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3. By making the Debentures convertible into its
Common Stock, Reynolds Metals is potentially
enlarging its equity base and is providing for a
wider international distribution of its Common
Stock.
On May 27, 1968, Reynolds Metals European Capital
Corporation (RMECC) was organized as a wholly-owned subsidiary of
Metals. RMECC's authorized capital stock was 100,000 shares,
having a par value of $1. Metals acquired 1,000 shares of the
RMECC stock for $1,000, which constituted all of the issued and
outstanding stock. The organization of RMECC was ratified and
approved by the Board of Directors of Metals at a special meeting
held June 4, 1968. The board further directed that authorized,
but unissued, common stock of Metals be reserved for the
conversion feature of the debentures to be issued by RMECC.
Since its organization, RMECC has joined in the filing of
the Reynolds Group's consolidated Federal income tax return. As
of July 17, 1968, RMECC did not own or lease any physical
facilities or properties other than books and records. Also,
each of RMECC's directors and officers was an officer or director
of Metals and received no remuneration from RMECC.
At the time of RMECC's incorporation, CBA owned and operated
an aluminum reduction plant located at Baie Comeau, Quebec,
having the capacity to produce approximately 115,000 tons of
primary aluminum annually. An aluminum reduction plant converts
raw materials, principally alumina, into primary aluminum using
an electrolytic process. As of December 31, 1968, CBA had
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