51 $1.56 $1.15 Cumulative effect of accounting change (0.24) - - - - - - - - - -------------------------------------------------------------------------------------------------------- Net income (loss) $(0.12) $0.81 $0.26 $(0.13) $1.13 $1.51 $1.56 $1.15 ======================================================================================================== Gross profit equals net sales minus cost of products sold (including manufacturing depreciation). Included in income before cumulative effect of accounting change for 1996 is a charge for restructuring costs of $23 million ($0.36 per share) in the first quarter of 1996 and favorable effects from LIFO inventory liquidations of $3 million ($0.05 per share), $6 million ($0.10 per share) and $10 million ($0.14 per share) in the second, third and fourth quarters, respectively.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Stockholders and Board of Directors Reynolds Metals Company We have audited the accompanying consolidated balance sheets of Reynolds Metals Company as of December 31, 1996 and 1995, and the related consolidated statements of income and retained earnings, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Reynolds Metals Company at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 1 to the Consolidated Financial Statements, in 1996 the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Ernst & Young LLP Richmond, Virginia February 21, 1997 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information concerning the directors and nominees for directorship and compliance with Section 16(a) of the Exchange Act of 1934, see the information under the captions "Item 1. Election of Directors" and "General Information - Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 16, 1997. That information is incorporated in this report by reference. Information concerning executive officers of the Registrant is shown in Part I - Item 4A of this report. Item 11. EXECUTIVE COMPENSATION For information required by this item, see the information under the captions "Item 1. Election of Directors - Board Compensation and Benefits", "Item 1. Election of Directors - Other Compensation", and "Executive Compensation" in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 16, 1997. That information is incorporated in this report by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT For information required by this item, see the information under the caption "Beneficial Ownership of Securities" in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 16, 1997. That information (other than that appearing under the caption "Beneficial Ownership of Securities - Stock Ownership Guidelines") is incorporated in this report by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS For information required by this item, see the information under the captions "Item 1. Election of Directors - Certain Relationships", "Item 1. Election of Directors - Other Compensation", "Executive Compensation - Pension Plan Table" and "Executive Compensation - Certain Arrangements" in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 16, 1997. That information is incorporated in this report by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The consolidated financial statements and exhibits listed below are filed as a part of this report. (1) Consolidated Financial Statements: Page ---- Consolidated statement of income and retained earnings - Years ended December 31, 1996, 1995 and 1994. 35 Consolidated balance sheet - December 31, 1996 and 1995. 36 Consolidated statement of cash flows - Years ended December 31, 1996, 1995 and 1994. 37 Notes to consolidated financial statements. 38 Report of Ernst & Young LLP, Independent Auditors. 55 (2) Financial Statement Schedules This report omits all schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission because they are not required, are inapplicable or the required information has otherwise been given. This report omits individual financial statements of Reynolds Metals Company because the restricted net assets (as defined in Accounting Series Release 302) of all subsidiaries included in the consolidated financial statements filed, in the aggregate, do not exceed 25% of the consolidated net assets shown in the consolidated balance sheet as of December 31, 1996. This report omits financial statements of all associated companies (20% to 50% owned) because no associated company is individually significant. (3) Exhibits EXHIBIT 2 - None EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended 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. * 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)) _______________________ *Incorporated by reference. * 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) * EXHIBIT 4.5 - Rights Agreement dated as of November 23, 1987 (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 November 23, 1987, pertaining to Preferred Stock Purchase Rights, EXHIBIT 1) * EXHIBIT 4.6 - Amendment No. 1 dated as of December 19, 1991 to the Rights Agreement. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.11) * EXHIBIT 4.7 - Form of 9-3/8% Debenture due June 15, 1999. (File No. 1-1430, Form 8-K Report dated June 6, 1989, EXHIBIT 4) * EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.3) * EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.4) * EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term Note. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.15) * EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term Note. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.16) * EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003. (File No. 1-1430, Form 8-K Report dated August 16, 1991, Exhibit 4(a)) * EXHIBIT 4.13 - 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) ("REYCAN"), as amended. (File No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.13) * EXHIBIT 4.14 - By-Laws of REYCAN, as amended. (File No. 1- 1430, 1995 Form 10-K Report, EXHIBIT 4.14) * EXHIBIT 4.15 - Articles of Incorporation of Societe Canadienne de Metaux Reynolds, Ltee/Canadian Reynolds Metals Company, Ltd. ("CRM"), as amended. (File No. 1- 1430, 1995 Form 10-K Report, EXHIBIT 4.15) * EXHIBIT 4.16 - By-Laws of CRM, as amended. (File No. 1- 1430, 1995 Form 10-K Report, EXHIBIT 4.16) _______________________ *Incorporated by reference. * EXHIBIT 4.17 - Indenture dated as of April 1, 1993 among REYCAN, 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)) * EXHIBIT 4.18 - First Supplemental Indenture, dated as of December 18, 1995 among REYCAN, Reynolds Metals Company, CRM and The Bank of New York, as Trustee. (File No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.18) * EXHIBIT 4.19 - 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)) EXHIBIT 9 - None =* 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) =* 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) =* 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) =* 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) =* EXHIBIT 10.5 - Supplemental Death Benefit Plan for Officers. (File No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.8) =* EXHIBIT 10.6 - Financial Counseling Assistance Plan for Officers. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.11) =* EXHIBIT 10.7 - Management Incentive Deferral Plan. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.12) =* 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) =* 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) ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. =* EXHIBIT 10.10 - Form of Executive Severance Agreement between Reynolds Metals Company and key executive personnel, including each of the individuals (other than Donna C. Dabney) listed in Item 4A of this report. (File No. 1-1430, 1987 Form 10- K Report, EXHIBIT 10.18) =* 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)) =* 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)) =* 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) =* 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) =* 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) =* EXHIBIT 10.16 - Letter Agreement dated January 18, 1991 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, 1990 Form 10-K Report, EXHIBIT 10.27) =* EXHIBIT 10.17 - 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)) =* EXHIBIT 10.18 - Consulting Agreement dated May 1, 1992 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, Form 10-Q Report for the Quarter Ended March 31, 1992, EXHIBIT 28(b)) =* EXHIBIT 10.19 - Renewal dated February 18, 1994 of Consulting Agreement dated May 1, 1992 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, 1993 Form 10-K Report, EXHIBIT 10.28) ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. =* EXHIBIT 10.20 - 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) =* EXHIBIT 10.21 - 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) =* EXHIBIT 10.22 - 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) =* EXHIBIT 10.23 - 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) =* EXHIBIT 10.24 - 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) =* EXHIBIT 10.25 - 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) =* EXHIBIT 10.26 - 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) =* EXHIBIT 10.27 - 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) =* EXHIBIT 10.28 - 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) =* EXHIBIT 10.29 - 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) =* EXHIBIT 10.30 - 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) ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. =* EXHIBIT 10.31 - 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) =* EXHIBIT 10.32 - Reynolds Metals Company 1996 Nonqualified Stock Option Plan. (Registration Statement No. 333-03947 on Form S-8, dated May 17, 1996, EXHIBIT 4.6) =* EXHIBIT 10.33 - 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) =* EXHIBIT 10.34 - 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) =* EXHIBIT 10.35 - 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) =* EXHIBIT 10.36 - 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) =* EXHIBIT 10.37 - 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) = EXHIBIT 10.38 - Amendment to Reynolds Metals Company New Management Incentive Deferral Plan effective January 1, 1996 = EXHIBIT 10.39 - Amendment to Reynolds Metals Company Performance Incentive Plan effective January 1, 1996 = EXHIBIT 10.40 - Reynolds Metals Company Supplemental Incentive Plan = EXHIBIT 10.41 - Reynolds Metals Company Stock Plan for Outside Directors = EXHIBIT 10.42 - Special Executive Severance Package for Certain Employees who Terminate Employment between January 1, 1997 and June 30, 1998, as approved by the Compensation Committee of the Company's Board of Directors on January 17, 1997 ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. = EXHIBIT 10.43 - 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 EXHIBIT 11 - Computation of Earnings Per Share EXHIBIT 12 - Not applicable EXHIBIT 13 - Not applicable EXHIBIT 16 - Not applicable EXHIBIT 18 - None EXHIBIT 21 - List of Subsidiaries of Reynolds Metals Company EXHIBIT 22 - None EXHIBIT 23 - Consent of Independent Auditors EXHIBIT 24 - Powers of Attorney EXHIBIT 27 - Financial Data Schedule ____________________________ = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. Pursuant to Item 601 of Regulation S-K, certain instruments with respect to long-term debt of the Company are omitted because such debt does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of any such instrument to the Commission upon request. (b) Reports on Form 8-K During the fourth quarter of 1996, the Registrant filed with the Commission a Current Report on Form 8-K dated December 2, 1996 reporting under Item 5 that it would redeem on December 31, 1996 all of its outstanding 7% PRIDES(SM), Convertible Preferred Stock, stated value $47.25 per share. _______________________ (SM) "PRIDES" is a service mark of Merrill Lynch & Co., Inc. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 Jeremiah J. Sheehan Jeremiah J. Sheehan, Chairman of the Board and Chief Executive Officer Date March 21, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By Henry S. Savedge, Jr. By Jeremiah J. Sheehan Henry S. Savedge, Jr., Director Jeremiah J. Sheehan, Director Executive Vice President and Chairman of the Board and Chief Financial Officer Chief Executive Officer (Principal Financial Officer) (Principal Executive Officer) Date March 21, 1997 Date March 21, 1997 By *Patricia C. Barron By *William O. Bourke Patricia C. Barron, Director William O. Bourke, Director Date March 21, 1997 Date March 21, 1997 By *John R. Hall By *Robert L. Hintz John R. Hall, Director Robert L. Hintz, Director Date March 21, 1997 Date March 21, 1997 By *William H. Joyce By *Mylle Bell Mangum William H. Joyce, Director Mylle Bell Mangum, Director Date March 21, 1997 Date March 21, 1997 By *D. Larry Moore By Randolph N. Reynolds D. Larry Moore, Director Randolph N. Reynolds, Director Date March 21, 1997 Date March 21, 1997 By *James M. Ringler By *Samuel C. Scott, III James M. Ringler, Director Samuel C. Scott, III, Director Date March 21, 1997 Date March 21, 1997 By J. Wilt Wagner By *Joe B. Wyatt J. Wilt Wagner, Director Joe B. Wyatt, Director Date March 21, 1997 Date March 21, 1997 By Allen M. Earehart Allen M. Earehart, Vice President, Controller (Principal Accounting Officer) Date March 21, 1997 *By D. Michael Jones D. Michael Jones, Attorney-in-Fact Date March 21, 1997 (THIS PAGE LEFT BLANK INTENTIONALLY) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS TO FORM 10-K For the fiscal year ended December 31, 1996 Commission File No. 1-1430 REYNOLDS METALS COMPANY Attached herewith are Exhibits 3.1, 3.2, 10.38, 10.39, 10.40, 10.41, 10.42, 10.43, 11, 21, 23, 24 and 27 INDEX EXHIBIT 2 - None EXHIBIT 3.1 - Restated Certificate of Incorporation, as amended 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. * 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)) _______________________ *Incorporated by reference. * 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) * EXHIBIT 4.5 - Rights Agreement dated as of November 23, 1987 (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 November 23, 1987, pertaining to Preferred Stock Purchase Rights, EXHIBIT 1) * EXHIBIT 4.6 - Amendment No. 1 dated as of December 19, 1991 to the Rights Agreement. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.11) * EXHIBIT 4.7 - Form of 9-3/8% Debenture due June 15, 1999. (File No. 1-1430, Form 8-K Report dated June 6, 1989, EXHIBIT 4) * EXHIBIT 4.8 - Form of Fixed Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.3) * EXHIBIT 4.9 - Form of Floating Rate Medium-Term Note. (Registration Statement No. 33-30882 on Form S-3, dated August 31, 1989, EXHIBIT 4.4) * EXHIBIT 4.10 - Form of Book-Entry Fixed Rate Medium-Term Note. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.15) * EXHIBIT 4.11 - Form of Book-Entry Floating Rate Medium-Term Note. (File No. 1-1430, 1991 Form 10-K Report, EXHIBIT 4.16) * EXHIBIT 4.12 - Form of 9% Debenture due August 15, 2003. (File No. 1-1430, Form 8-K Report dated August 16, 1991, Exhibit 4(a)) * EXHIBIT 4.13 - 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) ("REYCAN"), as amended. (File No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.13) * EXHIBIT 4.14 - By-Laws of REYCAN, as amended. (File No. 1- 1430, 1995 Form 10-K Report, EXHIBIT 4.14) * EXHIBIT 4.15 - Articles of Incorporation of Societe Canadienne de Metaux Reynolds, Ltee/Canadian Reynolds Metals Company, Ltd. ("CRM"), as amended. (File No. 1- 1430, 1995 Form 10-K Report, EXHIBIT 4.15) * EXHIBIT 4.16 - By-Laws of CRM, as amended. (File No. 1- 1430, 1995 Form 10-K Report, EXHIBIT 4.16) _______________________ *Incorporated by reference. * EXHIBIT 4.17 - Indenture dated as of April 1, 1993 among REYCAN, 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)) * EXHIBIT 4.18 - First Supplemental Indenture, dated as of December 18, 1995 among REYCAN, Reynolds Metals Company, CRM and The Bank of New York, as Trustee. (File No. 1-1430, 1995 Form 10-K Report, EXHIBIT 4.18) * EXHIBIT 4.19 - 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)) EXHIBIT 9 - None =* 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) =* 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) =* 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) =* 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) =* EXHIBIT 10.5 - Supplemental Death Benefit Plan for Officers. (File No. 1-1430, 1986 Form 10-K Report, EXHIBIT 10.8) =* EXHIBIT 10.6 - Financial Counseling Assistance Plan for Officers. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.11) =* EXHIBIT 10.7 - Management Incentive Deferral Plan. (File No. 1-1430, 1987 Form 10-K Report, EXHIBIT 10.12) =* 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) =* 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) ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. =* EXHIBIT 10.10 - Form of Executive Severance Agreement between Reynolds Metals Company and key executive personnel, including each of the individuals (other than Donna C. Dabney) listed in Item 4A of this report. (File No. 1-1430, 1987 Form 10- K Report, EXHIBIT 10.18) =* 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)) =* 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)) =* 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) =* 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) =* 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) =* EXHIBIT 10.16 - Letter Agreement dated January 18, 1991 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, 1990 Form 10-K Report, EXHIBIT 10.27) =* EXHIBIT 10.17 - 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)) =* EXHIBIT 10.18 - Consulting Agreement dated May 1, 1992 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, Form 10-Q Report for the Quarter Ended March 31, 1992, EXHIBIT 28(b)) =* EXHIBIT 10.19 - Renewal dated February 18, 1994 of Consulting Agreement dated May 1, 1992 between Reynolds Metals Company and William O. Bourke. (File No. 1-1430, 1993 Form 10-K Report, EXHIBIT 10.28) ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. =* EXHIBIT 10.20 - 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) =* EXHIBIT 10.21 - 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) =* EXHIBIT 10.22 - 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) =* EXHIBIT 10.23 - 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) =* EXHIBIT 10.24 - 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) =* EXHIBIT 10.25 - 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) =* EXHIBIT 10.26 - 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) =* EXHIBIT 10.27 - 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) =* EXHIBIT 10.28 - 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) =* EXHIBIT 10.29 - 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) =* EXHIBIT 10.30 - 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) ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. =* EXHIBIT 10.31 - 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) =* EXHIBIT 10.32 - Reynolds Metals Company 1996 Nonqualified Stock Option Plan. (Registration Statement No. 333-03947 on Form S-8, dated May 17, 1996, EXHIBIT 4.6) =* EXHIBIT 10.33 - 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) =* EXHIBIT 10.34 - 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) =* EXHIBIT 10.35 - 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) =* EXHIBIT 10.36 - 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) =* EXHIBIT 10.37 - 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) = EXHIBIT 10.38 - Amendment to Reynolds Metals Company New Management Incentive Deferral Plan effective January 1, 1996 = EXHIBIT 10.39 - Amendment to Reynolds Metals Company Performance Incentive Plan effective January 1, 1996 = EXHIBIT 10.40 - Reynolds Metals Company Supplemental Incentive Plan = EXHIBIT 10.41 - Reynolds Metals Company Stock Plan for Outside Directors = EXHIBIT 10.42 - Special Executive Severance Package for Certain Employees who Terminate Employment between January 1, 1997 and June 30, 1998, as approved by the Compensation Committee of the Company's Board of Directors on January 17, 1997 ____________________________ * Incorporated by reference. = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. = EXHIBIT 10.43 - 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 EXHIBIT 11 - Computation of Earnings Per Share EXHIBIT 12 - Not applicable EXHIBIT 13 - Not applicable EXHIBIT 16 - Not applicable EXHIBIT 18 - None EXHIBIT 21 - List of Subsidiaries of Reynolds Metals Company EXHIBIT 22 - None EXHIBIT 23 - Consent of Independent Auditors EXHIBIT 24 - Powers of Attorney EXHIBIT 27 - Financial Data Schedule ____________________________ = Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. EX-3 2 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION of REYNOLDS METALS COMPANY ___________ INTRODUCTION This Restated Certificate of Incorporation has been duly adopted by the Board of Directors of Reynolds Metals Company in accordance with Section 245 of the General Corporation Law of the State of Delaware. It only restates and integrates, and does not further amend, the provisions of the corporation's Certificate of Incorporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and this Restated Certificate of Incorporation. The corporation's original Certificate of Incorporation was filed with the Delaware Secretary of State on July 18, 1928. ARTICLE I The name of the corporation is REYNOLDS METALS COMPANY ARTICLE II Its registered office in the State of Delaware is located at 1013 Centre Road, in the City of Wilmington, County of New Castle, Delaware. The name and address of its registered agent is CORPORATION SERVICE COMPANY, a corporation of the State of Delaware, located at 1013 Centre Road, Wilmington, New Castle County, Delaware. ARTICLE III The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on are: 1. To manufacture, purchase, or otherwise acquire, hold, own, mortgage, pledge, sell, lease, assign and transfer, or otherwise dispose of, to invest, trade, deal in and deal with, goods, wares and merchandise and real and personal property of every class and description. 2. To erect, or cause to be erected, on any lands owned, held, and occupied by the corporation, buildings or other structures with their appurtenances and to rebuild, enlarge, alter, or improve any buildings or other structures now, or hereafter erected, on any lands so owned, held, or occupied. 3. To enter into, make and perform contracts of every kind for any lawful purpose with any person, firm, association or corporation, municipality, body politic, country, territory, State, government or colony or dependency thereof. 4. To acquire the goodwill, rights and property and the whole or any part of the assets, tangible or intangible, and to undertake or in any way assume the liabilities of any person, firm, association or corporation; to pay for the said goodwill, rights, property, and assets in cash, the stock of this company, bonds or otherwise, or by undertaking the whole or any part of the liabilities of the transferor; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. 5. To apply for, purchase, register or in any manner to acquire, and to hold, own, use, operate and introduce, and to sell, lease, assign, pledge, or in any manner dispose of, and in any manner deal with patents, patent rights, licenses, copyrights, trademarks, trade names, and to acquire, own, use or in any manner dispose of any and all inventions, improvements and processes, labels, designs, brands, or other rights, and to work, operate, or develop the same, and to carry on any business, manufacturing or otherwise, which may directly or indirectly effectuate these objects or any of them. 6. To guarantee, purchase, receive, hold, own, sell, assign, transfer, mortgage, pledge or otherwise dispose of shares of capital stock, bonds, mortgages, debentures, notes or other securities, obligations, contracts or evidences of indebtedness of any corporation, company or association (organized under the laws of this State or any other State, country, nation or government) or of any state, country, nation, municipality, government or a body politic; to receive, collect and dispose of interest, dividends and income upon, of and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held or owned by it and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property any and all rights, powers and privileges of individual ownership thereof, including the right to vote thereon. 7. Without limit as to amount to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments and evidences of indebtedness whether secured by mortgage or otherwise, as well as to secure the same by mortgage or otherwise, so far as may be permitted by the laws of the State of Delaware. 8. To purchase, in so far as the same may be done without impairing the capital of the corporation, and to hold, pledge and reissue shares of its own capital stock; but such stock, so acquired and held, shall not be entitled to vote nor to receive dividends. 9. To have one or more offices, conduct its business and promote its objects within and without the State of Delaware, in other States, the District of Columbia, the territories, colonies and dependencies of the United States, and in foreign countries, without restriction as to place or amount, but subject to the laws of such State, District, territory, colony, dependency or country. 10. To do any or all of the things herein set forth to the same extent as natural persons might or could do and in any part of the world, as principals, agents, contractors, trustees, or otherwise, and either alone or in company with others. 11. In general to carry on any other business in connection therewith, whether manufacturing or otherwise, not forbidden by the laws of the State of Delaware, and with all the powers conferred upon corporations by the laws of the State of Delaware. But if this corporation shall undertake to do any of the things hereinabove set forth in any State other than Delaware, in the District of Columbia, in any territory, colony, or dependency of the United States, or in any foreign country or in any colony or dependency thereof, then as to such jurisdictions and each of them this corporation shall be deemed to have such powers in so far only as such jurisdictions respectively permit corporations within their several respective jurisdictions to be organized for or to execute such powers. It is the intention that each of the objects, purposes and powers specified in each of the paragraphs of this third article of this Certificate of Incorporation shall, except where otherwise specified, be nowise limited or restricted by reference to or inference from the terms of any other paragraph or of any other article in this Certificate of Incorporation, but that the objects, purposes and powers specified in this article and in each of the articles or paragraphs of this Certificate shall be regarded as independent objects, purposes and powers, and the enumeration of specific purposes and powers shall not be construed to restrict in any manner the general terms and powers of this corporation, nor shall the expression of one thing be deemed to exclude another, although it be of like nature. ARTICLE IV The total number of shares of stock of all classes that may be issued by the Corporation is Two Hundred Twenty-one Million (221,000,000) shares, of which Twenty Million (20,000,000) shares shall be preferred stock without par value and shall be designated "Preferred Stock", One Million (1,000,000) shares shall be second preferred stock of the par value of One Hundred Dollars ($100.00) each and shall be designated "Second Preferred Stock" and Two Hundred Million (200,000,000) shares shall be common stock without par value and shall be designated "Common Stock". I. PREFERRED STOCK 1. The Preferred Stock may be issued in one or more series, from time to time, with each such series to have such designation, powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation (referred to herein as the "Issuing Resolution" for such series), subject to the limitations prescribed by law and in accordance with the provisions hereof, the Board of Directors being hereby expressly vested with authority to adopt any such resolution or resolutions. 2. The authority of the Board of Directors with respect to each series of the Preferred Stock shall include, but not be limited to, the determination or fixing of the following: (a) The distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the Board of Directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by like action of the Board of Directors; (b) The dividend rate of such series, the conditions upon which and times at which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other series of the Preferred Stock, and whether such dividends shall be cumulative or noncumulative; (c) The conditions, if any, upon which the shares of such series shall be subject to redemption by the Corporation and the times, prices and other terms and provisions upon which the shares of the series may be redeemed; (d) Whether or not the shares of the series shall be subject to the operation of a retirement or sinking fund to be applied to the purchase or redemption of such shares and, if such retirement or sinking fund be established, the annual amount thereof and the terms and provisions governing the operation of such retirement or sinking fund; (e) Whether or not the shares of the series shall be convertible into or exchangeable for shares of any other class or classes, with or without par value, or of any other series of the same class, and, if provision is made for conversion or exchange, the times, prices, rates, adjustments, and other terms and conditions of such conversion or exchange; (f) Whether or not the shares of the series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (g) The rights of the shares of the series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (h) The relative seniority, parity or junior rank of such series with respect to any other series of the Preferred Stock; and (i) Any other powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of the shares of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation. 3. No holder of shares of any series of the Preferred Stock shall have any preemptive or preferential right of subscription to any stock of any class of the Corporation, or to any obligations convertible into stock of any class, or to any warrant or option for the purchase of stock of any class, except to the extent granted in the Issuing Resolution creating such series. 4. The Board of Directors of the Corporation shall be empowered to provide in any Issuing Resolution with respect to any series of the Preferred Stock that any of the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of such series may be made dependent upon facts ascertainable outside this Certificate of Incorporation or any amendment hereto, or the Issuing Resolution with respect to such series, so long as the manner in which such facts shall operate upon the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of such series is clearly and expressly set forth in this Certification of Incorporation, as amended, or in the Issuing Resolution for such series. 5. The holders of shares of the Preferred Stock of each series shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends at the rate fixed by the Board of Directors in the Issuing Resolution for such series, and no more, before (i) any dividends (other than dividends payable in Second Preferred Stock or in Common Stock or in any other class of stock ranking junior to the Preferred Stock both as to dividends and upon liquidation, dissolution or winding up) shall be declared and paid, or set apart for payment, on, or (ii) any moneys or other consideration (other than shares of Second Preferred Stock or Common Stock or any other class of stock ranking junior to the Preferred Stock both as to dividends and upon liquidation, dissolution or winding up) is set aside for or applied to the purchase or redemption of, shares of the Second Preferred Stock or the Common Stock or any other class of stock ranking junior to the Preferred Stock as to dividends or upon liquidation, dissolution or winding up. 6. The holders of shares of the Preferred Stock of each series shall be entitled upon liquidation, dissolution or winding up of the Corporation, whether involuntary or voluntary, to such preferences as are provided in the Issuing Resolution creating such series of the Preferred Stock, and no more, before any distribution of the assets of the Corporation shall be made to or set apart for the holders of shares of the Second Preferred Stock or the Common Stock or any other class of stock ranking junior to the Preferred Stock upon liquidation, dissolution or winding up. For the purposes of this paragraph 6, a consolidation or merger of the Corporation with or into one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger), or a sale, lease or exchange of all or substantially all of the assets of the Corporation, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK Section 1. Designation and Amount. The distinctive designation of the series shall be "Series A Junior Participating Preferred Stock." The shares constituting such series shall be without par value. The number of shares constituting such series shall be 2,000,000, subject to increase or decrease by action of the Board of Directors as evidenced by a certificate of designations. Section 2. Dividends and Distributions. (A) Subject to the prior rights of the holders of any shares of any series of Preferred Stock ranking prior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available for the payment of dividends, quarterly dividends payable in cash on the first day of January, April, July and October in each year or such other days on which dividends are declared with respect to the Common Stock (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions (other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise)), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. If the Corporation shall at any time after November 20, 1987 (the "Rights Declaration Date") (i) declare any dividend payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, if no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless (i) such date of issue is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or (ii) such date of issue is either a Quarterly Dividend Payment Date or a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If and whenever at any time or times dividends payable on shares of any Series A Junior Participating Preferred Stock shall have been in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, then the holders of shares of any Series A Junior Participating Preferred Stock, together with the holders of any other series of Preferred Stock as to which dividends are in arrears and unpaid in an aggregate amount equal to or exceeding the amount of dividends payable thereon for six quarterly dividend periods, shall have the exclusive right, voting separately as a class with such other series, to elect two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately prior to the accrual of such right, the remaining directors to be elected by the other class or classes of stock entitled to vote therefor at each meeting of stockholders held for the purpose of electing directors. (ii) Such voting right may be exercised initially either at a special meeting of the holders of the Preferred Stock having such voting right, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing directors, and thereafter at each such annual meeting until such time as all cumulative dividends accumulated and payable on the shares of Series A Junior Participating Preferred Stock shall have been paid in full, at which time such voting right shall terminate, subject to revesting on the basis set forth in paragraph (C)(i). (iii) At any time when such voting right shall have vested in holders of the Preferred Stock, and if such right shall not already have been initially exercised, a proper officer of the Corporation shall, upon the written request of the record holders of 10% in number of shares of Preferred Stock having such voting right then outstanding, addressed to the Secretary of the Corporation, call a special meeting of the holders of Preferred Stock having such voting right and of any other class or classes of stock having voting power with respect to the election of such directors. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or, if none, at a place designated by the Board of Directors. If such meeting is not called by the proper officers of the Corporation within 30 days after the personal service of such written request upon the Secretary of the Corporation, or within 30 days after mailing the same within the United States of America, by registered mail, addressed to the Secretary of the Corporation at its principal office (such mailing to be evidenced by the registry receipt issued by the postal authorities), then the record holders of 10% in number of shares of the Preferred Stock then outstanding which would be entitled to vote at such meeting may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the same place as is elsewhere provided for in this paragraph (C)(iii) or such other place as is selected by such designated stockholder. Any holder of the Preferred Stock who would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this paragraph (C). Notwithstanding the provisions of this paragraph (C), no such special meeting shall be called during a period within 90 days immediately preceding the date fixed for the next annual meeting of stockholders. (iv) At any meeting held for the purpose of electing directors at which the holders of the Preferred Stock shall have the right to elect two directors in addition to the number of directors constituting the Board of Directors immediately prior to accrual of such right as provided herein, the presence in person or by proxy of the holders of 40% of the then outstanding shares of Preferred Stock having such right shall be required and shall be sufficient to constitute a quorum of such class of the election of directors by such class. At any such meeting or adjournment thereof (i) the absence of a quorum of the holders of the Preferred Stock having such right shall not prevent the election of directors other than those to be elected by the holders of the Preferred Stock, and the absence of a quorum or quorums of the holders of capital stock entitled to elect such other directors shall not prevent the election of directors to be elected by the holders of the Preferred Stock entitled to elect such directors and (ii) except as otherwise required by law, in the absence of a quorum of the holders of any class of stock entitled to vote for the election of directors, a majority of the holders present in person or by proxy of such class shall have the power to adjourn the meeting for the election of directors which the holders of such class are entitled to elect, from time to time, without notice other than announcement at the meeting, until a quorum is present. (v) Any vacancy in the Board of Directors in respect of a director elected by holders of Preferred Stock pursuant to the voting right created under this paragraph (C) shall be filled by vote of the remaining director so elected, or if there be no such remaining director, by the holders of Preferred Stock entitled to elect such director or directors at a special meeting called in accordance with the procedures set forth in paragraph (C)(iii), or, if no such special meeting is called, at the next annual meeting of stockholders. Upon any termination of such voting right, subject to the requirements of the General Corporation Law of Delaware, the term of office of all directors elected by holders of Preferred Stock voting separately as a class shall terminate. (D) Except as set forth herein, or as required by law, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (ii) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Article IV, Section I of its Certificate of Incorporation or paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in paragraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) (i) If there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such assets as are available shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. (ii) If there are not sufficient assets available to permit payment in full of the Common Adjustment, then such assets as are available shall be distributed ratably to the holders of Common Stock. (C) If the Corporation shall at any time after November 20, 1987 (i) declare any dividend payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. If the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the Issuing Resolution with respect to any such series shall provide otherwise. Section 10. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. II. SECOND PREFERRED STOCK 1. The Second Preferred Stock may be issued, from time to time, in one or more series, in any manner now or hereafter permitted by law. 2. The shares of each series shall have the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, which are stated and expressed in this section II, and those which are stated and expressed in the resolution or resolutions providing for the issue of such series, adopted by the Board of Directors under the authority granted to the Board of Directors by the provisions of paragraph 3 of this section II. 3. Authority is hereby expressly granted to and vested in the Board of Directors of the Corporation to provide for the issue of the Second Preferred Stock in one or more series, and with respect to each such series to fix, by resolution or resolutions, the following: (a) The maximum number of shares to constitute the series and the distinctive designation of the shares; (b) The annual dividend rate on the shares of the series and the date or dates from which dividends shall accumulate; (c) The amount which the holders of shares of the series shall be entitled to receive upon the voluntary liquidation, dissolution or winding up of the Corporation, which shall not be less than the par value plus an amount equal to all accumulated and unpaid dividends to the date of final distribution to such holders; (d) Whether or not the shares of the series shall be subject to redemption at the option of the Corporation and if so, the price which holders of shares so redeemed shall be entitled to receive, which price may vary at different redemption dates but shall in no event be less than the par value per share plus an amount equal to all accumulated and unpaid dividends to the date of redemption, and if such price varies, the period during which each such variation in price shall be applicable; (e) Whether or not the shares of the series shall be subject to redemption through the operation of a sinking fund and, if so, the terms and provisions of such sinking fund and the extent to which and the manner in which such fund shall be applied to the purchase, redemption or other acquisition of shares of the series and the redemption price for shares redeemed through the sinking fund, which price may vary at different redemption dates but shall in no event be less than the par value per share plus an amount equal to all accumulated and unpaid dividends to the date of redemption, and if such price varies, the period during which each such variation in price shall be applicable; (f) Whether or not there shall be a purchase fund to acquire shares of the series and, if so, the terms and provisions of the purchase fund and the extent to which and the manner in which such purchase fund shall be applied to the acquisition of shares of the series; (g) The limitations and restrictions, if any, in addition to, but not in derogation of, the limitations and restrictions set forth in paragraph 5 of this section II, which are to be effective while any shares of the series are outstanding, upon payment of dividends on, or making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation or any subsidiary of, shares of Common Stock or any other class of stock ranking junior to the Second Preferred Stock as to dividends or upon liquidation; (h) The conditions or restrictions, if any, which are to be effective while any shares of the series are outstanding, upon the creation of indebtedness of the Corporation or upon the issuance of shares of stock of the Corporation; (i) Any voting rights of the shares of the series, other than the voting rights for the election of Directors provided by paragraph 13 of this section II, in addition to and not inconsistent with those granted by this Article IV to the holders of the Second Preferred Stock; (j) The right, if any, to exchange or convert the shares of the series into shares of any other series of the Second Preferred Stock or into shares of any other class of stock of the Corporation and the rate or basis, time, manner and conditions of exchange or conversion or the method by which the same shall be determined; (k) Any other designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of the series, which are now or hereafter permitted by the laws of Delaware, and which are not inconsistent with the provisions of paragraphs 4 to 17, inclusive, of this section II. The resolution or resolutions providing for the issue of shares of any series are herein referred to as the "Issuing Resolution" for that series. 4. All series of the Second Preferred Stock shall be senior to the Common Stock and each series of the Second Preferred Stock shall rank equally with every other series. Each share of any one series shall be identical with every other share of that series except as to the date or dates from which dividends shall accumulate. 5. Subject to the provisions of paragraph 5 of section I of this Article IV and to any limitation or restriction contained in the Issuing Resolution for any series of Preferred Stock, the holders of shares of each series of the Second Preferred Stock shall be entitled to receive cash dividends, when and as declared by the Board of Directors out of any funds legally available therefor, at the annual rate fixed in the Issuing Resolution for that particular series and no more. Such dividends on each series of the Second Preferred Stock shall be payable quarterly on the first day of February, May, August and November in each year to holders of record on a date, not more than fifty (50) days before each such dividend payment date, to be determined by the Board of Directors in advance of the payment of each particular dividend. Dividends on each series of the Second Preferred Stock shall be cumulative and preferential so that in no event shall any dividend or other distribution (other than dividends payable in Common Stock or in any other class of stock ranking junior to the Second Preferred Stock as to dividends and upon liquidation) be declared or paid upon or set apart for the Common Stock or any other class of stock ranking junior to the Second Preferred Stock as to dividends or upon liquidation nor shall any moneys or other consideration (other than shares of Common Stock or any other class of stock ranking junior to the Second Preferred Stock as to dividends and upon liquidation) be set aside for or applied to the purchase or redemption of shares of Common Stock or any other class of stock ranking junior to the Second Preferred Stock as to dividends or upon liquidation, unless all dividends on each then outstanding series of the Second Preferred Stock for all past quarter-yearly dividend periods shall have been paid, or declared and a sum sufficient for the payment thereof set apart, and the full dividend thereon for the then quarterly dividend period shall have been or concurrently shall be paid or declared. With respect to each series of the Second Preferred Stock, such dividends shall accumulate from the date or dates fixed in the Issuing Resolution for such series which date or dates shall in no instance be more than ninety days before or after the date of the issuance of those shares for which the date is being set. No dividends shall be declared on any series of the Second Preferred Stock in respect of any dividend period unless the same proportion of the annual dividend rate respectively applicable to the shares of every series of the Second Preferred Stock at the time outstanding shall likewise be declared as a dividend in respect of such dividend period. The term "accumulated and unpaid dividends" means, in respect of each share of the Second Preferred Stock of any series, that amount which shall be equal to simple interest upon the par value of such share at the dividend rate for such series from the date from which dividends on such share commenced to accumulate to the date as of which the computation is to be made, less the aggregate amount (without interest thereon) of all dividends theretofore paid or declared and set aside for payment in respect thereof. 6. (a) In the event of any involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of every series of the Second Preferred Stock shall, subject to the provisions of paragraph 6 of section I of this Article IV, be entitled to receive payment at the rate of $100 per share, plus an amount equal to all accumulated and unpaid dividends to the date of final distribution to such holders, and no more, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of the Common Stock or any other class of stock ranking junior to the Second Preferred Stock upon liquidation. (b) In the event of any voluntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of each series of the Second Preferred Stock shall, subject to the provisions of paragraph 6 of section I of this Article IV, be entitled to receive the amount set forth for such payment in the Issuing Resolution for that particular series, which amount shall in no case be less than $100 per share, plus an amount equal to all accumulated and unpaid dividends to the date of final distribution to such holders, and no more, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of the Common Stock or any other class of stock ranking junior to the Second Preferred Stock upon liquidation. (c) If, upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Second Preferred Stock shall be insufficient to pay in full the preferential amount for every series of the Second Preferred Stock, then such assets or the proceeds thereof shall be distributed among the holders of the shares of all series of the Second Preferred Stock in proportion to the respective amounts to which they would be entitled if all amounts payable thereon were paid in full. (d) For the purposes of this paragraph 6, a consolidation or merger of the Corporation with or into one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger), or a sale, lease or exchange of all or substantially all of the assets of the Corporation, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. 7. (a) If the Issuing Resolution for any series of the Second Preferred Stock provides that the Corporation, at the option of the Board of Directors, may redeem at any time all, or from time to time any part, of the shares of the Second Preferred Stock of such series at the time outstanding or if the Issuing Resolution for any series of the Second Preferred Stock provides for the creation of a sinking fund to redeem outstanding shares of that series of the Second Preferred Stock, the shares of the series to be redeemed at the option of the Board of Directors or to be redeemed through operation of the sinking fund shall be redeemed in the manner set forth in this paragraph 7. (b) Notice of every such redemption shall be mailed at least 30 days in advance of the date designated for such redemption (herein called the "redemption date") to the holders of record of the shares of the Second Preferred Stock so to be redeemed at their respective addresses as the same shall appear on the books of the Corporation. In order to facilitate the redemption of any shares of the Second Preferred Stock that may be chosen for redemption as provided in this paragraph 7, the Board of Directors shall be authorized to cause the transfer books of the Corporation to be closed as to such shares as of a date within fifteen (15) days prior to the redemption date. In case of the redemption of a part only of any series of the Second Preferred Stock at the time outstanding, the shares of such series so to be redeemed shall be selected by lot or by such other equitable method as the Board of Directors may determine. (c) If said notice of redemption shall have been given as aforesaid, and if on or before the redemption date, the funds necessary for such redemption shall have been set aside by the Corporation, separate and apart from its other funds, in trust for the pro rata benefit of the holders of the shares so called for redemption, then, from and after the redemption date, notwithstanding that any certificate for shares of the Second Preferred Stock so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall not be deemed outstanding, and all rights of the holders of the shares of the Second Preferred Stock so called for redemption shall forthwith, from and after the redemption date, cease and terminate, excepting only the right to receive the redemption price therefor but without interest. Any moneys so set aside by the Corporation and unclaimed at the end of six years from the date fixed for such redemption shall revert to the general funds of the Corporation after which reversion any holder of such shares so called for redemption shall have only such rights, if any, as he may possess under applicable law to receive from the Corporation payment of the redemption price. (d) If, on or before the redemption date, the Corporation shall deposit in trust, with a bank or trust company in the Borough of Manhattan, in the City of New York, having a capital and surplus of at least $5,000,000, the funds necessary for the redemption of the shares of the Second Preferred Stock so to be redeemed, to be applied to the redemption of such shares, and if the Corporation shall have given notice of redemption as aforesaid or given irrevocable written authorization to such bank or trust company, in form satisfactory to it, for the timely giving of such notice, then from and after the time when such deposit is made all shares of the Second Preferred Stock so called for redemption shall not be deemed to be outstanding, and all rights of the holders of such shares of the Second Preferred Stock so called for redemption shall cease and terminate, excepting only the right to receive the redemption price therefor, but without interest. In case such deposit is made with a bank or trust company and any holder of shares of the Second Preferred Stock which shall have been called for redemption shall not, within one year after the redemption date, claim the amount deposited with respect to the redemption thereof, such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amount and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof to such holder and such holder thereafter shall have only such rights, if any, as he may possess under applicable law to receive from the Corporation payment thereof. Any interest accrued on funds so deposited shall be paid to the Corporation from time to time. Any such unclaimed amounts paid over by any such bank or trust company to the Corporation shall, for a period terminating six years after the date fixed for redemption, be set aside and held by the Corporation in the same manner as if such unclaimed amounts had been set aside under the preceding paragraph 7(c). 8. Whether or not the Issuing Resolution for any series of the Second Preferred Stock provides for optional redemption of shares, or for a sinking fund or a purchase fund for the redemption or purchase of shares of such series, the Corporation shall have the right, subject to the provisions of paragraph 5 of section I of this Article IV and subject to any limitation thereon in any Issuing Resolution for any series of Preferred Stock or Second Preferred Stock, at any time to purchase privately or in the public markets, and to solicit tenders of, any portion or the whole of the shares of any or all series at prices which are not in excess of the respective redemption prices of such shares. 9. (a) All shares of any series of the Second Preferred Stock which have been acquired through the operation of a purchase fund or of a sinking fund or by redemption or have been credited against any purchase fund or sinking fund or have been surrendered to the Corporation on the conversion or exchange thereof into or for other shares of the Corporation shall, upon compliance with any applicable provisions of the General Corporation Law of the State of Delaware, have the status of authorized and unissued shares of the Second Preferred Stock, but shall be reissued only as, or as part of, a new series of the Second Preferred Stock to be created by an Issuing Resolution of the Board of Directors or as part of any other series of the Second Preferred Stock the terms of which do not prohibit such reissue as a part thereof, and shall not be reissued as a part of the series of which they were originally a part. (b) All shares of any series of the Second Preferred Stock which have been acquired otherwise than through the operation of a purchase fund or of a sinking fund or by redemption and which have not been credited against any purchase fund or sinking fund, and which have not been surrendered to the Corporation on the conversion or exchange thereof into or for other shares of the Corporation, shall have the status of treasury stock and may be disposed of as permitted by law. 10. So long as any of the Second Preferred Stock is outstanding, the Corporation will not, without the affirmative vote or consent of the holders of at least 66-2/3% of all of the Second Preferred Stock at the time outstanding, voting as a class regardless of series, given in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose: (a) Amend, alter or repeal any of the provisions of this Article IV so as to affect adversely the designations, preferences and relative, participating, optional or other special rights, or the qualifications, limitations or restrictions thereof, of all of the series of the Second Preferred Stock; (b) (i) increase the authorized amount of the Preferred Stock, (ii) create any other class or classes of stock ranking senior to the Second Preferred Stock either as to dividends or upon liquidation, (iii) create any class or classes of stock which have any right to be converted into any class or classes of stock ranking senior to the Second Preferred Stock as to dividends or upon liquidation or grant any rights to any class of stock to be so converted, or (iv) merge or consolidate with or into any other corporation, if such merger or consolidation would affect adversely the designations, preferences and relative, participating, optional or other special rights, or the qualifications, limitations or restrictions thereof, of all of the series of the Second Preferred Stock. 11. The Corporation will not amend, alter or repeal any of the provisions of this Article IV or of any Issuing Resolution for series of Second Preferred Stock so as to affect adversely the designations, preferences and relative, participating, optional or other special rights, or the qualifications, limitations or restrictions thereof, of one or more, but not all, series of the Second Preferred Stock, or merge or consolidate with or into any other corporation if such merger or consolidation would affect adversely the designations, preferences and relative, participating, optional or other special rights, or the qualifications, limitations or restrictions thereof, of one or more, but not all, series of the Second Preferred Stock, without the affirmative vote or consent of the holders of at least 66-2/3% of each series so adversely affected at the time outstanding, voting as a class, in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose, but the other series of the Second Preferred Stock not affected thereby shall not have the right to vote thereon. 12. The Corporation will not, without the affirmative vote or consent of the holders of at least a majority of all of the Second Preferred Stock at the time outstanding, voting as a class regardless of series, given in person or by proxy, either in writing or by resolution adopted at a special meeting called for the purpose, (a) increase the authorized amount of the Second Preferred Stock, (b) create any class or classes of stock ranking on a parity with the Second Preferred Stock either as to dividends or upon liquidation, or (c) create any class or classes of stock which have any right to be converted into any class or classes of stock ranking on a parity with the Second Preferred Stock as to dividends or upon liquidation or grant any rights to any class of stock to be so converted. 13. (a) If, and whenever, at any time or times, there shall remain unpaid, on any series of the Second Preferred Stock, the dividends which were payable for four full quarterly dividend periods, or if any arrearage or default in any sinking fund provided for in any Issuing Resolution shall occur under such conditions and continue for such period of time as, under the provisions of such Issuing Resolution, to entitle the holders of the outstanding shares of the Second Preferred Stock to the voting rights provided by this paragraph 13, the outstanding Second Preferred Stock of all series, voting separately as a class, shall have the right to elect two Directors and the remaining Directors shall be elected by the holders of shares of the Common Stock (subject to the voting rights of the holders of the Preferred Stock). (b) Whenever such right of the holders of the Second Preferred Stock shall have vested, such right may be exercised initially either at a special meeting of such holders of the Second Preferred Stock called as provided in this paragraph, or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders. If the date upon which such right of the holders of the Second Preferred Stock shall become vested shall be more than sixty days preceding the date of the next ensuing annual meeting of stockholders as fixed by the By-Laws of the Corporation, the President of the Corporation shall call promptly a special meeting of the holders of the Second Preferred Stock and the Common Stock to be held within thirty days for the purpose of electing a new Board of Directors (exclusive of any Directors elected to represent the Preferred Stock pursuant to the provisions of section I of this Article IV) to serve until the next annual meeting and until their successors shall be elected and shall qualify. Notice of such meeting shall be mailed to each holder of Second Preferred Stock and each holder of Common Stock not less than ten days prior to the date of such meeting. If at any such meeting any Director (other than a Director elected to represent the Preferred Stock) shall not be re-elected, his term of office shall end upon the election of his successor, notwithstanding that the term for which he was originally elected shall not then have expired. In the event that at any such meeting at which holders of the Second Preferred Stock shall be entitled to elect Directors, a quorum of the holders of the Second Preferred Stock shall not be present in person or by proxy, the holders of the Common Stock, if a quorum thereof be present, may elect the Directors whom the holders of the Second Preferred Stock were entitled, but failed, to elect. Such Directors shall be designated as having been so elected to represent the Second Preferred Stock and their successors shall be elected by the holders of the Second Preferred Stock at the next annual meeting. (c) Whenever the holders of the Second Preferred Stock shall be entitled to elect Directors as provided in paragraph 13(a) of this section II, any holder of Second Preferred Stock shall have the right, during regular business hours, in person or by a duly authorized representative, to examine and to make transcripts of the stock records of the Corporation for the Second Preferred Stock for the purpose of communicating with other holders of Second Preferred Stock with respect to the exercise of such right of election. (d) At any election of members of the Board of Directors by the Second Preferred Stock, each holder of Second Preferred Stock shall have one vote for each share of such stock standing in his name on the books of the Corporation on any record date fixed for such purpose, or, if no such date be fixed, on the date on which the election is held. (e) The right of the holders of the Second Preferred Stock, voting separately as a class, to elect members of the Board of Directors of the Corporation as aforesaid shall continue until such time as any and all unpaid dividends shall have been paid and any and all sinking fund arrearages and defaults shall have been fully cured, at which time the right of the holders of the Second Preferred Stock to elect members of the Board of Directors shall terminate, subject to revesting. (f) Whenever the holders of the Second Preferred Stock shall be divested of the right to elect members of the Board of Directors, the President of the Corporation shall, within ten days after delivery to the Corporation at its principal office of a request to such effect signed by any holder of Common Stock, call a special meeting of the holders of the Common Stock to be held within forty days after the delivery of such request for the purpose of electing a new Board of Directors (exclusive of any Directors elected to represent the Preferred Stock pursuant to the provisions of section I of this Article IV) to serve until the next annual meeting or until their respective successors shall be elected and shall qualify. If, at any such special meeting, any Director (other than a Director elected to represent the Preferred Stock) shall not be re-elected, his term of office shall terminate upon the election and qualification of his successor, notwithstanding that the term for which such Director was originally elected shall not then have expired. 14. At any annual or special meeting of stockholders held for the purpose of electing Directors when the holders of the Second Preferred Stock shall be entitled to elect members of the Board of Directors as provided in paragraph 13 of this section II, the presence in person or by proxy of the holders of one-third of all of the outstanding shares of the Second Preferred Stock regardless of series shall be required to constitute a quorum for the election by the Second Preferred Stock of such Directors, and the presence in person or by proxy of the holders of a majority of the outstanding shares of the Common Stock shall be required to constitute a quorum for the election by the Common Stock of the remaining Directors (other than Directors elected to represent the Preferred Stock pursuant to the provisions of section I of this Article IV); provided, however, that absence of a quorum of the Common Stock shall not prevent the Second Preferred Stock if it has a quorum present from electing the number of Directors such class shall be entitled to elect and the Directors so elected by the Second Preferred Stock shall replace an equal number of Directors then in office. The Directors to be replaced by those elected by the holders of the Second Preferred Stock shall be designated by the Board of Directors of the Corporation; and, if the Board of Directors shall fail to make such designation within 15 days following such meeting, then such designation shall be made by the Directors elected by the holders of the Second Preferred Stock. The absence of a quorum of the Second Preferred Stock shall not prevent the Common Stock from electing the entire Board of Directors (other than Directors elected to represent the Preferred Stock) which shall include the proper number of members to represent the Second Preferred Stock. 15. If, during any interval between annual meetings of stockholders for the election of Directors and while the holders of the Second Preferred Stock shall be entitled to elect Directors, one of the Directors in office elected by the holders of the Second Preferred Stock shall resign or die or be removed, the vacancy shall be filled by a majority vote of all of the remaining Directors then in office, although less than a quorum, who shall elect a nominee designated by the remaining Director elected by the holders of the Second Preferred Stock or his successor and if not so filled within forty days after the creation thereof, the President of the Corporation shall call a special meeting in the manner provided in paragraph 13 of this section II but limited to the holders of shares of the Second Preferred Stock and such vacancy shall be filled at such special meeting, to be held within forty days after the delivery of such request. 16. If the Corporation is unable to meet the requirements of all sinking fund and of all purchase fund provisions of all Issuing Resolutions for series of Second Preferred Stock containing such provisions, the number of shares of the respective series to be redeemed or purchased, as the case may be, shall be in proportion to the respective amounts which would be redeemed or purchased if all such provisions were complied with in full. 17. No holder of shares of any series of the Second Preferred Stock shall have any preemptive or preferential right of subscription to any stock of any class of the Corporation, or to any obligations convertible into stock of any class, or to any warrant or option for the purchase of stock of any class but the Board of Directors of the Corporation, in the Issuing Resolution creating any series of the Second Preferred Stock, may confer on that series the right to subscribe to additional shares of that series or to shares of any series of the Second Preferred Stock which may be created thereafter. III. COMMON STOCK 1. All rights shall be held and possessed by the Common Stock except for the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, conferred on the Preferred Stock and the Second Preferred Stock by applicable law, by the provisions of sections I and II of this Article IV or by the provisions of any Issuing Resolutions for series of the Preferred Stock or the Second Preferred Stock. 2. Holders of the shares of Common Stock without par value shall have no right to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever or of securities convertible into stock of any class whatsoever whether now or hereafter authorized. ARTICLE V The number of shares with which this corporation will commence business is ten (10) shares of common stock, which shares are without nominal or par value. ARTICLE VI This corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE VII This corporation is to have perpetual existence. ARTICLE VIII The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. ARTICLE IX In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: 1. To make, alter, amend and rescind the by-laws of this corporation, without any action on the part of the stockholders. 2. To authorize and cause to be executed mortgages and liens upon the real and personal property of this corporation. 3. To fix, determine and vary the amount to be maintained as surplus and, subject to the other provisions and requirements of this Certificate of Incorporation, the amount or amounts to be set apart or reserved as working capital or for any other lawful purposes. If so determined by the Board of Directors, the corporation may from time to time receive money and/or other property and credit the amount or value thereof to reserve or surplus, and such money or other property may be an undivided part of money or other property for another part of which stock, bonds, debentures and/or other obligations of the corporation are issued. Against any reserve or surplus so established there may be charged losses at any time incurred by the corporation, also dividends or other distributions upon stock. Such reserve or surplus may be reduced from time to time by the Board of Directors for the purposes above specified or by transfer from such reserve or surplus to capital account. 4. From time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of this corporation (other than the stock ledger), or any of them, shall be open to inspection of stockholders; and no stockholder shall have any right of inspecting any account, book or document of this corporation except as conferred by statute, unless authorized by a resolution of stockholders or directors. 5. If the by-laws so provide, to designate two or more of its number to constitute an executive committee, which committee shall for the time being, as provided in said resolution or in the by-laws of this corporation, have and exercise any or all of the powers of the Board of Directors in the management of the business and affairs of this corporation, and have power to authorize the seal of this corporation to be affixed to all papers which may require it. 6. Pursuant to the affirmative vote of the holders of at least a majority of the stock issued and outstanding having voting power, given at a stockholders' meeting duly called for that purpose, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of this corporation, including its goodwill and its corporate franchises, upon such terms and conditions as its Board of Directors deem expedient and for the best interests of the corporation. 7. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 3883 of the Revised Code of 1915 of said State, or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 43 of this Chapter, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. 8. This corporation may in its by-laws confer powers upon its directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon them by the statute. 9. Both stockholders and directors shall have power, if the by-laws so provide, to hold their meetings, and to have one or more offices within or without the State of Delaware and to keep the books of this corporation (subject to the provisions of the statutes), outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors. ARTICLE X The number of directors of this corporation shall be such number, not less than three, as shall from time to time be fixed by the by-laws of the corporation. In case of any vacancy in the Board of Directors through death, resignation, disqualification or other cause, the remaining directors, by affirmative vote of a majority thereof, may elect a successor to office for the unexpired portion of the term of the director whose place shall be vacant and until the election of a successor. ARTICLE XI A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except that nothing contained in this Article XI shall eliminate or limit the liability of a director (1) for any breach of the director's duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the Delaware General Corporation Law, or (4) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article XI shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. ARTICLE XII In the absence of fraud, no contract or transaction between this corporation and any other association or corporation shall be affected by the fact that any of the Directors or officers of this corporation are interested in or are directors or officers of such other association or corporation, and any director or officer of this corporation individually may be a party to or may be interested in any such contract or transaction of this corporation; and no such contract or transaction of this corporation with any person or persons, firm, association or corporation shall be affected by the fact that any director or officer of this corporation is a party to or interested in such contract or transaction or in any way connected with such person or persons, firm, association or corporation; and each and every person who may become a director or officer of this corporation is hereby relieved from any liability that might otherwise exist from thus contracting with this corporation for the benefit of himself or any person, firm, association or corporation in which he may be in any wise interested. IN WITNESS WHEREOF, the corporation has caused its corporate seal to be affixed and this Restated Certificate of Incorporation to be signed by its Senior Vice President and General Counsel and attested by its Secretary this 21st day of October, 1988. REYNOLDS METALS COMPANY By John H. Galea John H. Galea Senior Vice President and General Counsel ATTEST: Donald T. Cowles Donald T. Cowles Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING FOIL DISTRIBUTING COMPANY INTO REYNOLDS METALS COMPANY ___________________________________ Pursuant to Section 253 of the Delaware General Corporation Law ___________________________________ REYNOLDS METALS COMPANY, a corporation incorporated on the 18th day of July, 1928, pursuant to the provisions of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify that the Corporation owns all of the outstanding stock of FOIL DISTRIBUTING COMPANY, a corporation incorporated on the 4th day of April, 1983, pursuant to the provisions of the general corporation Law of the State of Delaware, and that the Corporation by resolutions of its Board of Directors duly adopted at a meeting held on the 17th day of April, 1991, determined to and did merge into itself said FOIL DISTRIBUTING COMPANY, which resolutions are as follows: RESOLVED, that this corporation, as owner of all the outstanding capital stock of Foil Distributing Company, merge into itself Foil Distributing Company and assume all of its liabilities and obligations effective as of 12:01 a.m. on April 30, 1991; and FURTHER RESOLVED, that the Chairman of the Board, the President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such other action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents, which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of such action or the execution of any such agreements, instruments or documents to be conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 12:01 A.M. on April 30, 1991. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed and attested by its officers thereunto duly authorized this 22nd day of April, 1991. REYNOLDS METALS COMPANY By Donald T. Cowles Vice President, General Counsel and Secretary ATTEST: Donna C. Dabney Assistant Secretary State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP & MERGER OF "REYNOLDS METALS COMPANY" FILED IN THIS OFFICE ON THE TWENTY-THIRD DAY OF APRIL, A.D. 1991, AT 9 O'CLOCK A.M. * * * * * * * * William T. Quillen ----------------------------- William T. Quillen, Secretary of State AUTHENTICATION: *4114707 DATE: 10/25/1993 932985004 CERTIFICATE OF OWNERSHIP AND MERGER MERGING REYNOLDS OF HAWAII, INC. INTO REYNOLDS METALS COMPANY ___________________________________ Pursuant to Section 253 of the Delaware General Corporation Law ___________________________________ REYNOLDS METALS COMPANY, a corporation incorporated on the 18th day of July, 1928, pursuant to the provisions of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify that the Corporation owns all of the outstanding stock of REYNOLDS OF HAWAII, INC., a corporation incorporated on the 4th day of May, 1979, pursuant to the provisions of the general corporation Law of the State of Delaware, and that the Corporation by resolutions of its Board of Directors duly adopted at a meeting held on the 17th day of April, 1991, determined to and did merge into itself said REYNOLDS OF HAWAII, INC., which resolutions are as follows: RESOLVED, that this corporation, as owner of all the outstanding capital stock of Reynolds of Hawaii, Inc., merge into itself Reynolds of Hawaii, Inc. and assume all of its liabilities and obligations effective as of 12:01 a.m. on April 30, 1991; and FURTHER RESOLVED, that the Chairman of the Board, the President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such other action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents, which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of such action or the execution of any such agreements, instruments or documents to be conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 12:01 A.M. on April 30, 1991. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed and attested by its officers thereunto duly authorized this 22nd day of April, 1991. REYNOLDS METALS COMPANY By Donald T. Cowles Vice President, General Counsel and Secretary ATTEST: Donna C. Dabney Assistant Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING BROAD ST. ROAD CORPORATION INTO REYNOLDS METALS COMPANY ___________________________________ Pursuant to Section 253 of the Delaware General Corporation Law ___________________________________ REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify that the Corporation owns all the outstanding stock of BROAD ST. ROAD CORPORATION, a Delaware corporation, and that the Corporation by resolutions of its Board of Directors duly adopted at a meeting held on the 15th day of November, 1991, determined to and did merge into itself BROAD ST. ROAD CORPORATION, which resolutions are as follows: RESOLVED, that this corporation, as owner of all the outstanding capital stock of Broad St. Road Corporation, merge into itself Broad St. Road Corporation and assume all of its liabilities and obligations effective as of 5:00 p.m. on December 31, 1991; and FURTHER RESOLVED, that the Chairman of the Board, the President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such other action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents, which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of such action or the execution of any such agreements, instruments or documents to be conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 5:00 p.m. on December 31, 1991. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed and attested by its officers thereunto duly authorized this 26th day of November, 1991. REYNOLDS METALS COMPANY By Donald T. Cowles Vice President, General Counsel and Secretary ATTEST: D. Michael Jones Assistant Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING REYNOLDS ALUMINUM RECYCLING COMPANY INTO REYNOLDS METALS COMPANY ____________________________________ Pursuant to Section 253 of the Delaware General Corporation Law ____________________________________ REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify that the Corporation owns all the outstanding stock of REYNOLDS ALUMINUM RECYCLING COMPANY, a Missouri corporation, and that the Corporation by resolutions of its Board of Directors duly adopted by unanimous written consent on December 16, 1991 pursuant to Section 141(f) of the Delaware General Corporation Law determined to and did merge into itself REYNOLDS ALUMINUM RECYCLING COMPANY, which resolutions are as follows: RESOLVED, that this corporation, as owner of all the outstanding capital stock of Reynolds Aluminum Recycling Company, merge into itself Reynolds Aluminum Recycling Company and assume all of its liabilities and obligations effective as of 5:00 p.m. on December 31, 1991 pursuant to the following Plan of Merger: 1. Reynolds Metals Company of Delaware is the survivor. 2. All of the property, rights, privileges, leases and patents of Reynolds Aluminum Recycling Company, a Missouri corporation, are to be transferred to and become the property of Reynolds Metals Company, the survivor. The officers and board of directors of the above named corporations are authorized to execute all deeds, assignments, and documents of every nature which may be needed to effectuate a full and complete transfer of ownership. 3. The officers and board of directors of Reynolds Metals Company shall continue in office until their successors are duly elected and qualified under the provisions of the by-laws of the surviving corporation. 4. It is agreed that, upon and after the issuance of a certificate of merger by the Secretary of State of the State of Missouri: a. The surviving corporation may be served with process in the State of Missouri in any proceeding for the enforcement of any obligation of any corporation organized under the laws of the State of Missouri which is a party to the merger and in any proceeding for the enforcement of the rights of a dissenting shareholder of any such corporation organized under the laws of the State of Missouri against the surviving corporation; b. The Secretary of State of the State of Missouri shall be and hereby is irrevocably appointed as the agent of the surviving corporation to accept service of process in any such proceeding; the address to which the service of process in any such proceeding shall be mailed is: Secretary, Reynolds Metals Company, 6601 West Broad Street, Richmond, Virginia 23230; and c. The surviving corporation will promptly pay to the dissenting shareholders of any corporation organized under the laws of the State of Missouri which is a party to the merger the amount, if any, to which they shall be entitled under the provisions of "The General and Business Corporation Law of Missouri" with respect to the rights of dissenting shareholders. 5. The articles of incorporation of the survivor are not amended. provided that, at any time prior to the filing with the Delaware Secretary of State of a Certificate of Ownership and Merger merging Reynolds Aluminum Recycling Company into this corporation, the Board of Directors of this corporation may terminate this resolution and abandon the merger contemplated hereby; and FURTHER RESOLVED, that the Chairman of the Board, the President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents, which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of such action or the execution of any such agreements, instruments or documents to the conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 5:00 p.m. on December 31, 1991. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed and attested by its officers thereunto duly authorized this 20th day of December, 1991. REYNOLDS METALS COMPANY By Donald T. Cowles Vice President, General Counsel and Secretary ATTEST: D. Michael Jones Assistant Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING REYNOLDS SEATTLE CAN COMPANY INTO REYNOLDS METALS COMPANY _____________________________________________ Pursuant to Section 253 of the General Corporation Law of Delaware _____________________________________________ REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of REYNOLDS SEATTLE CAN COMPANY, a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted at a meeting held on the 19th day of June, 1992, determined to merge into itself REYNOLDS SEATTLE CAN COMPANY on the conditions set forth in such resolutions: RESOLVED, that this corporation, as owner of all of the outstanding shares of each class of the capital stock of Reynolds Seattle Can Company, merge into itself Reynolds Seattle Can Company and assume all of its liabilities and obligations effective as of 5:00 p.m. E.D.T. on June 30, 1992; and FURTHER RESOLVED, that the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any Vice Chairman, any Executive Vice President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents (including, without limitation, a certificate of ownership and merger) which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of any such action or the execution of any such agreements, instruments or documents to be conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 5:00 p.m. E.D.T. on June 30, 1992. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 19th day of June, 1992. REYNOLDS METALS COMPANY By Donald T. Cowles Vice President, General Counsel and Secretary [SEAL] ATTEST: By: D. Michael Jones Assistant Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING REYNOLDS ALUMINUM CREDIT CORPORATION INTO REYNOLDS METALS COMPANY Pursuant to Section 253 of the General Corporation Law of Delaware REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporations owns all of the outstanding shares of the capital stock of REYNOLDS ALUMINUM CREDIT CORPORATION, a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted by unanimous written consent dated December 16, 1993, determined to merge into itself REYNOLDS ALUMINUM CREDIT CORPORATION on the conditions set forth in such resolutions: RESOLVED, that this corporation, as owner of all of the outstanding shares of the capital stock of Reynolds Aluminum Credit Corporation, merge into itself Reynolds Aluminum Credit Corporation and assume all of its liabilities and obligations effective as of 5:00 p.m. E.S.T. on December 31, 1993; FURTHER RESOLVED, that the Chief Executive Officer, the Chief Financial Officer, any Vice Chairman, any Executive Vice President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents (including, without limitation, a certificate of ownership and merger) which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of any such action or the execution of any such agreements, instruments or documents to be conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 5:00 p.m. E.S.T. on December 31, 1993. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 29th day of December, 1993. REYNOLDS METALS COMPANY By: D. Michael Jones Vice President, General Counsel and Secretary [SEAL] ATTEST: By:Carol L. Dillon Assistant Secretary CERTIFICATE OF OWNERSHIP AND MERGER MERGING REYNOLDS KANSAS CITY CAN COMPANY INTO REYNOLDS METALS COMPANY Pursuant to Section 253 of the General Corporation Law of Delaware REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporations owns all of the outstanding shares of each class of the capital stock of REYNOLDS KANSAS CITY CAN COMPANY, a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted by unanimous written consent dated December 16, 1993, determined to merge into itself REYNOLDS KANSAS CITY CAN COMPANY on the conditions set forth in such resolutions: RESOLVED, that this corporation, as owner of all of the outstanding shares of each class of the capital stock of Reynolds Kansas City Can Company, merge into itself Reynolds Kansas City Can Company and assume all of its liabilities and obligations effective as of 5:00 p.m. E.S.T. on December 31, 1993; FURTHER RESOLVED, that the Chief Executive Officer, the Chief Financial Officer, any Vice Chairman, any Executive Vice President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents (including, without limitation, a certificate of ownership and merger) which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of any such action or the execution of any such agreements, instruments or documents to be conclusive evidence of the authority to take or execute the same. This Certificate of Ownership and Merger shall be effective as of 5:00 p.m. E.S.T. on December 31, 1993. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 29th day of December, 1993. REYNOLDS METALS COMPANY By:D. Michael Jones Vice President, General Counsel and Secretary [SEAL] ATTEST: By:Carol L. Dillon Assistant Secretary State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "REYNOLDS METALS COMPANY" FILED IN THIS OFFICE ON THE TWENTIETH DAY OF JANUARY, A.D. 1994, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. William T. Quillen ----------------------------- William T. Quillen, Secretary of State AUTHENTICATION: 7005454 DATE: 01-21-94 0240111 8100 944002852 CERTIFICATE OF DESIGNATIONS, PREFERENCES, RIGHTS AND LIMITATIONS OF 7% PRIDES, Convertible Preferred Stock of REYNOLDS METALS COMPANY ______________________ Pursuant to Section 151 of the General Corporation Law of the State of Delaware ______________________ Reynolds Metals Company, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that, under (i) authority conferred upon the Board of Directors by the Restated Certificate of Incorporation of the Corporation, as amended to date, (ii) the provisions of Sections 141(c) and 151 of the General Corporation Law of the State of Delaware, and (iii) resolutions adopted by the Board of Directors at its meeting on December 17, 1993, the 1993 Preferred Stock Committee of the Board of Directors at its meeting on January 18, 1994 duly adopted the following resolution: RESOLVED, that under (i) authority conferred upon the 1993 Preferred Stock Committee by the Board of Directors and (ii) authority conferred upon the Board of Directors by the Restated Certificate of Incorporation, as amended to date (the "Restated Certificate of Incorporation"), the 1993 Preferred Stock Committee hereby authorizes the issuance of 11,000,000 shares of authorized and unissued preferred stock, without par value, of the Corporation, and hereby fixes the designation, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such shares, in addition to those set forth in the Restated Certificate of Incorporation, as follows, to be set forth in a certificate of designations (the "Certificate of Designations"): Section 1. Designation and Size of Issue; Ranking. (a) The distinctive designation of the series of preferred stock shall be "7% PRIDES, Convertible Preferred Stock" (the "PRIDES"). The shares are Preferred Redeemable Increased Dividend Equity Securities. The number of shares constituting the PRIDES shall be 11,000,000 shares. Each share of PRIDES shall have a stated value of $47.25. (b) Any shares of the PRIDES which at any time have been redeemed for, or converted into, Common Stock, without par value, of the Corporation (the "Common Stock") or otherwise reacquired by the Corporation shall, after such redemption, conversion or other acquisition, resume the status of authorized and unissued shares of preferred stock, without par value, of the Corporation (the "Preferred Stock"), without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (c) The shares of PRIDES shall rank on a parity, both as to payment of dividends and distribution of assets upon liquidation, with any Preferred Stock issued by the Corporation after the date of this Certificate of Designations that by its terms ranks pari passu with the PRIDES. Section 2. Dividends. (a) The holders of record of the shares of PRIDES shall be entitled to receive, when and as declared by the Board of Directors out of funds legally available therefor, cash dividends ("Preferred Dividends") from the date of the issuance of the shares of PRIDES at the rate per annum of 7 percent of the stated value per share (equivalent to $3.31 per annum or $0.8275 per quarter for each share of PRIDES), payable quarterly in arrears, on each April 1, July 1, October 1 and December 31 (each a "Dividend Payment Date") or, if any such date is not a business day (as defined herein), the Preferred Dividend due on such Dividend Payment Date shall be paid on the next succeeding business day; provided, however, that, with respect to any dividend period during which a redemption occurs, the Corporation may, at its option, declare accrued Preferred Dividends to, and pay such Preferred Dividends on, the date fixed for redemption, in which case such Preferred Dividends shall be payable to the holders of shares of PRIDES as of the record date for such dividend payment and shall not be included in the calculation of the related PRIDES Call Price (as defined herein). The first dividend period shall be from the date of initial issuance of the shares of PRIDES to but excluding April 1, 1994 and the first Preferred Dividend shall be payable on April 1, 1994. Preferred Dividends on shares of PRIDES shall be cumulative and shall accumulate from the date of original issuance. Preferred Dividends on shares of PRIDES shall cease to accrue on and after the Mandatory Conversion Date (as defined herein) or on and after the date of their earlier conversion or redemption, as the case may be. Preferred Dividends shall be payable to holders of record as they appear on the stock register of the Corporation on such record dates, not less than 15 nor more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Preferred Dividends payable on shares of PRIDES for any period less than a full quarterly dividend period (or, in the case of the first Preferred Dividend, from the date of initial issuance of the shares of PRIDES to but excluding the first Dividend Payment Date) shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in any period less than one month. Preferred Dividends shall accrue on a daily basis whether or not there are funds of the Corporation legally available for the payment of such dividends and whether or not such Preferred Dividends are declared. Accrued but unpaid Preferred Dividends shall cumulate as of the Dividend Payment Date on which they first become payable, but no interest shall accrue on accumulated but unpaid Preferred Dividends. (b) As long as shares of PRIDES are outstanding, no dividends (other than dividends payable in shares of, or warrants, rights or options exercisable for or convertible into shares of, Second Preferred Stock, $100 par value, of the Corporation (the "Second Preferred Stock"), Common Stock or any other capital stock of the Corporation ranking junior to the shares of PRIDES as to the payment of dividends and the distribution of assets upon liquidation (collectively, the "Junior Stock") and cash in lieu of fractional shares in connection with any such dividend) shall be paid or declared in cash or otherwise, nor shall any other distribution be made (other than a distribution payable in Junior Stock and cash in lieu of fractional shares in connection with any such distribution), on any Junior Stock unless (i) full dividends on Preferred Stock (including the shares of PRIDES) that does not constitute Junior Stock ("Parity Preferred Stock") have been paid, or declared and set aside for payment, for all dividend periods terminating at or before the date of such Junior Stock dividend or distribution payment to the extent such dividends are cumulative; (ii) dividends in full for the current quarterly dividend period have been paid, or declared and set aside for payment, on all Parity Preferred Stock to the extent such dividends are cumulative; (iii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any Parity Preferred Stock; and (iv) the Corporation is not in default on any of its obligations to redeem any Parity Preferred Stock. (c) As long as any shares of PRIDES are outstanding, no shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by the Corporation or any of its subsidiaries (except in connection with a reclassification or exchange of any Junior Stock through the issuance of other Junior Stock (and cash in lieu of fractional shares in connection therewith) or the purchase, redemption or other acquisition of any Junior Stock with any Junior Stock (and cash in lieu of fractional shares in connection therewith)) nor may any funds be set aside or made available for any sinking fund for the purchase or redemption of any Junior Stock unless: (i) full dividends on Parity Preferred Stock have been paid, or declared and set aside for payment, for all dividend periods terminating at or before the date of such purchase, redemption or other acquisition to the extent such dividends are cumulative; (ii) dividends in full for the current quarterly dividend period have been paid, or declared and set aside for payment, on all Parity Preferred Stock to the extent such dividends are cumulative; (iii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any Parity Preferred Stock; and (iv) the Corporation is not in default on any of its obligations to redeem any Parity Preferred Stock. (d) As long as any shares of PRIDES are outstanding, dividends or other distributions may not be declared or paid on any Parity Preferred Stock (other than dividends or other distributions payable in Junior Stock and cash in lieu of fractional shares in connection therewith), and the Corporation may not purchase, redeem or otherwise acquire any Parity Preferred Stock (except with any Junior Stock and cash in lieu of fractional shares in connection therewith), unless either: (a)(i) full dividends on Parity Preferred Stock have been paid, or declared and set aside for payment, for all dividend periods terminating at or before the date of such Parity Preferred Stock dividend, distribution, purchase, redemption or other acquisition payment to the extent such dividends are cumulative; (ii) dividends in full for the current quarterly dividend period have been paid, or declared and set aside for payment, on all Parity Preferred Stock to the extent such dividends are cumulative; (iii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any Parity Preferred Stock; and (iv) the Corporation is not in default on any of its obligations to redeem any Parity Preferred Stock; or (b) with respect to the payment of dividends only, any such dividends shall be declared and paid pro rata so that the amounts of any dividends declared and paid per share of PRIDES and each other share of Parity Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends (including any accumulation with respect to unpaid dividends for prior dividend periods, if such dividends are cumulative) per share of PRIDES and such other shares of Parity Preferred Stock bear to each other. Section 3. Conversion or Redemption. (a) Unless previously either redeemed or converted at the option of the holder in accordance with the provisions of Section 3(c), on December 31, 1997 (the "Mandatory Conversion Date"), each outstanding share of PRIDES shall mandatorily convert ("Mandatory Conversion") into (i) shares of authorized Common Stock at the PRIDES Common Equivalent Rate (as defined herein) in effect on the Mandatory Conversion Date and (ii) the right to receive cash in an amount equal to all accrued and unpaid Preferred Dividends on such share of PRIDES (other than previously declared dividends payable to a holder of record as of a prior date) to but excluding the Mandatory Conversion Date, whether or not declared, out of funds legally available for the payment of Preferred Dividends, subject to the right of the Corporation to redeem the shares of PRIDES on or after December 31, 1996 (the "Initial Redemption Date") and before the Mandatory Conversion Date and subject to the conversion of the shares of PRIDES at the option of the holder at any time before the Mandatory Conversion Date. The "PRIDES Common Equivalent Rate" shall initially be one share of Common Stock for each share of PRIDES and shall be subject to adjustment as set forth in Sections 3(d) and 3(e). Shares of PRIDES shall cease to be outstanding on the Mandatory Conversion Date. The Corporation shall make such arrangements as it deems appropriate for the issuance of certificates representing shares of Common Stock and for the payment of cash in respect of such accrued and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in exchange for and contingent upon surrender of certificates representing the shares of PRIDES, and the Corporation may defer the payment of dividends on such shares of Common Stock and the voting thereof until, and make such payment and voting contingent upon, the surrender of certificates representing the shares of PRIDES; provided, that the Corporation shall give the holders of the shares of PRIDES such notice of any such actions as the Corporation deems appropriate and upon surrender such holders shall be entitled to receive such dividends declared and paid, if any, on such shares of Common Stock subsequent to the Mandatory Conversion Date. (b)(i) Shares of PRIDES are not redeemable by the Corporation before the Initial Redemption Date. At any time and from time to time on or after that date until immediately before the Mandatory Conversion Date, the Corporation shall have the right to redeem, in whole or in part, the outstanding shares of PRIDES (subject to the notice provisions set forth in Section 3(b)(iii)). Upon any such redemption, the Corporation shall deliver to each holder thereof, in exchange for each such share of PRIDES subject to redemption, the greater of: (A) the number of shares of Common Stock equal to the applicable PRIDES Call Price (as defined herein) in effect on the redemption date divided by the Current Market Price (as defined herein) of the Common Stock, determined as of the second Trading Day (as defined herein) immediately preceding the Notice Date (as defined herein); or (B) .82 of a share of Common Stock (subject to adjustment in the same manner as the PRIDES Optional Conversion Rate (as defined herein) is adjusted). Preferred Dividends on the shares of PRIDES shall cease to accrue on and after the date fixed for their redemption. The "PRIDES Call Price" of each share of PRIDES shall be the sum of (x) $48.077 on and after the Initial Redemption Date, to and including March 31, 1997; $47.870 on and after April 1, 1997, to and including June 30, 1997; $47.663 on and after July 1, 1997, to and including September 30, 1997; $47.457 on and after October 1, 1997, to and including November 30, 1997; and $47.25 on and after December 1, 1997, to and including December 31, 1997; and (y) all accrued and unpaid Preferred Dividends thereon to but not including the date fixed for redemption (other than previously declared Preferred Dividends payable to a holder of record as of a prior date). If fewer than all the outstanding shares of PRIDES are to be called for redemption, shares of PRIDES to be called shall be selected by the Corporation from outstanding shares of PRIDES not previously called by lot or pro rata (as nearly as may be) or by any other method determined by the Board of Directors in its sole discretion to be equitable. (ii) The term "Current Market Price" per share of the Common Stock on any date of determination means the lesser of (x) the average of the Closing Prices (as defined herein) of the Common Stock for the 15 consecutive Trading Days ending on and including such date of determination, or (y) the Closing Price of the Common Stock for such date of determination; provided, however, that, with respect to any redemption of shares of PRIDES, if any event resulting in an adjustment of the PRIDES Common Equivalent Rate occurs during the period beginning on the first day of such 15-day period and ending on the applicable redemption date, the Current Market Price as determined pursuant to the foregoing shall be appropriately adjusted to reflect the occurrence of such event. (iii) The Corporation shall provide notice of any redemption of the shares of PRIDES to holders of record of the shares of PRIDES to be called for redemption not less than 15 nor more than 60 days before the date fixed for redemption. Any such notice shall be provided by mail, sent to the holders of record of the shares of PRIDES to be called at each such holder's address as it appears on the stock register of the Corporation, first class postage prepaid; provided, however, that failure to give such notice or any defect therein shall not affect the validity of the proceeding for redemption of any shares of PRIDES to be redeemed except as to the holder to whom the Corporation has failed to give such notice or whose notice was defective. A public announcement of any call for redemption shall be made by the Corporation before, or at the time of, the mailing of such notice of redemption. The term "Notice Date" with respect to any notice given by the Corporation in connection with a redemption of the shares of PRIDES means the date on which first occurs either the public announcement of such redemption or the commencement of mailing of the notice to the holders of shares of PRIDES, in each case pursuant to this Section 3(b)(iii). Each such notice shall state, as appropriate, the following and may contain such other information as the Corporation deems advisable: (A) the redemption date; (B) that all outstanding shares of PRIDES are to be redeemed or, in the case of a redemption of fewer than all outstanding shares of PRIDES, the number of such shares held by such holder to be redeemed; (C) the PRIDES Call Price, the number of shares of Common Stock deliverable upon redemption of each share of PRIDES to be redeemed and the Current Market Price used to calculate such number of shares of Common Stock; (D) the place or places where certificates for such shares are to be surrendered for redemption; and (E) that dividends on the shares of PRIDES to be redeemed shall cease to accrue on and after such redemption date (except as otherwise provided herein). (iv) The Corporation's obligation to deliver shares of Common Stock and provide funds upon redemption in accordance with this Section 3(b) shall be deemed fulfilled if, on or before a redemption date, the Corporation shall deposit with a bank or trust company, or an affiliate of a bank or trust company, having an office or agency in New York, New York and having (or such affiliate having) a combined capital and surplus of at least $50,000,000 according to its last published statement of condition, or shall set aside or make other reasonable provision for the issuance of, such number of shares of Common Stock as are required to be delivered by the Corporation pursuant to this Section 3(b) upon the occurrence of the related redemption of shares of PRIDES and for the payment of cash in lieu of the issuance of fractional share amounts and accrued and unpaid dividends payable in cash on the shares of PRIDES to be redeemed as required by this Section 3(b), in trust for the account of the holders of such shares of PRIDES to be redeemed (and so as to be and continue to be available therefor), with irrevocable instructions and authority to such bank or trust company that such shares and funds be delivered upon redemption of the shares of PRIDES so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any shares of Common Stock or funds so deposited and unclaimed at the end of three years from such redemption date shall be repaid and released to the Corporation, after which the holder or holders of such shares of PRIDES so called for redemption shall look only to the Corporation for delivery of shares of Common Stock and the payment of any other funds due in connection with the redemption of the shares of PRIDES. (v) Each holder of shares of PRIDES called for redemption must surrender the certificates evidencing such shares (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state) to the Corporation at the place designated in the notice of such redemption and shall thereupon be entitled to receive certificates evidencing shares of Common Stock and to receive any funds payable pursuant to this Section 3(b) following such surrender and following the date of such redemption. In case fewer than all the shares represented by any such surrendered certificate are called for redemption, a new certificate shall be issued at the expense of the Corporation representing the unredeemed shares. If such notice of redemption shall have been given, and if on the date fixed for redemption shares of Common Stock and funds necessary for the redemption shall have been irrevocably either set aside by the Corporation separate and apart from its other funds or assets in trust for the account of the holders of the shares to be redeemed (and so as to be and continue to be available therefor) or deposited with a bank or trust company or an affiliate thereof as provided herein or the Corporation shall have made other reasonable provision therefor, then notwithstanding that the certificates evidencing any shares of PRIDES so called for redemption shall not have been surrendered, the shares represented thereby so called for redemption shall be deemed no longer outstanding and Preferred Dividends with respect to the shares so called for redemption and all rights with respect to the shares so called for redemption shall forthwith on and after such date cease and terminate (unless the Corporation defaults on the payment of the redemption price), except for (i) the rights of the holders to receive the shares of Common Stock and funds, if any, payable pursuant to this Section 3(b) without interest upon surrender of their certificates therefor and (ii) the right of the holders, pursuant to Section 3(c) to convert the shares of PRIDES called for redemption until immediately before the close of business on any redemption date; provided, however, that holders of shares of PRIDES at the close of business on a record date for any payment of Preferred Dividends shall be entitled to receive the Preferred Dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such shares following such record date and before the Dividend Payment Date. Holders of shares of PRIDES that are redeemed shall not be entitled to receive dividends declared and paid on such shares of Common Stock, and such shares of Common Stock shall not be entitled to vote, until such shares of Common Stock are issued upon the surrender of the certificates representing such shares of PRIDES and upon such surrender such holders shall be entitled to receive such dividends declared and paid on such shares of Common Stock subsequent to such redemption date. (c) Shares of PRIDES are convertible, in whole or in part, at the option of the holders thereof ("Optional Conversion"), at any time before the Mandatory Conversion Date, unless previously redeemed, into shares of Common Stock at a rate of .82 of a share of Common Stock for each share of PRIDES (the "PRIDES Optional Conversion Rate"), subject to adjustment as set forth below. The right of Optional Conversion of shares of PRIDES called for redemption shall terminate immediately before the close of business on any redemption date with respect to such shares. Optional Conversion of shares of PRIDES may be effected by delivering certificates evidencing such shares of PRIDES, together with written notice of conversion and a proper assignment of such certificates to the Corporation or in blank (and, if applicable, cash payment of an amount equal to the Preferred Dividend attributable to the current quarterly dividend period payable on such shares), to the office of the transfer agent for the shares of PRIDES or to any other office or agency maintained by the Corporation for that purpose and otherwise in accordance with Optional Conversion procedures established by the Corporation. Each Optional Conversion shall be deemed to have been effected immediately before the close of business on the date on which the foregoing requirements shall have been satisfied. The Optional Conversion shall be at the PRIDES Optional Conversion Rate in effect at such time and on such date. Holders of shares of PRIDES at the close of business on a record date for any payment of declared Preferred Dividends shall be entitled to receive the Preferred Dividend payable on such shares of PRIDES on the corresponding Dividend Payment Date notwithstanding the Optional Conversion of such shares of PRIDES following such record date and before such Dividend Payment Date. However, shares of PRIDES surrendered for Optional Conversion after the close of business on a record date for any payment of declared Preferred Dividends and before the opening of business on the next succeeding Dividend Payment Date must be accompanied by payment in cash of an amount equal to the Preferred Dividends attributable to the current quarterly dividend period payable on such date (unless such shares of PRIDES are subject to redemption on a redemption date between such record date established for such Dividend Payment Date and such Dividend Payment Date). Except as provided above, upon any Optional Conversion of shares of PRIDES, the Corporation shall make no payment of or allowance for unpaid Preferred Dividends, whether or not in arrears, on such shares of PRIDES as to which Optional Conversion has been effected or for previously declared dividends or distributions on the shares of Common Stock issued upon Optional Conversion. (d) The PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate are each subject to adjustment from time to time as provided below in this paragraph (d). (i) If the Corporation shall pay a stock dividend or make a distribution with respect to its Common Stock in shares of Common Stock (including by way of reclassification of any shares of its Common Stock), the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate in effect at the opening of business on the day following the date fixed for the determination by stockholders entitled to receive such dividend or other distribution shall each be increased by multiplying such PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate by a fraction of which the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination, immediately before such dividend or distribution, plus the total number of shares of Common Stock constituting such dividend or other distribution, and of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination, immediately before such dividend or distribution, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this clause (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of certificates issued in lieu of fractions of shares of Common Stock. (ii) In case outstanding shares of Common Stock shall be subdivided or split into a greater number of shares of Common Stock, the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall each be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall each be proportionately reduced, such increases or reductions, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (iii) If the Corporation shall, after the date of this Certificate of Designations, issue rights or warrants to all holders of its Common Stock entitling them (for a period not exceeding 45 days from the date of such issuance) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price of the Common Stock (determined pursuant to Section 3(b)(ii)) on the record date for the determination of stockholders entitled to receive such rights or warrants, then in each case the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate shall each be adjusted by multiplying the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate in effect on such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately before such issuance, plus the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately before such issuance, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such Current Market Price (determined by multiplying such total number of shares by the exercise price of such rights or warrants and dividing the product so obtained by such Current Market Price). Shares of Common Stock held by the Corporation or by another corporation of which a majority of the shares entitled to vote in the election of directors are held, directly or indirectly, by the Corporation shall not be deemed to be outstanding for purposes of such computation. Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate shall each be readjusted to the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate which would then be in effect had the adjustments made after the issuance of such rights or warrants been made upon the basis of issuance of rights or warrants in respect of only the number of shares of Common Stock actually delivered. (iv) If the Corporation shall pay a dividend or make a distribution to all holders of its Common Stock consisting of evidences of its indebtedness, cash or other assets (including shares of capital stock of the Corporation other than Common Stock but excluding any cash dividends or distributions, other than Extraordinary Cash Distributions (as defined herein) and dividends referred to in clauses (i) and (ii) above), or shall issue to all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in clause (iii) above), then in each such case, the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate shall each be adjusted by multiplying the PRIDES Common Equivalent Rate and the PRIDES Optional Conversation Rate in effect on the record date for such dividend or distribution or for the determination of stockholders entitled to receive such rights or warrants, as the case may be, by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock (determined pursuant to Section 3(b)(ii) on such record date), and of which the denominator shall be such Current Market Price per share of Common Stock less either (i) the fair market value (as determined by the Board of Directors, whose determination shall be conclusive) on such record date of the portion of the assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, applicable to one share of Common Stock, or (ii) if applicable, the amount of the Extraordinary Cash Distributions. Such adjustment shall become effective on the opening of business on the business day next following the record date for such dividend or distribution or for the determination of holders entitled to receive such rights or warrants, as the case may be. (v) Any shares of Common Stock issuable in payment of a dividend or other distribution shall be deemed to have been issued immediately before the close of business on the record date for such dividend or other distribution for purposes of calculating the number of outstanding shares of Common Stock under this Section 3. (vi) Anything in this Section 3 notwithstanding, the Corporation shall be entitled (but shall not be required) to make such upward adjustments in the PRIDES Common Equivalent Rate, the PRIDES Optional Conversion Rate and the PRIDES Call Price in addition to those set forth by this Section 3, as the Corporation, in its sole discretion, shall determine to be advisable, in order that any stock dividends, subdivision of stock, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock (or any transaction that could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Corporation to its stockholders shall not be taxable. The term "Extraordinary Cash Distribution" means, with respect to any consecutive 12-month period, all cash dividends and cash distributions on the Common Stock during such period (other than cash dividends and cash distributions for which a prior adjustment to the PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate was previously made) to the extent such dividends and distributions exceed, on a per share of Common Stock basis, 10% of the average daily Closing Price of the Common Stock over such period. (vii) In any case in which this Section 3(d) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date and the date fixed for conversion pursuant to Section 3(a) or redemption pursuant to Section 3(b) on and after such record date, but before the occurrence of such event, the Corporation may, in its sole discretion, elect to defer the following until after the occurrence of such event: (A) issuing to the holder of any shares of PRIDES surrendered for conversion or redemption the fractional shares of Common Stock issuable before giving effect to such adjustment; and (B) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to Section 4. (viii) All adjustments to the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate shall be calculated to the nearest 1/100th of a share of Common Stock. No adjustment in the PRIDES Common Equivalent Rate or in the PRIDES Optional Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least one percent therein; provided, however, that any adjustments which by reason of this Section 3(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All adjustments to the PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate shall be made successively. (ix) At least 10 business days before taking any action that could result in an adjustment affecting the PRIDES Common Equivalent Rate or the PRIDES Optional Conversion Rate such that the conversion price (for purposes of this section, an amount equal to the PRIDES Call Price divided by the PRIDES Common Equivalent Rate or the PRIDES Optional Conversion Rate, respectively, as in effect from time to time) would be below the then par value of the Common Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at the PRIDES Common Equivalent Rate or the PRIDES Optional Conversion Rate as so adjusted. (x) Before redeeming any shares of PRIDES, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock upon such redemption. (e) In case of any consolidation or merger to which the Corporation is a party (other than a consolidation or merger in which the Corporation is the surviving or continuing corporation and in which the shares of Common Stock outstanding immediately before the merger or consolidation remain unchanged), or in the case of any sale or transfer to another corporation of the property of the Corporation as an entirety or substantially as an entirety, or in the case of a statutory exchange of securities with another corporation (other than in connection with a merger or acquisition), each share of PRIDES shall, after consummation of such transaction, be subject to (i) conversion at the option of the holder into the kind and amount of securities, cash, or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such share of PRIDES might have been converted immediately before consummation of such transaction, (ii) conversion on the Mandatory Conversion Date into the kind and amount of securities, cash, or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such share of PRIDES would have been converted if the conversion on the Mandatory Conversion Date had occurred immediately before the date of consummation of such transaction, plus the right to receive cash in an amount equal to all accrued and unpaid dividends on such share of PRIDES (other than previously declared dividends payable to a holder of record as of a prior date), and (iii) redemption on any redemption date in exchange for the kind and amount of securities, cash, or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock that would have been issuable at the PRIDES Call Price in effect on such redemption date upon a redemption of such share of PRIDES immediately before consummation of such transaction, assuming that, if the Notice Date for such redemption is not before such transaction, the Notice Date had been the date of such transaction; and assuming in each case that such holder of shares of Common Stock failed to exercise rights of election, if any, as to the kind or amount of securities, cash, or other property receivable upon consummation of such transaction (provided that, if the kind or amount of securities, cash, or other property receivable upon consummation of such transaction is not the same for each non-electing share, then the kind and amount of securities, cash, or other property receivable upon consummation of such transaction for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The kind and amount of securities into or for which the shares of PRIDES shall be convertible or redeemable after consummation of such transaction shall be subject to adjustment as described in Section 3(d) following the date of consummation of such transaction. The Corporation may not become a party to any such transaction unless the terms thereof are consistent with the foregoing. (f) Whenever the PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate are adjusted as provided in Section 3(d), the Corporation shall: (i) forthwith compute the adjusted PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate in accordance with this Section 3 and prepare a certificate signed by the Chief Financial Officer, any Vice President, the Treasurer or the Controller of the Corporation setting forth the adjusted PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and shall file such certificate forthwith with the transfer agent for the shares of the PRIDES and the Common Stock; (ii) make a prompt public announcement stating that the PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate have been adjusted and setting forth the adjusted PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate; (iii) mail a notice stating that the PRIDES Common Equivalent Rate and the PRIDES Optional Conversion Rate have been adjusted, the facts requiring such adjustment and upon which such adjustment is based and setting forth the adjusted PRIDES Common Equivalent Rate and PRIDES Optional Conversion Rate, to the holders of record of the outstanding shares of PRIDES, at or prior to the time the Corporation mails an interim statement, if any, to its stockholders covering the fiscal quarter period during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such fiscal quarter period. (g) In case, at any time while any of the shares of PRIDES are outstanding, (i) the Corporation shall declare a dividend (or any other distribution) on the Common Stock, excluding any cash dividends other than Extraordinary Cash Distributions; or (ii) the Corporation shall authorize the issuance to all holders of the Common Stock of rights or warrants to subscribe for or purchase shares of the Common Stock or of any other subscription rights or warrants; or (iii) the Corporation shall authorize any reclassification of the Common Stock (other than a subdivision or combination thereof) or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required (except for a merger of the Corporation into one of its subsidiaries solely for the purpose of changing the corporate domicile of the Corporation to another state of the United States and in connection with which there is no substantive change in the rights or privileges of any securities of the Corporation other than changes resulting from differences in the corporate statutes of the state the Corporation was then domiciled in and the new state of domicile), or the sale or transfer of all or substantially all of the assets of the Corporation; then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the shares of PRIDES, and shall cause to be mailed to the holders of shares of PRIDES at their last addresses as they shall appear on the stock register of the Corporation, at least 10 business days before the date hereinafter specified in clause (A) or (B) below (or the earlier of the dates hereinafter specified, in the event that more than one date is specified), a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (B) the date on which any such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property (including cash), if any, deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. The failure to give or receive the notice required by this paragraph (g) or any defect therein shall not affect the legality or validity of any such dividend, distribution, right or warrant or other action. Section 4. No Fractional Shares. No fractional shares of Common Stock shall be issued upon redemption or conversion of any shares of the PRIDES. In lieu of any fractional share otherwise issuable in respect of the aggregate number of shares of the PRIDES of any holder that are redeemed or converted on any redemption date or upon Mandatory Conversion or Optional Conversion, such holder shall be entitled to receive an amount in cash (computed to the nearest cent) equal to the same fraction of the (i) Current Market Price of the Common Stock (determined as of the second Trading Day immediately preceding the Notice Date) in the case of redemption, or (ii) Closing Price of the Common Stock determined (A) as of the fifth Trading Day immediately preceding the Mandatory Conversion Date, in the case of Mandatory Conversion, or (B) as of the second Trading Day immediately preceding the effective date of conversion, in the case of an Optional Conversion by a holder. If more than one share of PRIDES shall be surrendered for conversion or redemption at one time by or for the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the PRIDES so surrendered or redeemed. Section 5. Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion or redemption of shares of PRIDES, as herein provided, free from preemptive rights, such maximum number of shares of Common Stock as shall from time to time be issuable upon the Mandatory Conversion or Optional Conversion or redemption of all the shares of PRIDES then outstanding. Section 6. Definitions. As used in this Certificate of Designations: (i) the term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close; (ii) the term "Closing Price", on any day, shall mean the last sale price as shown on the New York Stock Exchange Composite Tape on such day, or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices of the Common Stock on the over-the-counter market on the day in question as reported by the National Association of Securities Dealers, Inc. Automated Quotation System, or a similar generally accepted reporting service, or if not so available in such manner, as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose; (iii) the term "record date" shall be such date as from time to time fixed by the Board of Directors with respect to the receipt of dividends, the receipt of a redemption price upon redemption or the taking of any action or exercise of any voting rights permitted hereby; and (iv) the term "Trading Day" shall mean a date on which the New York Stock Exchange (or any successor to such Exchange) is open for the transaction of business. Section 7. Payment of Taxes. The Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the redemption or conversion of shares of PRIDES pursuant to Section 3; provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of shares of PRIDES redeemed or converted or to be redeemed or converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. Section 8. Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, and subject to the rights of holders of any other series of Preferred Stock, the holders of outstanding shares of PRIDES are entitled to receive the sum of $47.25 per share, plus an amount equal to any accrued and unpaid Preferred Dividends thereon, out of the assets of the Corporation available for distribution to stockholders, before any distribution of assets is made to holders of Second Preferred Stock, Common Stock or any other capital stock ranking junior to the shares of PRIDES upon liquidation, dissolution, or winding up. If upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, the assets of the Corporation are insufficient to permit the payment of the full preferential amounts payable with respect to the shares of PRIDES and all other series of Parity Preferred Stock, the holders of shares of PRIDES and of all other series of Parity Preferred Stock shall share ratably in any distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of PRIDES shall not be entitled to any further participation in any distribution of assets by the Corporation. A consolidation or merger of the Corporation with or into one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger), or a sale, lease or exchange of all or substantially all of the assets of the Corporation shall not be deemed to be a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation. Section 9. Voting Rights. (a) The holders of shares of PRIDES shall have the right with the holders of Common Stock to vote in the election of directors and upon each other matter coming before any meeting of the holders of Common Stock on the basis of 4/5 of a vote for each share of PRIDES held. The holders of shares of PRIDES and the holders of Common Stock shall vote together as one class on such matters except as otherwise provided by law or by the Restated Certificate of Incorporation. (b) In the event that dividends on the shares of PRIDES or any other series of Preferred Stock shall be in arrears and unpaid for six quarterly dividend periods, or if any series of Preferred Stock (other than the PRIDES) shall be entitled for any other reason to exercise voting rights, separate from the Common Stock, to elect any directors of the Corporation ("Preferred Stock Directors"), the holders of the shares of PRIDES (voting separately as a class with holders of all other series of Preferred Stock upon which like voting rights have been conferred and are exercisable), with each share of PRIDES entitled to one vote on this and other matters in which Preferred Stock votes as a group, shall be entitled to vote for the election of two directors of the Corporation, such directors to be in addition to the number of directors constituting the Board of Directors immediately before the accrual of such right. Such right, when vested, shall continue until all cumulative dividends accumulated and payable on the shares of PRIDES and such other series of Preferred Stock shall have been paid in full and the right of any other series of Preferred Stock to exercise voting rights, separate from the Common Stock, to elect Preferred Stock Directors shall terminate or have terminated, and, when so paid and any such termination occurs or has occurred, such right of the holders of the shares of PRIDES shall cease. The term of office of any director elected by the holders of the shares of PRIDES and such other series shall terminate on the earlier of (i) the next annual meeting of stockholders at which a successor shall have been elected and qualified or (ii) the termination of the right of holders of the shares of PRIDES and such other series to vote for such directors. (c) The Corporation shall not, without the approval of the holders of at least 66-2/3 percent of the shares of PRIDES then outstanding: (i) amend, alter, or repeal any of the provisions of the Restated Certificate of Incorporation or By-Laws of the Corporation so as to affect adversely the powers, preferences or rights of the holders of the shares of PRIDES then outstanding or reduce the minimum time for any required notice to which the holders of the shares of PRIDES then outstanding may be entitled (an amendment of the Restated Certificate of Incorporation to authorize or create, or to increase the authorized amount of, Junior Stock or any stock of any class ranking on a parity with the PRIDES being deemed not to affect adversely the powers, preferences, or rights of the holders of the shares of PRIDES); (ii) authorize or create, or increase the authorized amount of, any capital stock, or any security convertible into capital stock of any class, ranking prior to the shares of PRIDES either as to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation; or (iii) merge or consolidate with or into any other corporation, unless each holder of shares of PRIDES immediately preceding such merger or consolidation shall receive or continue to hold in the resulting corporation the same number of shares, with substantially the same rights and preferences, as correspond to the shares of PRIDES so held. (d) The Corporation shall not, without the approval of the holders of at least a majority of the shares of PRIDES then outstanding: (i) increase the authorized number of shares of Preferred Stock; or (ii) create any other class or classes of capital stock of the Corporation ranking on a parity with the Preferred Stock, either as to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation, or create any stock or other security convertible into or exchangeable for or evidencing the right to purchase any stock of such other class ranking on a parity with the Preferred Stock, or increase the authorized number of shares of any such other class or amount of such other stock or security. (e) Notwithstanding the provisions set forth in Sections 9(c) and 9(d), no such approval described therein of the holders of the shares of PRIDES shall be required if, at or before the time when such amendment, alteration, or repeal is to take effect or when the authorization, creation, increase or issuance of any such prior or parity stock or convertible security is to be made, or when such consolidation or merger, voluntary liquidation, dissolution, or winding up, sale, lease, conveyance, purchase, or redemption is to take effect, as the case may be, provision is made for the redemption of all shares of PRIDES at the time outstanding. IN WITNESS WHEREOF, Reynolds Metals Company has caused this certificate to be signed and attested this 20th day of January, 1994. REYNOLDS METALS COMPANY By: Henry S. Savedge, Jr. Name: Henry S. Savedge, Jr. Title: Executive Vice President and Chief Financial Officer Attest: D. Michael Jones Name: D. Michael Jones Title: Vice President, General Counsel and Secretary State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES: "BEV-PAK, INC.", A DELAWARE CORPORATION, "R/M CAN COMPANY", A DELAWARE CORPORATION, WITH AND INTO "REYNOLDS METALS COMPANY" UNDER THE NAME OF "REYNOLDS METALS COMPANY", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWELFTH DAY OF DECEMBER, A.D. 1994, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. Edward J. Freel ----------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 7334005 DATE: 12-12-94 0240111 8100M 944241228 CERTIFICATE OF OWNERSHIP AND MERGER MERGING R/M CAN COMPANY AND BEV-PAK, INC. INTO REYNOLDS METALS COMPANY _____________________________________________ Pursuant to Section 253 of the General Corporation Law of Delaware _____________________________________________ REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of R/M CAN COMPANY and BEV-PAK, INC., each a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted at a meeting held on the 21st day of October, 1994, determined to merge into itself R/M CAN COMPANY and BEV-PAK, INC. on the conditions set forth in such resolutions: RESOLVED, that the corporation, as owner of all of the outstanding shares of each class of the capital stock of R/M Can Company and Bev-Pak, Inc., merge into itself R/M Can Company and Bev-Pak, Inc. and assume all of their respective liabilities and obligations effective as of 11:59 p.m. E.S.T. on December 31, 1994; and FURTHER RESOLVED, that the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any Vice Chairman of the Board, any Executive Vice President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized on behalf of the corporation to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents (including, without limitation, a certificate of ownership and merger and documents relating to employee benefit plans maintained for employees of Bev-Pak, Inc.) which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of any such action or the execution and delivery of any such agreements, instruments or documents to be conclusive evidence of the authority to take, execute or deliver the same. This Certificate of Ownership and Merger shall be effective as of 11:59 p.m. E.S.T. on December 31, 1994. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 29th day of November, 1994. REYNOLDS METALS COMPANY By D. Michael Jones Vice President, General Counsel and Secretary [SEAL] ATTEST: By: Brenda A. Hart Assistant Secretary State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES: "RMC HOLDING, INC.", A DELAWARE CORPORATION, WITH AND INTO "REYNOLDS METALS COMPANY" UNDER THE NAME OF "REYNOLDS METALS COMPANY", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE THIRTEENTH DAY OF DECEMBER, A.D. 1995, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. Edward J. Freel ----------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 7752105 DATE: 12-15-95 0240111 8100M 950294013 CERTIFICATE OF OWNERSHIP AND MERGER MERGING RMC HOLDINGS, INC. INTO REYNOLDS METALS COMPANY Pursuant to Section 253 of the General Corporation Law of Delaware REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of RMC HOLDINGS, Inc., a Delaware corporation. THIRD: That the Corporation, by the following resolutions of its Board of Directors, duly adopted at a meeting held on the 17th day of November, 1995, determined to merge into itself RMC HOLDINGS, INC. on the conditions set forth in such resolutions: RESOLVED, that the corporation, as owner of all of the outstanding shares of each class of the capital stock of RMC Holdings, Inc., merge into itself RMC Holdings, Inc. and assume all of its liabilities and obligations effective as of 11:59 p.m. E.S.T. on December 15, 1995; provided, that at any time prior to the filing of a certificate of ownership and merger with the Delaware Secretary of State with respect to such merger, this resolution may be rescinded by the Board of Directors of the corporation or by the Executive Committee thereof; and FURTHER RESOLVED, that the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Vice Chairman of the Board, any Executive Vice President, any Vice President, the Secretary and any Assistant Secretary are each hereby authorized on behalf of the corporation to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents (including, without limitation, a certificate of ownership and merger) which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of any such action or the execution and delivery of any such agreements, instruments or documents to be conclusive evidence of the authority to take, execute or deliver the same. FOURTH: That the foregoing resolutions of the Corporation's Board of Directors have not been rescinded by the Board of Directors or the Executive Committee thereof. This Certificate of Ownership and Merger shall be effective as of 11:59 p.m. E.S.T. on December 15, 1995. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 11th day of December, 1995. REYNOLDS METALS COMPANY By D. Michael Jones ______________________________ Vice President, General Counsel and Secretary [SEAL] ATTEST: Brenda A. Hart By: ----------------------------- Assistant Secretary State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES: "RMC ACCEPTANCE, INC.", A DELAWARE CORPORATION, WITH AND INTO "REYNOLDS METALS COMPANY" UNDER THE NAME OF "REYNOLDS METALS COMPANY", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWENTY-THIRD DAY OF DECEMBER, A.D. 1996, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. Edward J. Freel ----------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: DATE: 12-24-96 024011100 8100 96036137 CERTIFICATE OF OWNERSHIP AND MERGER MERGING RMC ACCEPTANCE, INC. INTO REYNOLDS METALS COMPANY _____________________________________________ Pursuant to Section 253 of the General Corporation Law of Delaware _____________________________________________ REYNOLDS METALS COMPANY, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of RMC ACCEPTANCE, INC., a Delaware corporation. THIRD: That the Corporation, by the following resolutions of the Executive Committee of its Board of Directors, duly adopted by unanimous written consent as of the 20th day of December, 1996, determined to merge into itself RMC ACCEPTANCE, INC. on the conditions set forth in such resolutions: RESOLVED, that the corporation, as owner of all of the outstanding shares of each class of the capital stock of RMC ACCEPTANCE, INC., merge into itself RMC ACCEPTANCE, INC. and assume all of its liabilities and obligations effective as of 12:01 a.m. E.S.T. on January 2, 1997; and FURTHER RESOLVED, that the Chief Executive Officer, any Vice Chairman and Executive Officer, the Chief Financial Officer, any Senior Vice President, any Vice President, the Secretary and any Assistant Secretary are each authorized on behalf of the corporation to take all such action, including, without limitation, incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents (including, without limitation, a certificate of ownership and merger) which in the opinion of any of them may be necessary or desirable to achieve the purposes of or effect the transactions contemplated by the preceding resolution, the taking of any such action or the execution and delivery of any such agreements, instruments or documents to be conclusive evidence of the authority to take, execute or deliver the same. This Certificate of Ownership and Merger shall be effective as of 12:01 a.m. E.S.T. on January 2, 1997. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 20th day of December, 1996. REYNOLDS METALS COMPANY By D. Michael Jones Senior Vice President and General Counsel [SEAL] ATTEST: By: Donna C. Dabney Secretary State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "REYNOLDS METALS COMPANY", FILED IN THIS OFFICE ON THE TWENTY-FIRST DAY OF JANUARY, A.D. 1997, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING. Edward J. Freel ----------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 8294419 DATE: 01-22-97 0240111 8100 971020822 CERTIFICATE OF ELIMINATION OF 7% PRIDES, Convertible Preferred Stock of REYNOLDS METALS COMPANY ________________________ Pursuant to Section 151 of the General Corporation Law of the State of Delaware ________________________ REYNOLDS METALS COMPANY, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that: 1. The Corporation has heretofore authorized and issued 11,000,000 shares of 7% PRIDES, Convertible Preferred Stock, Stated Value $47.25 Per Share (the "PRIDES"), pursuant to its Certificate of Designations, Preferences, Rights and Limitations under Section 151 of the General Corporation Law of the State of Delaware (the "PRIDES Certificate of Designations") filed in the Office of Secretary of State of the State of Delaware on January 20, 1994. 2. Pursuant to Section 3 of the PRIDES Certificate of Designations, on December 2, 1996 the Corporation called all of the outstanding shares of PRIDES for redemption on December 31, 1996. 3. The Board of Directors of the Corporation duly adopted the following resolutions at a meeting held on January 17, 1997, acknowledging that as a result of the redemption of all of the outstanding shares of the PRIDES on December 31, 1996, none of the authorized shares of the PRIDES are outstanding, and none will be issued subject to the PRIDES Certificate of Designations: RESOLVED, that as a result of the redemption on December 31, 1996 of all of the outstanding shares of 7% PRIDES(SM), Convertible Preferred Stock, Stated Value $47.25 Per Share (the "PRIDES"), of the corporation, none of the authorized shares of the PRIDES are outstanding and none will be issued subject to the Certificate of Designations, Preferences, Rights and Limitations relating to the PRIDES (the "PRIDES Certificate of Designations") previously filed in the Office of Secretary of State of the State of Delaware; and FURTHER RESOLVED, that the Restated Certificate of Incorporation of the corporation be amended to eliminate all matters set forth in the PRIDES Certificate of Designations; and FURTHER RESOLVED, that the Chief Executive Officer, any Vice Chairman and Executive Officer, the Chief Financial Officer, the Senior Vice President and General Counsel and the Secretary of the corporation are each hereby authorized on behalf of the corporation to take any and all such action, including, without limitation, the filing and recording of one or more certificates in the appropriate offices in the State of Delaware, and the incurrence and payment of all fees, expenses and other charges, and to execute and deliver all such agreements, instruments and documents which in the opinion of any of them may be necessary or desirable to achieve the purposes of, or to effect the transactions contemplated by, the preceding resolutions, the taking of any such action or the execution and delivery of any such agreements, instruments or documents to be conclusive evidence of the authority to take, execute or deliver the same. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed and this Certificate to be executed and attested by its officers thereunto duly authorized this 17th day of January, 1997. REYNOLDS METALS COMPANY By D. Michael Jones -------------------------- D. Michael Jones Senior Vice President and General Counsel [SEAL] ATTEST: By Donna C. Dabney ------------------ Donna C. Dabney Secretary F:\BAH\PRIDES\ELIMIN.CER EX-3 3 EXHIBIT 3.2 By-Laws of REYNOLDS METALS COMPANY (Incorporated under the Laws of Delaware) 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 Section 5. Notice of Meetings . . . . . . . . . . . 4 Section 6. Quorum . . . . . . . . . . . . . . . . . 4 Section 7. Adjourned Meetings . . . . . . . . . . . 4 Section 8. Inspectors of Election . . . . . . . . . 4 Section 9. List of Stockholders . . . . . . . . . . 5 Section 10. Voting . . . . . . . . . . . . . . . . . 5 Section 11. Consents in Writing . . . . . . . . . . 6 ARTICLE III - Board of Directors Section 1. Number; Term of Office; Powers . . . . . 6 Section 2. Resignations . . . . . . . . . . . . . . 6 Section 3. Vacancies . . . . . . . . . . . . . . . 7 Section 4. Annual Meeting . . . . . . . . . . . . . 7 Section 5. Regular Meetings . . . . . . . . . . . . 7 Section 6. Special Meetings . . . . . . . . . . . . 7 Section 7. Notice of Meetings . . . . . . . . . . . 7 Section 8. Quorum; Adjourned Meetings; Required Vote . . . . . . . . . . . . . 8 Section 9. Committees . . . . . . . . . . . . . . . 8 Section 10. Compensation . . . . . . . . . . . . . . 8 Section 11. Consents in Writing . . . . . . . . . . 9 Section 12. Participation by Conference Telephone . 9 Table of Contents, Continued ARTICLE IV - Officers Section 1. Officers . . . . . . . . . . . . . . . . 9 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 Section 7. Secretary . . . . . . . . . . . . . . . 10 Section 8. Treasurer . . . . . . . . . . . . . . . 10 Section 9. Controller . . . . . . . . . . . . . . . 11 Section 10. Other Officers and Assistant Officers . 11 Section 11. Term of Office; Vacancies . . . . . . . 11 Section 12. Removal . . . . . . . . . . . . . . . . 11 ARTICLE V - Dividends and Finance Section 1. Dividends . . . . . . . . . . . . . . . 11 Section 2. Deposits; Withdrawals; Notes and Other Instruments . . . . . . . . . . . . . . 11 Section 3. Fiscal Year . . . . . . . . . . . . . . 11 ARTICLE VI - Books and Records; Record Date Section 1. Books and Records . . . . . . . . . . . 12 Section 2. Record Date . . . . . . . . . . . . . . 12 ARTICLE VII - Notices Section 1. Notices . . . . . . . . . . . . . . . . 13 Section 2. Waivers of Notice . . . . . . . . . . . 13 ARTICLE VIII - Contracts Section 1. Interested Directors or Officers . . . . 13 ARTICLE IX - Seal Section 1. Seal . . . . . . . . . . . . . . . . . . 14 ARTICLE X - Indemnification Section 1. Indemnification in Third Party Actions . . . . . . . . . . . . . . . . 14 Section 2. Indemnification in an Action by or in the Right of the Corporation . . . . . . 15 Section 3. Indemnification as of Right . . . . . . 16 Section 4. Determination of Indemnification . . . . 16 Section 5. Advance for Expenses . . . . . . . . . . 16 Section 6. General Provisions . . . . . . . . . . . 16 ARTICLE XI - Amendments Section 1. Amendments . . . . . . . . . . . . . . . 18 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 Assis tant Secretary, or the Treasurer or an Assistant Treasurer, and sealed with the corporate seal; provided, that where any Certifi cate 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. 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 first Wednesday after April 15th of each year, if not a legal holiday, and if a legal holiday, then on the first business day following, at 10:00 a.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 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 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 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 fourteen (14) persons. Direc tors 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 express ly 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. 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 at such adjourned meeting. Unless otherwise specifically provided by the Certifi cate 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 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. 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. 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 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 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, employee or agent 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 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, employee or agent 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, employee or agent 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, employee or agent is proper in the circum stances because the person has met the applicable standard of conduct set forth in such Sections l and 2. Such determination shall be made (a) by the Board of Directors (the Board) by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion or (c) by the stockholders. 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, employee or agent 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. 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, employee or agent of the corporation, who served at the request of the corporation on a committee created by the Board 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, employee or agent 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, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent 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 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, employee or agent 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 pro posed 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. 010197 bylaws\rmet EX-10 4 EXHIBIT 10.38 REYNOLDS METALS COMPANY NEW MANAGEMENT INCENTIVE DEFERRAL PLAN Section 2.09 of the Reynolds Metals Company New Management Incentive Deferral Plan is hereby amended effective January 1, 1996, to read in its entirety as follows: 2.09 "Incentive Compensation" shall mean the cash incentive payable to Eligible Employees under the Company's Performance Incentive Plan and/or its Supplemental Incentive Plan. Executed and adopted as of January 1, 1996, pursuant to action taken by the Board of Directors of Reynolds Metals Company at its meeting on November 17, 1995. REYNOLDS METALS COMPANY By: F. Robert Newman Vice President, Human Resources F:\LJA\EXECCOMP\NEWMIDP\AM-01-01.996 EX-10 5 EXHIBIT 10.39 REYNOLDS METALS COMPANY PERFORMANCE INCENTIVE PLAN The Reynolds Metals Company Performance Incentive Plan is hereby amended effective January 1, 1996, by adding a new Paragraph 11 to read as follows: 11. SPECIAL PROVISIONS FOR TOP EXECUTIVES Anything herein to the contrary notwithstanding, effective with the 1996 calendar year, the following provisions shall apply each calendar year to awards to participants who are designated by the Committee as "Top Executives" for that calendar year. Top Executives shall be eligible for awards only under this Paragraph 11. (a) The provisions of this Paragraph 11, including the designation of Top Executives each year, shall be administered solely by those members of the Committee (at least two) who are "outside directors" for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). For the Top Executives, the Plan shall be administered in a manner consistent with the performance-based compensation requirements of Section 162(m)(4) of the Code. (b) No later than ninety days after the beginning of each calendar year, the Committee shall establish in writing (i) one or more Performance Goals (as defined below) that must be reached in order for a Top Executive to receive an award under the Plan for the calendar year and (ii) the amount of the award to be paid upon attainment of these goals. The Committee shall have the discretion later to revise the amount to be paid upon the attainment of these goals solely for the purpose of reducing or eliminating the amount of the award otherwise payable upon attainment of these goals. (c) In establishing Performance Goals, the Committee shall establish both the minimum Performance Goal(s) (the "Minimum Goals") that must be reached in order for the Top Executive to receive any award for the calendar year and the maximum Performance Goal(s) (the "Maximum Goals") that must be reached in order for the Top Executive to receive the maximum award for the calendar year. Between the Minimum Goals and the Maximum Goals, the Committee may establish a range of intermediate Performance Goals with a corresponding range of awards between the minimum and maximum award opportunity. In no event may a Top Executive's maximum award hereunder for any calendar year exceed $2,500,000. (d) A "Performance Goal" is an objective performance goal established in writing by the Committee; it may be based on net earnings, stock price, profit before taxes, return on equity, return on capital, return on assets, total return to shareholders, earnings per share, or debt rating. Performance Goals may be absolute in their terms or measured against or in relationship to other companies comparably or otherwise situated. Performance Goals may be particular to a Top Executive or the division, department, branch, line of business, subsidiary or other unit in which the Top Executive works or with respect to which the Top Executive has responsibility and\or may be based on the performance of the Company generally. Performance Goals may vary from Top Executive to Top Executive and from calendar year to calendar year. (e) The amount payable to a Top Executive shall be based upon the achievement of the Performance Goals, as certified in writing by the Committee after the end of each calendar year. If the Committee believes that factors outside the Performance Goals should also be taken into account in determining the amount of the award, the Committee shall have the discretion to reduce, but not increase, the amount payable to a Top Executive based on these outside factors. No payment shall be made unless the Minimum Goals are achieved. (f) Awards under this Paragraph 11 shall be paid out in accordance with the provisions of Paragraph 8. Executed and adopted as of January 1, 1996, pursuant to action taken by the Board of Directors of Reynolds Metals Company and approved by the Stockholders of Reynolds Metals Company at the 1996 Annual Meeting. REYNOLDS METALS COMPANY By: F. Robert Newman Vice President, Human Resources F:\LJA\EXECCOMP\PIP\162MAM11.996 EX-10 6 EXHIBIT 10.40 REYNOLDS METALS COMPANY SUPPLEMENTAL INCENTIVE PLAN Effective January 1, 1996 1. PURPOSE The purpose of the Supplemental Incentive Plan (the "Plan") is to promote the financial success of Reynolds Metals Company (the "Company") by: (a) providing compensation opportunities which are competitive with those of other major companies; (b) supporting the Company's goal-setting and strategic planning process by permitting awards to be based on other than completely objective criteria; and (c) motivating designated key executives to achieve important qualitative business goals by allowing them to share in the risks and rewards of the business. 2. ADMINISTRATION (a) The Plan shall be administered by the Compensation Committee (the "Committee") of the Company's Board of Directors (the "Board"). No member of the Committee shall be eligible to participate in the Plan. (b) The Committee shall have the power and authority to adopt, amend and rescind any administrative guidelines, rules, regulations, and procedures deemed appropriate to the administration of the Plan, and to interpret and rule on any questions relating to any provision of the Plan. (c) The decisions of the Committee shall be final, conclusive and binding on all parties, including the Company and participating employees. (d) The Board may from time to time amend, suspend or terminate the Plan, in whole or in part. 3. PARTICIPATION Each calendar year, the Committee shall designate employees eligible to participate in this Plan during that calendar year. 4. MAXIMUM AWARD LEVELS After consultation with management, the Committee shall designate maximum award levels to be earned by participants for a calendar year. Such maximum awards may vary by management level. These maximum award levels shall be independent of any award levels established under any other incentive plan of the Company. The Committee shall also establish a performance threshold that must be reached before any award can be paid hereunder for the year. No award may be paid hereunder unless the Company achieves adequate financial performance as established in the performance threshold, such as achievement of the minimum goals established under the Company's Performance Incentive Plan for the calendar year. 5. PERFORMANCE GOALS The Committee shall establish performance goals for participants to help it determine awards for each calendar year. Such goals shall be different from and independent of any goals established under any other incentive plan of the Company and may relate to corporate performance, divisional performance, and individual performance as appropriate to the purpose of the Plan and the positions and responsibilities of the participants. 6. DETERMINATION OF AWARDS Subject to the limitations imposed by Paragraph 4, each calendar year the Committee shall, after consultation with management, determine the award earned by each participant under this Plan for the calendar year based upon the achievement of the performance goals established hereunder for the participant for the calendar year. 7. COMMUNICATION Participants shall be advised in writing of their participation in the Plan and of the performance goals applicable to their awards. 8. PAYMENT OF AWARDS Awards shall be payable in cash as soon after the close of the calendar year as feasible; provided, however, that payment of part or all of any award may be deferred in accordance with the terms of any incentive deferral plan maintained from time to time by the Company. 9. EFFECTIVE DATE OF PLAN The Plan shall be effective January 1, 1996, and shall continue in effect, as amended from time to time, until it is terminated by the Board. Executed and adopted as of January 1, 1996, pursuant to action taken by the Board of Directors of Reynolds Metals Company at its meeting on November 17, 1995. REYNOLDS METALS COMPANY By: F. Robert Newman Vice President, Human Resources EX-10 7 EXHIBIT 10.41 REYNOLDS METALS COMPANY STOCK PLAN FOR OUTSIDE DIRECTORS Effective January 1, 1997 ARTICLE I PURPOSE OF THE PLAN The purposes of the Plan are to promote a greater identity of interests between the Company's Directors and its stockholders through grants of Phantom Stock and to assist the Company in attracting and retaining qualified individuals to serve as Directors by affording them an opportunity to share in the future successes of the Company. ARTICLE II DEFINITIONS 2.01 "Beneficiary" shall mean the individual or entity designated by the Director to receive any amounts allocated to the Director that remain in the Plan upon the death of the Director. If no such designation is made, or if the designated individual predeceases the Director or the entity no longer exists, then the Beneficiary shall be the Director's estate. 2.02 "Board" shall mean the Board of Directors of the Company. 2.03 "Company" shall mean Reynolds Metals Company, a Delaware corporation. 2.04 "Company Stock" shall mean the Common Stock of the Company, without par value. 2.05 "Director" shall mean a voting member of the Board (a) who is not an employee of the Company or of one of its subsidiaries and (b) who is not entitled, as a result of previous employment by any of them, to receive any retirement benefits from the Company or from any company that is or has been a subsidiary. 2.06 "Effective Date" shall mean January 1, 1997. 2.07 "Phantom Stock" shall mean shares of Company Stock credited to a Director in accordance with Article III. 2.08 "Plan" shall mean this Reynolds Metals Company Stock Plan for Outside Directors, as amended from time to time. ARTICLE III GRANTS OF PHANTOM STOCK 3.01 Each Director shall be granted 225 shares of Phantom Stock under the Plan each calendar year. Grants shall be credited to Directors' accounts under the Plan in four equal quarterly installments on the last day of each calendar quarter. A Director who ceases to be a member of the Board during a calendar quarter shall be credited on the last day of that quarter with a proportionate share of the quarterly allocation based on the Director's service during the quarter. 3.02 In addition to the Phantom Stock grants described in Section 3.01 above, the account of each Director who is serving as a Director on January 1, 1997, shall be credited as of such date with an additional initial grant of Phantom Stock. The number of shares of Phantom Stock in this initial grant shall be determined in accordance with the action taken by the Board at its meeting on November 15, 1996. 3.03 As of each date when cash dividends are paid on Company Stock, each Director's account under the Plan shall also be adjusted to reflect dividend equivalents computed in accordance with this Section 3.03. The dollar amount of the dividend equivalent for each Director shall equal the cash dividends that would have been paid on the number of shares of Phantom Stock credited to the Director'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 Director shall be converted into a number representing additional shares of Phantom Stock by dividing (a) the total dollar amount of the Director's dividend equivalent by (b) 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 Director's account under this Plan shall then be credited with the determined number of shares of Phantom Stock, including fractional shares calculated to three decimal places. 3.04 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 account of a Director under the Plan shall be proportionately and appropriately adjusted. ARTICLE IV PAYMENT OF PLAN ACCOUNTS 4.01 No Director shall receive any payment under the Plan while serving as a Director. If a Director resigns or retires during a calendar year, the Director's 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 Director's account (representing both grants and dividend equivalents) shall be computed and a distribution made to the Director as soon after January 15 as administratively feasible. Distributions shall be in shares of Company Stock, except that 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). 4.02 Except as otherwise specifically provided in Section 4.03 below, any payment shall be made in a single lump sum. 4.03(a) Payment of Phantom Stock credited to a Director's account from time to time in accordance with Section 3.01, including any dividend equivalents attributable to such Phantom Stock, shall be made in a single lump sum unless the Director elects before December 31 of any year to have the Phantom Stock (including dividend equivalents attributable thereto) credited during the following calendar year paid out in five annual installments. Once made, any such election is irrevocable for the calendar year to which it applies. A new election will be required each December if installments are desired for the following calendar years. If the Director elects payment in the form of five annual installments, the initial installment shall be paid as soon as administratively feasible after January 15 of the year following the year of the Director's resignation or retirement 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. (b) Payment of Phantom Stock credited to a Director's account in accordance with Section 3.02, including any dividend equivalents attributable to such Phantom Stock, shall be made in a single lump sum. 4.04 In the event of a Director's death, the remaining unpaid portion of such Director's Phantom Stock credited under the Plan, including any applicable dividend equivalents, shall be paid in a single lump sum to the Director's Beneficiary as soon as administratively feasible after January 15 of the year following the calendar year of the Participant's death. The payment shall be in shares of Company Stock, except that the value of any fractional share shall be computed as described in Section 4.01 and paid in cash. ARTICLE V COMPANY STOCK Shares of Company Stock distributed under the Plan may 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 VI 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; provided, however, that without the Director's consent, no such amendment, suspension or termination shall materially adversely affect the rights of any Director in respect of previous grants to such Director. ARTICLE VII GENERAL PROVISIONS 7.01 Neither the establishment of the Plan nor the payment of any benefits hereunder nor any action of the Company, including the Board, in connection therewith shall be held or construed to confer upon any individual any legal right to remain on the Board. 7.02 No rights or benefits 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 right or benefit shall, before receipt thereof, be in any manner liable for or subject to the recipient's debts, contracts, liabilities, engagements, or torts. 7.03 This Plan shall inure to the benefit of, and be binding upon, the Company and each Director, and upon the successors and assigns of the Company and of each Director. 7.04 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 Director (or the Director's Beneficiary, if applicable). The cash value of a fractional share shall be computed as described in Section 4.01. 7.05 Except as otherwise required by applicable federal laws, this Plan shall be governed by, and construed in accordance with, the laws of the Commonwealth of Virginia. Executed and adopted effective January 1, 1997, pursuant to action taken by the Board of Directors of Reynolds Metals Company at its meeting on November 15, 1996. REYNOLDS METALS COMPANY By F Robert Newman Title: Vice President, Human Resources F:\LJA\DIRCOMP\STOCKPLN\EF-01-01.997 EX-10 8 EXHIBIT 10.42 Summary - Executive Severance Package Purpose: To provide reduction- in- force benefits for certain key employees from January 1997 through June 1998 Requirements: - Employees must fulfill service and performance stipulations through designated termination date Severance Payment Tiers Amounts Tier I - Office of 18 months base salary the Chief plus 1997 termination Executive allowance package Tier II - all 12 months base salary other officers of plus 1997 termination Reynolds Metals allowance package Company Tier III - other 6 months base salary key employees plus 1997 termination allowance package Outplacement Full individualized outplacement services until individual is successfully placed. Incentive If the employee works at least six months during the incentive year, then a pro-rata award based on performance and number of months worked during incentive year will be made. Release Employees must sign a release to be Requirement eligible for benefits under this policy. Note: "Officer" does not include assistant officers. EX-10 9 EXHIBIT 10.43 Special Award Program 1-17-97 - - - Due to actions resulting from the portfolio review process, special awards to certain executives or "key employees" may be recommended for exceptional performance in successfully completing the disposition of a business unit. - - - Awards: amount is discretionary based on situation can be based on the value of the proceeds achieved from the sale of the business unit no individual award to exceed $100,000 aggregate cap on all awards is $2,000,000 - - - Payment: generally paid in a lump sum timing could be immediate or upon closing of the sale - - - Approval: all recommendations must be approved by the Office of the Chief Executive - - - Special awards would not be considered for purposes of any pension or benefit plan EX-11 10 EXHIBIT 11 REYNOLDS METALS COMPANY AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In millions, except share data) EARNINGS PER SHARE: For 1996 and 1994, earnings per share equals net income, minus dividends on the Company's convertible preferred stock (PRIDES), divided by the weighted-average number of common shares outstanding during the year. For 1995, earnings per share equals net income divided by the weighted-average number of common shares and common share equivalents outstanding during the year. The number of common share equivalents outstanding for 1995 was based on the assumed conversion of the PRIDES. For the purpose of this computation, the conversion rate shown below, which refers to the number of shares of common stock to be received for each share of PRIDES, was based on the average market value of common stock during 1995 (also shown below). Common share equivalents relating to the PRIDES were not included in 1996 and 1994 since their effect would have been anti-dilutive.
YEARS ENDED DECEMBER 31 --------------------------------------- 1996 1995 1994 --------------------------------------- Weighted-average shares outstanding: Common shares 63,730,000 63,051,000 61,756,000 Common share equivalents - 9,704,000 - --------------------------------------- Total 63,730,000 72,755,000 61,756,000 ======================================= Income before cumulative effect of accounting change $104 $389 $122 Less preferred stock dividends 36 - 34 --------------------------------------- $68 $389 $88 --------------------------------------- Cumulative effect of accounting change (15) - - --------------------------------------- Net income $53 $389 $88 ======================================= Earnings per share: Income before cumulative effect of accounting change $1.06 $5.35 $1.42 Cumulative effect of accounting change (0.24) - - --------------------------------------- Net income $0.82 $5.35 $1.42 ======================================= Conversion rate - 0.88 - Average market value of common stock - $53.56 -
EARNINGS PER SHARE (FULLY DILUTED): For 1996, earnings per share (fully diluted) equals net income divided by the weighted-average number of common shares outstanding during the year. For purposes of this calculation, the PRIDES were assumed to be redeemed or converted into 9,019,990 shares of common stock on January 1, 1996 (see Note 7). For 1995 and 1994, earnings per share (fully diluted) equals net income divided by the weighted-average number of common shares and common share equivalents outstanding during the year. For the 1995 and 1994 calculation, the number of common share equivalents outstanding was based on the maximum potential issuance of common shares upon conversion of the PRIDES, which was one share of common for each share of PRIDES. These computations were made for presentation purposes only since the effect was anti-dilutive in 1996 and 1994 and was not material in 1995. The difference between the number of common share equivalents for the years ended December 31, 1995 and 1994 is due to the PRIDES having been issued on January 25, 1994. The calculation for 1996 is equivalent to supplemental earnings per share disclosed in Note 1.
YEARS ENDED DECEMBER 31 ---------------------------------------- 1996 1995 1994 ---------------------------------------- Weighted-average shares outstanding: Common shares 72,680,000 63,051,000 61,756,000 Common share equivalents - 11,000,000 10,277,000 ---------------------------------------- Total 72,680,000 74,051,000 72,033,000 ======================================== Income before cumulative effect of accounting change $104 $389 $122 Cumulative effect of accounting change (15) - - ---------------------------------------- Net income $89 $389 $122 ======================================== Earnings per share (fully diluted): Income before cumulative effect of accounting change $1.43 $5.26 $1.69 Cumulative effect of accounting change (0.21) - - ---------------------------------------- Net income $1.22 $5.26 $1.69 ========================================
EX-21 11 PARENTS AND SUBSIDIARIES EXHIBIT 21 (A) Reynolds Metals Company has no parents. (B) Set forth below is a list of certain of the subsidiaries and associated companies of Reynolds Metals Company: Place of Incorporation Or Organization ------------ Aluminerie de Becancour Inc. Quebec * Aluminio Reynolds de Venezuela, S. A. Venezuela Aluminium Oxid Stade Gesellschaft mit beschrankter Haftung Germany * Bakers Choice Products, Inc. Delaware Bohai Aluminium Industries, Ltd. China * Canadian Reynolds Metals Company, Ltd./Societe Canadienne de Metaux Reynolds, Ltee Quebec Hamburger Aluminium-Werk Gesellschaft mit beschrankter Haftung Germany * Hanover Manufacturing Corporation Delaware * Industria Navarra del Aluminio, S. A. Spain * Latas de Aluminio Reynolds, Inc. Delaware Latas de Aluminio, S. A. Brazil Manicouagan Power Company - La Compagnie Hydroelectrique Manicouagan Quebec * Malakoff Industries, Inc. Texas * Mt. Vernon Plastics Corporation Delaware Pechiney Reynolds Quebec, Inc. Nebraska * Presidential Development Corporation New York * RAMCO Manufacturing Company Delaware * RB Sales Company, Ltd. Delaware * Reynolds Aluminium Deutschland, Inc. Delaware * Reynolds Aluminium Deutschland Internationale Vertriebsgesellschaft mbH Germany * Reynolds Aluminium France, S.A. France * Reynolds Aluminium Holland B. V. The Netherlands * Reynolds Aluminum Company of Canada, Ltd./Societe D'Aluminium Reynolds Du Canada, Ltee Quebec * Reynolds Australia Alumina, Ltd. Delaware * Reynolds Becancour, Inc. Delaware * Reynolds Consumer Products, Inc. Delaware * Reynolds International Holdings, Inc. Delaware * Reynolds International, Inc. Delaware Reynolds International (China), Ltd. Bermuda * Reynolds International Latin America, S.A. Panama * Reynolds International (Panama) Inc. Panama * Reynolds Italy Holding, S.p.A Italy * Reynolds-Lemmerz Industries Ontario * Reynolds Wheels-Holding, S.p.A. Italy * Reywest Development Corporation Arizona * RMC Delaware, Inc. Delaware * RMC Properties, Ltd. Delaware * RMCC Company Delaware * Reynolds Metals Development Company Delaware * Reynolds Metals Foreign Sales Corporation Barbados * Saint George Insurance Company Vermont * Southern Graphic Systems - Canada, Ltd./Systemes Graphiques Southern - Canada, Ltee Quebec * Southern Graphic Systems, Inc. Kentucky * Southern Reclamation Company, Inc. Alabama * Southwestern Graphics Systems, Inc. Texas The names of a number of subsidiaries and associated companies have been omitted because considered in the aggregate they would not constitute a significant subsidiary. * Consolidated subsidiaries EX-23 12 EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the: 1. Registration Statement (Form S-8 No. 2-76789) pertaining to the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; 2. Registration Statement (Form S-8 No. 33-13822) pertaining to the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; 3. Registration Statement (Form S-8 No. 33-44400) pertaining to the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; 4. Registration Statement (Form S-8 No. 33-20498) pertaining to the Reynolds Metals Company Savings and Investment Plan for Salaried Employees; 5. Registration Statement (Form S-3 No. 33-43443) pertaining to the shelf registration of debt securities of Reynolds Metals Company; 6. Registration Statement (Form S-8 No. 33-66032) pertaining to the Reynolds Metals Company Savings Plan for Hourly Employees; 7. Registration Statement (Form S-3 No. 33-51153) pertaining to the offer and resale of shares of Reynolds Metals Company Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust; 8. Registration Statement (Form S-8 No. 33-53847) pertaining to the Employees Savings Plan; 9. Registration Statement (Form S-8 No. 33-53851) pertaining to the Reynolds Metals Company Restricted Stock Plan for Outside Directors; 10. Registration Statement (Form S-3 No. 33-59168) pertaining to the registration of debt securities of Reynolds Aluminum Company of Canada, Ltd. (formerly known as Canadian Reynolds Metals Company Limited); 11. Registration Statement (Form S-8 No. 333-00929) pertaining to the Reynolds Metals Company Performance Incentive Plan, 12. Registration Statement (Form S-8 No. 333-03947) pertaining to the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; and in the related prospectuses of our report dated February 21, 1997, with respect to the consolidated financial statements of Reynolds Metals Company included in this Annual Report (Form 10- K) for the year ended December 31, 1996. Ernst & Young LLP Richmond, Virginia March 18, 1997 EX-24 13 EXHIBIT 24 1. Powers of Attorney from the following persons are attached: Patricia C. Barron William O. Bourke John R. Hall Robert L. Hintz William H. Joyce Mylle Bell Mangum D. Larry Moore James M. Ringler Samuel C. Scott, III Joe B. Wyatt F:\BFH\SEC\10K\EX-24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. Patricia C. Barron ______________________________ Patricia C. Barron F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 16th day of April, 1997. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. William O. Bourke ______________________________ William O. Bourke F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. John R. Hall ______________________________ John R. Hall F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. Robert L. Hintz ______________________________ Robert L. Hintz F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. William H. Joyce ______________________________ William H. Joyce F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. Mylle Bell Mangum ______________________________ Mylle Bell Mangum F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. D. Larry Moore ______________________________ D. Larry Moore F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. James M. Ringler ______________________________ James M. Ringler F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. Samuel C. Scott, III ______________________________ Samuel C. Scott, III F:\BFH\SEC\POA.97 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints D. Michael Jones and Brenda A. Hart, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including without limitation in any capacity on behalf of Reynolds Metals Company (the "Company")), to (i) Sign the Annual Report on Form 10-K of the Company for the year ended December 31, 1996 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, if any, with the Securities and Exchange Commission (the "SEC"), and to take all such other action which they or either of them may consider necessary or desirable in connection therewith, all in accordance with the Securities Exchange Act of 1934, as amended; and (ii) Sign any and all post-effective amendments to the Company's Registration Statements relating to (a) the offer and sale of interests in the Reynolds Metals Company Savings and Investment Plan for Salaried Employees and an indefinite number of shares of the Company's common stock, without par value (the "Common Stock") in connection therewith; (b) the offer and sale of up to 900,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Reynolds Metals Company Savings Plan for Hourly Employees; (c) the offer and sale of up to 50,000 shares of Common Stock together with an indeterminate amount of interests to be offered and sold in connection therewith under the Employees Savings Plan; (d) the offer and sale of up to 1,200,000 shares of Common Stock under the Reynolds Metals Company 1982 Nonqualified Stock Option Plan; (e) the offer and sale of up to 3,000,000 shares of Common Stock under the Reynolds Metals Company 1987 Nonqualified Stock Option Plan; (f) the offer and sale of up to 3,250,000 shares of Common Stock under the Reynolds Metals Company 1992 Nonqualified Stock Option Plan; (g) the offer and sale of up to 2,000,000 shares of Common Stock under the Reynolds Metals Company 1996 Nonqualified Stock Option Plan; (h) the offer and sale of up to 100,000 shares of Common Stock under the Reynolds Metals Company Performance Incentive Plan; and (i) the offer and sale of up to 30,000 shares of Common Stock under the Reynolds Metals Company Restricted Stock Plan for Outside Directors; and to file the same, with all exhibits thereto, and all documents in connection therewith, with the SEC; and (iii) Sign any and all Registration Statements on Form S- 3, or on such other form as may be appropriate, for registration of the shares of Common Stock and Series A Junior Participating Preferred Stock (without par value) of the Company, issuable upon exercise of Rights (as defined in the Rights Agreement between the Company and The Chase Manhattan Bank, N.A., dated as of November 23, 1987, as amended from time to time) and any and all amendments (including post-effective amendments) to such Registration Statements, and to file the same, with all exhibits thereto, and all preliminary prospectuses, prospectuses, prospectus supplements and documents in connection therewith, with the SEC; and (iv) Sign any and all post-effective amendments to the Company's Registration Statements relating to the offer and sale of up to $1,650,000,000 principal amount of unsecured debt securities of the Company, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; and (v) Sign any and all post-effective amendments to the Company's Registration Statement relating to the offer and resale from time to time of up to 3,000,000 shares of Common Stock by the Trustee of the Reynolds Metals Company Pension Plans Master Trust, and to file the same, with all exhibits thereto, and all prospectuses, prospectus supplements, pricing supplements and documents in connection therewith, with the SEC; granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney shall expire on the 28th day of February, 1998. IN WITNESS WHEREOF, the undersigned has executed and delivered this Power of Attorney on the 21st day of February, 1997. Joe B. Wyatt ______________________________ Joe B. Wyatt F:\BFH\SEC\POA.97 EX-27 14
5 This schedule contains summary financial information extracted from the Reynolds Metals Company Consolidated Balance Sheet for December 31, 1996 and Consolidated Statement of Income and Retained Earnings for the Year Ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 1000000 12-MOS DEC-31-1996 DEC-31-1996 38 00 829 18 787 1873 6813 3576 7516 1333 1793 0 0 1451 1183 7516 6972 7016 5856 6221 37 0 160 153 49 104 0 0 (15) 89 0.82 0
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