<PAGE>
As filed with the Securities and Exchange Commission on August 20, 1999
Registration No. 333-XXXXX
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
ASARCO CYPRUS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
--------------
Delaware 3330 13-4070384
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification Number)
of Incorporation or Classification Code
Organization) Number)
180 Maiden Lane
New York, New York 10038
(212) 510-2000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
--------------
Francis R. McAllister
Milton H. Ward
Co-Chief Executive Officers
Asarco Cyprus Incorporated
180 Maiden Lane
New York, New York 10038
(212) 510-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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Copies to:
J. Michael Augustus B. Philip C. Wolf, Esq. Elliott V. Stein,
Schell, Esq. Kinsolving, Esq. Cyprus Amax Esq.
Margaret L. ASARCO Minerals Company Wachtell, Lipton,
Wolff, Esq. Incorporated 9100 East Mineral Rosen & Katz
Skadden, Arps, 180 Maiden Lane Circle 51 West 52nd Street
Slate, New York, New York Englewood, New York, New York
Meagher & Flom 10038 Colorado 80112 10019
LLP (212) 510-2000 (303) 643-5000 (212) 403-1000
919 Third Avenue
New York, New
York 10022
(212) 735-3000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effectiveness of this Registration Statement and the
satisfaction or waiver of all other conditions to the business combination
described in the Agreement and Plan of Merger, dated as of July 15, 1999.
--------------
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] .
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed Proposed
Title of Each Class of Amount To Maximum Offering Maximum Aggregate Amount of
Securities Being Registered(1) Be Registered Price Per Share Offering Price Registration Fee(6)
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share........ 124,869,783(2) $16.16(3) $2,018,394,160(3) $561,114(3)
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$4.00 Series A
Convertible Preferred
Stock, par value $.01
per share............. 4,666,667(4) $50.00(5) $233,333,350(5) $64,867
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</TABLE>
(1) Also includes associated Rights to purchase shares of the Registrant's
Series A Junior Participating Preferred Stock, which Rights (i) are not
currently separable from the shares of common stock and (ii) are not
currently exercisable. See "DESCRIPTION OF ASARCO CYPRUS CAPITAL STOCK."
(2) Consists of (i) 41,683,903 shares of Asarco Cyprus common stock to be
issued in the ASARCO merger and pursuant to certain ASARCO stock option
plans and (ii) 83,185,880 shares of Asarco Cyprus common stock to be
issued in the Cyprus Amax merger and pursuant to the conversion of Cyprus
Amax Series A convertible preferred stock and certain Cyprus Amax stock
option plans (based on an exchange ratio of 0.765).
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c), based on the sum of (i) the
product of (a) $18.3125 (the average of the high and low prices of ASARCO
common stock on August 18, 1999 on the New York Stock Exchange Composite
Tape) times (b) 41,683,903, (the number of shares of ASARCO common stock
outstanding plus those reserved for issuance pursuant to certain ASARCO
stock option plans) and (ii) the product of (a) $13.875 (the average of
the high and low prices of Cyprus Amax common stock on August 18, 1999 on
the New York Stock Exchange Composite Tape) times (b) 90,454,608 (the
number of shares of Cyprus Amax common stock outstanding plus those
reserved for issuance pursuant to certain Cyprus Amax stock option plans).
Pursuant to Rule 457(i) the registration fee calculated on the basis of
the proposed aggregate offering price does not include shares of Asarco
Cyprus common stock that are registered pursuant to the conversion of the
Cyprus Amax Series A convertible preferred stock.
(4) The number of shares to be registered is based upon the number of shares
of $4.00 Series A Convertible Preferred Stock, par value $.01 per share,
presently outstanding and expected to be exchanged in connection with the
proposed Cyprus Amax merger for shares of $4.00 Series A Convertible
Preferred Stock, par value $.01 per share, of Asarco Cyprus.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2), based on the product of $50.00 (the
liquidation value of the Cyprus Amax Series A convertible preferred stock)
times 4,666,667 (the number of shares of Cyprus Amax Series A convertible
preferred shares outstanding on June 30, 1999).
(6) Pursuant to Rule 457(b), the registration fee has been reduced by $427,605
paid on August 11, 1999 upon the filing under the Securities Exchange Act
of 1934, as amended, of ASARCO and Cyprus Amax joint proxy material
included herein relating to the business combination. Accordingly, the
registration fee payable upon the filing of this Registration Statement is
$198,376.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
ASARCO [LOGO] CYPRUS AMAX
MINERALS COMPANY
YOUR VOTE ON OUR PROPOSED BUSINESS COMBINATION IS VERY IMPORTANT!
To the Stockholders of ASARCO Incorporated and
Cyprus Amax Minerals Company:
ASARCO and Cyprus Amax have agreed common stock, while Cyprus Amax
to combine in a merger of equals to common stockholders will own
create a new company named Asarco approximately 69.2 million shares,
Cyprus Incorporated. If the business or 63.5%, of Asarco Cyprus common
combination is approved by our stock following the mergers. More
stockholders we will combine our information about the business
businesses through two separate combination is contained in the
mergers with wholly owned materials that accompany this
subsidiaries of Asarco Cyprus. After letter.
the mergers, ASARCO and Cyprus Amax
will be wholly owned subsidiaries of
Asarco Cyprus.
The boards of directors of both
ASARCO and Cyprus Amax have approved
the mergers and recommend that their
respective stockholders vote for the
merger proposals as described in the
attached materials.
In order to complete the mergers,
we must obtain the approval of our
stockholders. We believe that the
business combination will benefit
the stockholders of both companies
and we ask for your support in
voting for the merger proposals at
the special meetings.
ASARCO stockholders will vote at
ASARCO's special meeting on
September 30, 1999, at 10:00 a.m.,
local time, at the New York
Information Technology Center, 55
Broad Street, 4th Floor, New York,
New York. Cyprus Amax stockholders
will vote at Cyprus Amax's special
meeting on September 30, 1999, at
10:00 a.m., local time, at the World
Financial Center--North Tower, 250
Vesey Street, New York, New York.
When the business combination is
completed, ASARCO stockholders will
receive one share of common stock of
Asarco Cyprus for each ASARCO share
they currently own and Cyprus Amax
stockholders will receive 0.765
shares of common stock of Asarco
Cyprus for each Cyprus Amax share
they currently own.
Your vote is important, regardless
of the number of shares you own.
Please vote as soon as possible to
make sure that your shares are
represented at the special meetings.
To vote your shares, please complete
and return the enclosed proxy card.
You also may cast your vote in
person at the special meetings.
We anticipate that approximately
109 million shares of Asarco Cyprus
common stock will be issued to
stockholders of ASARCO and Cyprus
Amax in or as a result of the
mergers. We estimate that
ASARCOstockholders will own
approximately 39.8 million shares,
or 36.5%, of Asarco Cyprus
Very truly yours,
/s/ Francis R. McAllister /s/ Milton H. Ward
Francis R. McAllister Milton H. Ward
Chairman and Chief Executive Officer Chairman, Chief Executive Officer
ASARCO Incorporated and President
Cyprus Amax Minerals Company
Neither the Securities and Exchange Commission nor any state securities
commission has approved the common stock to be issued under this joint
proxy statement and prospectus or determined if this joint proxy statement
and prospectus is accurate or complete. Any representation to the contrary
is a criminal offense.
This joint proxy statement and prospectus is dated August 20, 1999, and is
first being mailed to stockholders on or about August 26, 1999.
<PAGE>
ASARCO LOGO
NOTICE OF SPECIAL MEETING OF ASARCO STOCKHOLDERS
SEPTEMBER 30, 1999
New York, New York
August 20, 1999
A special meeting of stockholders of ASARCO Incorporated will be held at the
New York Information Technology Center, 55 Broad Street, 4th Floor, New York,
New York, on September 30, 1999, at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of July 15, 1999, among Asarco Cyprus
Incorporated, ACO Acquisition Corp., CAM Acquisition Corp., ASARCO
Incorporated and Cyprus Amax Minerals Company, and to approve the ASARCO
merger. We have included a copy of the merger agreement as Appendix A to
the attached joint proxy statement and prospectus.
2. To transact such other business as properly may come before the ASARCO
special meeting or any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on August 25, 1999 will
be entitled to vote at the ASARCO special meeting. To vote your shares, please
complete and return the enclosed proxy card. You also may cast your vote in
person at the ASARCO special meeting. Please vote promptly whether or not you
expect to attend the ASARCO special meeting.
By order of the Board of Directors,
Robert Ferri
Secretary
PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE
ENCLOSED PROXY CARD.
<PAGE>
[LOGO] CYPRUS AMAX
MINERALS COMPANY
NOTICE OF SPECIAL MEETING OF CYPRUS AMAX STOCKHOLDERS
SEPTEMBER 30, 1999
Englewood, Colorado
August 20, 1999
A special meeting of stockholders of Cyprus Amax Minerals Company will be
held at the World Financial Center--North Tower, 250 Vesey Street, New York,
New York, on September 30, 1999, at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of July 15, 1999, among Asarco Cyprus
Incorporated, ACO Acquisition Corp., CAM Acquisition Corp., ASARCO
Incorporated and Cyprus Amax Minerals Company, and to approve the Cyprus
Amax merger. We have included a copy of the merger agreement as Appendix A
to the attached joint proxy statement and prospectus.
2. To transact such other business as properly may come before the Cyprus
Amax special meeting or any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on August 25, 1999 will
be entitled to vote at the Cyprus Amax special meeting. To vote your shares,
please complete and return the enclosed proxy card. You also may cast your vote
in person at the Cyprus Amax special meeting. Please vote promptly whether or
not you expect to attend the Cyprus Amax special meeting. The list of
stockholders of record entitled to vote at the special meeting of Cyprus Amax
stockholders will be available for inspection during the 10 days prior to the
meeting at the offices of The Bank of New York, at 101 Barclay Street, Floor
12W, New York, New York 10286.
Under Delaware law, appraisal rights will be available to record holders of
Cyprus Amax Series A convertible preferred stock. In order for stockholders to
exercise such appraisal rights, they must follow the procedures prescribed by
Delaware law, which are summarized under "Appraisal Rights of Cyprus Amax
Series A Convertible Preferred Stockholders" in the accompanying joint proxy
statement and prospectus.
By order of the Board of Directors,
Philip C. Wolf
Senior Vice President,
General Counsel and Secretary
PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE
ENCLOSED PROXY CARD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION...................... 1
SUMMARY................................................................... 3
The Companies........................................................... 3
ASARCO Incorporated..................................................... 3
Cyprus Amax Minerals Company............................................ 3
Asarco Cyprus Incorporated.............................................. 4
Vote Required to Approve the Mergers.................................... 4
The Business Combination................................................ 4
Our Reasons for the Business Combination................................ 5
Our Recommendations to Stockholders..................................... 5
Opinions of Financial Advisors.......................................... 5
Board of Directors and Management Following the Mergers................. 5
Additional Interests of Our Executive Officers and Boards of Directors
as a Result of the Mergers............................................. 6
Conditions to the Mergers............................................... 6
Restrictions on Alternative Transactions................................ 7
Termination of the Merger Agreement..................................... 7
Termination Fees........................................................ 7
Regulatory Matters...................................................... 7
United States Federal Income Tax Consequences of the Business
Combination............................................................ 8
Accounting Treatment.................................................... 8
Appraisal Rights........................................................ 8
Comparative Per Share Market Price Information.......................... 8
Listing of Asarco Cyprus Common Stock................................... 8
Summary of Selected Historical and Unaudited Pro Forma Combined
Financial Information.................................................. 9
Cyprus Amax--Selected Historical Financial Information.................. 9
ASARCO--Selected Historical Financial Information....................... 10
Unaudited Selected Pro Forma Combined Financial Information............. 11
Comparative Per Share Information....................................... 13
Ratios of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.............................................................. 14
RISK FACTORS.............................................................. 15
Metals Prices Are Highly Volatile....................................... 15
Mine Operations and Development Will Be Subject To Risks Beyond Our
Control................................................................ 15
Asarco Cyprus Will Compete Intensely With Mining Companies As Well As
Manufacturers of Substitute Materials.................................. 16
Some Employees Will Be Covered by Union Contracts....................... 17
Asarco Cyprus May Incur Significant Expenses To Comply With
Environmental Regulation............................................... 17
Reserve Levels Are Subject To Uncertainty Beyond Our Control............ 18
Asarco Cyprus Will Face Uncertainty and Competition As It Replaces Older
Mining Properties...................................................... 18
Foreign Operations Are Subject To Political and Economic Risks That Are
Beyond Our Control..................................................... 18
Merger Consideration Is Fixed Despite Potential Changes in Stock
Prices................................................................. 19
Integration of ASARCO and Cyprus Amax Operations May Be Difficult....... 19
Members of ASARCO and Cyprus Amax Management and Boards of Directors May
Have Interests in The Mergers That Differ From the Interests of Their
Stockholders........................................................... 19
Anti-Takeover Provisions in The Asarco Cyprus Charter and By-laws May
Delay Or Prevent A Change of Control................................... 19
Asarco Cyprus Will Rely On Key Personnel................................ 20
Year 2000 Poses Potential Risks......................................... 20
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................ 21
</TABLE>
i
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<TABLE>
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Page
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<S> <C>
THE ASARCO SPECIAL MEETING................................................ 22
When and Where the ASARCO Special Meeting Will be Held.................. 22
What Will be Voted Upon................................................. 22
Only ASARCO Stockholders of Record as of August 25, 1999 Are Entitled to
Vote................................................................... 22
Majority of Outstanding Shares Must be Represented For a Vote to be
Taken.................................................................. 22
Vote Required for Approval.............................................. 22
Voting Your Shares and Changing Your Vote............................... 22
How Proxies Are Counted................................................. 23
Confidential Voting..................................................... 23
Cost of Solicitation.................................................... 23
THE CYPRUS AMAX SPECIAL MEETING........................................... 24
When and Where the Cyprus Amax Special Meeting Will be Held............. 24
What Will be Voted Upon................................................. 24
Only Cyprus Amax Common Stockholders of Record as of August 25, 1999 Are
Entitled to Vote....................................................... 24
One-Third of Outstanding Shares Must be Represented For a Vote to be
Taken.................................................................. 24
Vote Required for Approval.............................................. 24
Voting Your Shares and Changing Your Vote............................... 24
How Proxies Are Counted................................................. 25
Cost of Solicitation.................................................... 25
THE BUSINESS COMBINATION.................................................. 26
The Companies........................................................... 26
Background of the Business Combination.................................. 26
Reasons for the Business Combination and Recommendations of the Boards.. 30
Opinion of ASARCO's Financial Advisor................................... 35
Opinion of Cyprus Amax's Financial Advisor.............................. 42
Accounting Treatment.................................................... 48
United States Federal Income Tax Consequences of the Business
Combination............................................................ 48
Regulatory Matters...................................................... 51
Appraisal Rights........................................................ 51
Federal Securities Laws Consequences; Stock Transfer Restriction
Agreements............................................................. 51
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION............... 53
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS......................... 54
PRO FORMA COMBINED CAPITALIZATION......................................... 61
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................ 62
ASARCO Employment Agreements............................................ 62
ASARCO Stock Based Plans................................................ 63
Other ASARCO Plans...................................................... 63
Cyprus Amax Employment Arrangements..................................... 64
Other Cyprus Amax Plans................................................. 65
Indemnification and Insurance........................................... 66
THE MERGER AGREEMENT...................................................... 67
Form of Mergers......................................................... 67
Consideration to be Received in the Mergers............................. 67
Exchange Agent; Procedures for Exchange of Certificates................. 67
Asarco Cyprus following the Mergers..................................... 68
Representations and Warranties in the Merger Agreement.................. 69
Covenants in the Merger Agreement....................................... 69
</TABLE>
ii
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<TABLE>
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Page
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<S> <C>
No Solicitation of Alternative Takeover Proposals...................... 71
Stock Options and Other Stock-Based Awards............................. 72
Benefits Matters....................................................... 73
Indemnification; Directors' and Officers' Insurance.................... 73
Conditions Precedent to the Mergers.................................... 74
Termination............................................................ 75
Termination Fees....................................................... 75
Costs and Expenses..................................................... 76
Amendment.............................................................. 76
Waiver................................................................. 76
APPRAISAL RIGHTS OF CYPRUS AMAX SERIES A CONVERTIBLE PREFERRED
STOCKHOLDERS............................................................ 77
DIRECTORS AND MANAGEMENT FOLLOWING THE BUSINESS COMBINATION.............. 79
Directors.............................................................. 79
Committees of the Board of Directors................................... 79
Compensation of Directors.............................................. 79
Management............................................................. 79
OWNERSHIP OF COMMON STOCK................................................ 80
Beneficial Ownership of ASARCO Stock................................... 80
Beneficial Ownership of Cyprus Amax Common Stock....................... 84
DESCRIPTION OF ASARCO CYPRUS CAPITAL STOCK............................... 86
Authorized Capital Stock............................................... 86
Asarco Cyprus Common Stock............................................. 86
Asarco Cyprus Preferred Stock.......................................... 86
Asarco Cyprus Rights................................................... 87
Transfer Agent and Registrar........................................... 89
COMPARISON OF STOCKHOLDERS' RIGHTS....................................... 90
Comparison of Charter and By-law Provisions............................ 90
Comparison of Certain Statutory Provisions............................. 94
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF ASARCO COMMON
STOCK AND CYPRUS AMAX COMMON STOCK...................................... 97
INDEPENDENT ACCOUNTANTS.................................................. 97
LEGAL MATTERS............................................................ 97
WHERE YOU CAN FIND MORE INFORMATION...................................... 98
APPENDIX A--AGREEMENT AND PLAN OF MERGER
APPENDIX B--OPINION OF CREDIT SUISSE FIRST BOSTON CORPORATION
APPENDIX C--OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
APPENDIX D--SECTION 262 DGCL APPRAISAL RIGHTS
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION
Q: Why are the companies proposing the business combination?
A: We believe the combined strengths of the two companies will enable us to
reduce our overall costs of producing copper, thus providing enhanced value
to our stockholders. Additionally, the combined company will be able to
compete more effectively on a global basis. The business combination will
create the world's largest publicly traded copper producer. We believe this
will be attractive to investors interested in investing in copper mining
companies. These goals can best be achieved through a combination of our
businesses.
Q: Why is the business combination being accomplished through two separate
mergers?
A: The business combination is a merger of equals. ASARCO and Cyprus Amax will
continue to exist after the mergers, but will be wholly owned subsidiaries
of the new company named Asarco Cyprus. Having the two companies continue as
wholly owned subsidiaries of the new company is the most appropriate way to
accomplish a merger of equals.
Q: What will a stockholder receive when the mergers occur?
A: Holders of ASARCO Common Stock
An ASARCO stockholder will receive one share of Asarco Cyprus common stock
in exchange for each share of ASARCO common stock owned.
Example: If an ASARCO stockholder currently owns 10 shares of ASARCO common
stock, after the ASARCO merger he or she will be entitled to receive 10
shares of Asarco Cyprus common stock.
Holders of Cyprus Amax Common Stock
A holder of Cyprus Amax common stock will receive 0.765 shares of Asarco
Cyprus common stock in exchange for each share of Cyprus Amax common stock
owned. He or she will receive cash instead of any resulting fraction of a
share, in an amount reflecting the market value of the fraction of a share.
Example: If a Cyprus Amax stockholder currently owns 10 shares of Cyprus
Amax common stock, after the Cyprus Amax merger he or she will be entitled
to receive 7 shares of Asarco Cyprus common stock and a check for the market
value of sixty-five one-hundredths of a share of Asarco Cyprus common stock.
The exchange ratios were determined in negotiations by the two companies,
and reflect the relative recent market prices of the two common stocks, the
number of shares outstanding, and other factors that the boards of directors
considered relevant. As a result of these exchanges, ASARCO stockholders
will own 36.5% of Asarco Cyprus common stock, while Cyprus Amax common
stockholders will own 63.5% of Asarco Cyprus common stock following the
mergers.
Holders of Cyprus Amax Series A Convertible Preferred Stock
Holders of Cyprus Amax Series A convertible preferred stock, other than
those that exercise their appraisal rights, will receive one share of Asarco
Cyprus Series A convertible preferred stock for each share of Cyprus Amax
Series A convertible preferred stock owned. The terms of the Asarco Cyprus
Series A convertible preferred stock issued in the Cyprus Amax merger will
be nearly identical to the terms of the Cyprus Amax Series A convertible
preferred stock. Shares of Cyprus Amax Series A convertible preferred stock
are currently convertible into Cyprus Amax common stock at the option of the
holder at a conversion price of $24.30 per share. The Asarco Cyprus Series A
convertible preferred stock would be convertible into Asarco Cyprus common
stock at the option of the holder at a conversion price of $31.7647 per
share, subject to adjustments.
Example: If a Cyprus Amax Series A convertible preferred stockholder
currently owns 10 shares of Cyprus Amax Series A convertible preferred
stock, he or she will be entitled to receive 10 shares of Asarco Cyprus
Series A convertible preferred stock.
Q: What will be the dividend on Asarco Cyprus common stock?
A: ASARCO currently pays dividends at a rate of $.20 per share each year, and
Cyprus Amax currently pays dividends at a rate of $.20 per share each year.
The Board of Directors of Asarco Cyprus will determine the dividend policy
following the business combination. We expect that the initial annualized
dividend rate will be $.20 per share of Asarco Cyprus common stock. Assuming
this is the case, because each share of Cyprus Amax common stock will be
converted into 0.765 of a share of Asarco Cyprus common stock in the Cyprus
Amax merger, Cyprus Amax stockholders will experience a reduction in their
aggregate dividends.
<PAGE>
Q: What are the expected synergies and other expense reductions which should
result from the business combination?
A: Based on the reviews being conducted by the managements of ASARCO and Cyprus
Amax since the signing of the merger agreement, the two managements
currently believe that the synergies and other expense reductions, including
lower depreciation due to the application of purchase accounting, could
approximate $200 million rather than the $150 million initially estimated.
Q: When do the companies expect to complete the business combination?
A: We are working to complete the business combination as quickly as possible.
In addition to obtaining the approvals of our stockholders, we must satisfy
the specified waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. We expect to complete the business combination in
the fourth quarter of 1999.
Q: What are the U.S. federal tax consequences of the mergers to stockholders?
A: In general, holders of ASARCO common stock and Cyprus Amax common stock will
not be required to pay any U.S. federal income tax as a result of the
business combination until they sell their shares, except for taxes on cash
Cyprus Amax stockholders receive instead of fractions of shares.
Q: Do stockholders have appraisal rights?
A: Under applicable law, appraisal rights are not available to the holders of
ASARCO and Cyprus Amax common stock in connection with the mergers. The
holders of Cyprus Amax Series A convertible preferred stock will have the
right to receive an appraisal of the value of their shares in connection
with the Cyprus Amax merger.
Q: What vote is required to approve the ASARCO merger?
A: For the ASARCO merger to occur, a majority of the votes cast by holders of
ASARCO common stock must approve and adopt the merger agreement at the
ASARCO special meeting.
Q: What vote is required to approve the Cyprus Amax merger?
A: For the Cyprus Amax merger to occur, the holders of at least a majority of
all outstanding stock of Cyprus Amax entitled to vote must approve and adopt
the merger agreement at the Cyprus Amax special meeting.
Q: Who can vote on the mergers?
A: Only holders of record of ASARCO and Cyprus Amax common stock as of the
close of business on August 25, 1999 will be entitled to notice of and to
vote at the respective special meetings to approve and adopt the merger
agreement.
Q: When and where are the special meetings?
A: The special meeting of ASARCO stockholders will be held on September 30,
1999, at 10:00 a.m., local time, at the New York Information Technology
Center, 55 Broad Street, 4th Floor, New York, New York. The special meeting
of Cyprus Amax stockholders will be held on September 30, 1999, at 10:00
a.m., local time, at the World Financial Center--North Tower, 250 Vesey
Street, New York, New York.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. Just send in a written revocation or a later dated, signed proxy card
before the special meetings or simply attend the special meeting and vote in
person.
Q: What do I need to do now?
A: Please vote your shares as soon as possible, so that your shares may be
represented at the appropriate special meeting. You may vote by signing your
proxy card and mailing it in the enclosed return envelope, or you may vote
in person at the special meetings.
Q: Should I send in my stock certificates now?
A: No. Soon after the mergers are completed, we will send to ASARCO
stockholders and Cyprus Amax stockholders written instructions for
exchanging their stock certificates for new Asarco Cyprus certificates.
Q: Whom should I call if I have questions?
A: ASARCO stockholders who have questions about the ASARCO merger or the ASARCO
merger proposal may call Morrow & Co. at (212) 754-8000.
Cyprus Amax stockholders who have questions about the Cyprus Amax merger or
the Cyprus Amax merger proposal may call Georgeson Shareholder
Communications Inc. at (212) 440-9800.
2
<PAGE>
SUMMARY
This section summarizes particular selected information about the business
combination from this joint proxy statement and prospectus. To understand the
business combination fully, we strongly encourage you to read carefully this
entire joint proxy statement and prospectus and the documents which we have
filed with the Securities and Exchange Commission. We have included a copy of
the merger agreement in this joint proxy statement and prospectus as Appendix
A. For information on how to obtain the documents that we have filed with the
Securities and Exchange Commission, see "Where You Can Find More Information"
on page 98.
Throughout this joint proxy statement and prospectus when we use the term
"Asarco Cyprus" we are referring to the newly formed holding company Asarco
Cyprus Incorporated, the company in which you will own shares following the
business combination. When we use the term the "ASARCO merger" we are referring
to the merger of ACO Acquisition Corp., a newly formed wholly owned subsidiary
of Asarco Cyprus, into ASARCO. When we use the term the "Cyprus Amax merger" we
are referring to the merger of CAM Acquisition Corp., a newly formed wholly
owned subsidiary of Asarco Cyprus, into Cyprus Amax. When we use the term the
"mergers" or the "business combination," we are referring to the ASARCO merger
and the Cyprus Amax merger together. When we use the term "ASARCO exchange
ratio," we are referring to the one share of Asarco Cyprus common stock to be
received by the stockholders of ASARCO in the ASARCO merger and when we use the
term "Cyprus Amax exchange ratio," we are referring to the 0.765 of a share of
Asarco Cyprus common stock to be received by common stockholders of Cyprus Amax
in the Cyprus Amax merger.
The Companies
(See Page 26)
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
(212) 510-2000
ASARCO Incorporated, a New Jersey corporation organized in 1899, is one of
the world's leading producers of copper. ASARCO also produces specialty chemi-
cals and aggregates. ASARCO's copper business includes integrated mining,
smelting and refining operations in North America and in Peru through its 54.3%
owned subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly
owned subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing in-
dustries. American Limestone Company, a wholly owned subsidiary, produces con-
struction aggregates, ready-mixed concrete and agricultural limestone. ASARCO
also operates a custom lead smelting business, a zinc mining business and a
specialty metals business. ASARCO owns Encycle, Inc., which operates a waste
recycling facility and Hydrometrics, an environmental consulting and construc-
tion firm. As of June 30, 1999, ASARCO and its subsidiaries employed approxi-
mately 10,100 employees.
For additional information about ASARCO and its business, see "The Business
Combination--The Companies--ASARCO Incorporated" and "Where You Can Find More
Information."
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
(303) 643-5000
Cyprus Amax Minerals Company, a Delaware corporation, is a major mining com-
pany engaged, directly or through its subsidiaries and affiliates, in the ex-
ploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of mo-
lybdenum and has a significant position in gold via its 30% interest in Kinross
Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal opera-
tions in June of 1998 and sold its lithium business in October of 1998. Cyprus
Amax sold its remaining U.S. coal operations in June 1999. Cyprus Amax still
holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and its
subsidiaries employed approximately 4,600 employees.
For additional information about Cyprus Amax and its business, see "The
Business Combinations-- The Companies--Cyprus Amax Minerals Company" and "Where
You Can Find More Information."
3
<PAGE>
Asarco Cyprus Incorporated
180 Maiden Lane
New York, New York 10038
(212) 510-2000
Asarco Cyprus is a newly formed Delaware corporation that has not, to date,
conducted any activities other than those incident to its formation, the execu-
tion of the merger agreement and the preparation of this joint proxy statement
and prospectus. As a result of the business combination, ASARCO and Cyprus Amax
will become wholly owned subsidiaries of Asarco Cyprus. The business of Asarco
Cyprus will be the businesses currently conducted by ASARCO and Cyprus Amax. We
anticipate that approximately 109 million shares of Asarco Cyprus common stock
will be issued to stockholders of ASARCO and Cyprus Amax in the mergers. We es-
timate that the former stockholders of ASARCO will own approximately 39.8 mil-
lion shares, or 36.5%, of Asarco Cyprus common stock and the former common
stockholders of Cyprus Amax will own approximately 69.2 million shares, or
63.5%, of Asarco Cyprus common stock.
Vote Required to Approve the Mergers
(See Pages 22 and 24)
ASARCO Stockholders
ASARCO stockholders will vote on a proposal to approve and adopt the merger
agreement and approve the ASARCO merger and the other transactions described in
the merger agreement. We refer to this proposal as the "ASARCO merger propos-
al." Approval of the ASARCO merger proposal requires the affirmative vote of at
least a majority of all votes cast by holders of ASARCO common stock at the
ASARCO special meeting. ASARCO directors and executive officers as a group own
and are entitled to vote approximately 0.9% of the outstanding shares of ASARCO
common stock.
Cyprus Amax Stockholders
Cyprus Amax stockholders will vote on a proposal to approve and adopt the
merger agreement and approve the Cyprus Amax merger and the other transactions
described in the merger agreement. We refer to this proposal as the "Cyprus
Amax merger proposal." Approval of the Cyprus Amax merger proposal requires the
affirmative vote of the holders of at least a majority of all shares of Cyprus
Amax common stock that are outstanding and entitled to vote at the Cyprus Amax
special meeting. Cyprus Amax directors and executive officers as a group own
and are entitled to vote approximately 1.4% of the outstanding shares of Cyprus
Amax common stock. If a Cyprus Amax stockholder does not vote at the Cyprus
Amax special meeting, either in person or by proxy, it will have the same ef-
fect as a vote against the Cyprus Amax merger.
The Business Combination
(See Page 67)
The merger agreement provides for the combination of ASARCO and Cyprus Amax
in a merger of equals. If the business combination is approved by our stock-
holders, we will combine our businesses through two separate mergers with
wholly owned subsidiaries of a new holding company we created named Asarco Cy-
prus Incorporated. After the business combination, ASARCO and Cyprus Amax will
be wholly owned subsidiaries of Asarco Cyprus.
As a result of the ASARCO merger, each share of ASARCO common stock will be
converted into one share of Asarco Cyprus common stock. As a result of the Cy-
prus Amax merger, each share of Cyprus Amax common stock will be converted into
0.765 shares of Asarco Cyprus common stock.
Each share of Cyprus Amax Series A convertible preferred stock, other than
shares held by those seeking appraisal rights, will be converted into one share
of Asarco Cyprus Series A convertible preferred stock in the Cyprus Amax merg-
er. The terms of the Asarco Cyprus Series A convertible preferred stock issued
in the Cyprus Amax merger will be nearly identical to the terms of the Cyprus
Amax Series A convertible preferred stock. Shares of Cyprus Amax Series A con-
vertible preferred stock are currently convertible into Cyprus Amax common
stock at the option of the holder at a conversion price of $24.30 per share.
The Asarco Cyprus Series A convertible preferred stock would be convertible
into Asarco Cyprus common stock at the option of the holder at a conversion
price of $31.7647 per share, subject to adjustments.
4
<PAGE>
We encourage you to read the merger agreement carefully because it is the le-
gal document that governs the mergers.
Our Reasons for the Business Combination
(See Pages 30 and 33)
We believe that the combination of ASARCO and Cyprus Amax will combine our
resources and enable us to be a stronger competitor in the mining industry. The
business combination will create significant opportunities to enhance stock-
holder value. We believe the mergers will, among other things:
. create the world's largest publicly traded copper company;
. generate significant cost savings and synergies during the period after
the mergers are completed;
. bring together a complementary blend of assets and capabilities and
enhance our growth opportunities;
. provide Asarco Cyprus with opportunities to enhance operating
efficiencies, expand or develop low cost copper properties, and otherwise
rationalize operations to achieve optimum operating levels; and
. provide substantially greater financial capacity than either company
would have had separately.
Our Recommendations to Stockholders
(See Pages 30 and 33)
To ASARCO Stockholders:
The ASARCO Board of Directors believes that the ASARCO merger proposal is in
your best interest and recommends that you vote FOR the ASARCO merger proposal.
To Cyprus Amax Stockholders:
The Cyprus Amax Board of Directors believes that the Cyprus Amax merger pro-
posal is in your best interest and recommends that you vote FOR the Cyprus Amax
merger proposal.
Opinions of Financial Advisors
(See Pages 35 and 42)
In connection with the mergers, each of our boards of directors received an
opinion from our respective financial advisors. The opinions of the financial
advisors are directed to the boards of directors and are not recommendations to
stockholders with respect to any matter relating to the business combination.
ASARCO received a written opinion dated July 15, 1999 from its financial ad-
visor, Credit Suisse First Boston Corporation, to the effect that, as of that
date and based on and subject to the matters described in the opinion, the ex-
change ratio (defined in the opinion as, collectively, the ASARCO exchange ra-
tio and the Cyprus Amax exchange ratio) was fair from a financial point of view
to holders of ASARCO common stock. We have included this opinion in this joint
proxy statement and prospectus as Appendix B. ASARCO urges its stockholders to
read the opinion of Credit Suisse First Boston in its entirety.
Cyprus Amax received a written opinion dated July 15, 1999, from its finan-
cial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to the effect
that, as of the date of such opinion, the exchange ratio (defined in the opin-
ion as the ratio of the Cyprus Amax exchange ratio to the ASARCO exchange ra-
tio) was fair from a financial point of view to the stockholders of Cyprus
Amax. We have included this opinion in this joint proxy statement and prospec-
tus as Appendix C. Cyprus Amax urges its stockholders to read the opinion of
Merrill Lynch in its entirety.
Board of Directors and Management Following the Mergers
(See Page 79)
We have agreed that the board of directors of Asarco Cyprus will have 16 mem-
bers and will be divided into three classes with each class serving a staggered
three-year term. Two classes of directors will consist of five directors each
and one class of directors will consist of six directors. Eight members
5
<PAGE>
of the board of directors of Asarco Cyprus will be designated by ASARCO and
eight members will be designated by Cyprus Amax.
From the time the mergers become effective, Milton H. Ward, the Chairman,
President and Chief Executive Officer of Cyprus Amax, will be Chairman of the
Board and Co-Chief Executive Officer of Asarco Cyprus, and Francis R.
McAllister, the Chairman and Chief Executive Officer of ASARCO, will serve as
President and Co-Chief Executive Officer of Asarco Cyprus. At the first annual
meeting of Asarco Cyprus, expected to be held in April of 2000, Mr. McAllister
will become the sole Chief Executive Officer of Asarco Cyprus and will continue
to serve as President of Asarco Cyprus and Mr. Ward will continue to serve as
Chairman of the Board of Asarco Cyprus. Mr. Ward will continue, through the end
of 2000, to participate actively in managing the consolidation of the opera-
tions of ASARCO and Cyprus Amax, realizing the synergies expected to be derived
from the mergers and exploring growth opportunities for Asarco Cyprus. Mr.
McAllister will become Chairman, President and Chief Executive Officer of
Asarco Cyprus following Mr. Ward's retirement on December 31, 2000. Mr. Ward
will continue to serve as a non-employee director following his retirement.
In addition, Jeffrey G. Clevenger, Executive Vice President of Cyprus Amax,
will be Executive Vice President and Chief Operating Officer of Asarco Cyprus,
and Kevin R. Morano, President and Chief Operating Officer of ASARCO, will be
Executive Vice President and Chief Financial Officer of Asarco Cyprus, follow-
ing the mergers. Both Messrs. Clevenger and Morano will be directors of Asarco
Cyprus.
The remaining key executive officers of Asarco Cyprus will be jointly desig-
nated by Messrs. McAllister and Ward with the advice and consent of the Asarco
Cyprus Board of Directors.
Additional Interests of Our Executive Officers and Boards of Directors as a
Result of the Mergers
(See Page 62)
In addition to their interests as stockholders, the directors and executive
officers of ASARCO and Cyprus Amax have interests in the business combination
that are different from, or in addition to, your interests. These interests ex-
ist because of rights they have pursuant to the terms of benefit and compensa-
tion plans maintained by ASARCO and Cyprus Amax, pursuant to the terms of em-
ployment or severance agreements or as a result of their continued employment
or service on the board of directors following the business combination.
Some of the compensation and benefits plans or agreements provide for the ac-
celerated vesting of or lapse of restrictions on stock-based rights and the
distribution of certain specified benefits, in connection with the mergers. The
severance agreements provide the executive officers with severance benefits if
their employment is terminated under specified circumstances following the
mergers.
In addition, Asarco Cyprus will indemnify the officers and directors of
ASARCO and Cyprus Amax for events occurring before the mergers.
The members of the ASARCO and Cyprus Amax boards of directors knew about
these additional interests, and considered them when they approved the business
combination.
Conditions to the Mergers
(See Page 74)
Completion of the mergers requires:
. approval of the ASARCO merger proposal and the Cyprus Amax merger pro-
posal by our respective stockholders;
. absence of any law or injunction preventing the mergers;
. expiration of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976;
. approval of government regulators having jurisdiction over the business
combination;
. approval of third parties required to complete the business combination;
6
<PAGE>
. receipt of legal opinions from counsel to ASARCO and Cyprus Amax stating
that the ASARCO merger and the Cyprus Amax merger, respectively, will
qualify as a tax-free reorganization; and
. absence of breaches of representations and warranties contained in the
merger agreement which have or are reasonably expected to have a material
adverse effect on ASARCO or Cyprus Amax.
Other than the conditions pertaining to stockholder approval, the Hart-Scott-
Rodino waiting period, approvals of certain government regulators and the
legality of the business combination, either of us could elect to waive
conditions to our own performance and complete the business combination.
However, we will not waive the condition relating to the receipt of the tax
opinions from counsel after the ASARCO stockholders or the Cyprus Amax
stockholders approve their respective merger proposals unless further
stockholder approval is obtained with appropriate disclosure.
Restrictions on Alternative Transactions
(See Page 71)
The merger agreement generally limits the ability of each of our boards of
directors to solicit or participate in discussions with any third party about
transactions alternative to the business combination. In addition, the merger
agreement requires each company to seek the stockholder approvals required to
complete the business combination even if its board of directors were to change
its recommendation of the business combination.
Termination of the Merger Agreement
(See Page 75)
We may agree to terminate the merger agreement at any time. In addition, ei-
ther company may terminate the merger agreement if specified events do or do
not occur. These include:
. if the mergers are not completed by June 30, 2000;
. if a court order or other government action prohibits the business combi-
nation;
. if the other party materially breaches any of its representations, war-
ranties or obligations under the merger agreement and fails to cure that
breach within a specified period;
. if the board of directors of either company solicits or encourages an al-
ternative transaction involving a third party in breach of the merger
agreement; or
. if the required stockholder approvals are not obtained.
Termination Fees
(See Page 75)
The merger agreement generally requires ASARCO or Cyprus Amax to pay to the
other a termination fee of $45 million if the merger agreement terminates and
specified events occur. For example, this fee is payable by a party if:
. its board of directors solicits or encourages an alternative transaction
proposal involving a third party in breach of the merger agreement; or
. (1) it receives an offer to enter into an alternative transaction, (2)
the merger agreement is terminated because its stockholders fail to ap-
prove the business combination and (3) the other party's stockholders do
not disapprove of the business combination;
and within 18 months of termination of the merger agreement that party enters
into an agreement with respect to or completes an alternative transaction.
Regulatory Matters
(See Page 51)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, we cannot
complete the mergers until we have furnished certain information and materials
to the Antitrust Division of the Department of Justice and the Federal Trade
Commission and a required waiting period has ended.
As with any U.S. merger, the Department ofJustice has the authority to chal-
lenge the mergers on antitrust grounds before or after the mergers are complet-
ed.
7
<PAGE>
United States Federal Income Tax Consequences of the Business Combination
(See Page 48)
We have structured the business combination so that, in general, none of
ASARCO, Cyprus Amax or either company's stockholders will recognize gain or
loss for U.S. federal income tax purposes in the mergers (except for gain or
loss recognized because of cash received by Cyprus Amax stockholders instead of
fractional shares). We will not be obligated to complete the business combina-
tion unless we receive legal opinions to this effect. The condition related to
those opinions is not waivable after receipt of stockholder approval unless
further stockholder approval is obtained with appropriate disclosure.
Accounting Treatment
(See Page 48)
The mergers will be accounted for using the purchase method of accounting as
such term is used under U.S. generally accepted accounting principles, with Cy-
prus Amax deemed the acquiring company for accounting purposes principally be-
cause the common stockholders of Cyprus Amax will receive 63.5% of the shares
of Asarco Cyprus. The purchase method accounts for a merger as an acquisition
of one company by another. See "Pro Forma Condensed Combined Financial Informa-
tion" and "The Merger--Accounting Treatment."
Appraisal Rights
(See Pages 51 and 77)
Under the law of New Jersey, where ASARCO is incorporated, holders of ASARCO
common stock do not have the right to receive an appraisal of the value of
their shares in connection with the ASARCO merger.
Under the law of Delaware, where Cyprus Amax is incorporated, holders of Cy-
prus Amax common stock do not have the right to receive an appraisal of the
value of their shares in connection with the Cyprus Amax merger. Holders of Cy-
prus Amax Series A convertible preferred stock who comply with the applicable
requirements of Delaware law will have the right to receive an appraisal of the
value of their shares in connection with the Cyprus Amax merger.
Comparative Per Share Market Price Information
(See Page 53)
Cyprus Amax common stock is listed on the New York Stock Exchange under the
symbol "CYM." ASARCO common stock is listed on the New York Stock Exchange un-
der the symbol "AR."
Set forth below are the closing stock prices of Cyprus Amax common stock and
ASARCO common stock on the New York Stock Exchange Composite Transactions Tape
on July 14, 1999, the last full trading day before the public announcement of
the mergers, and on August 19, 1999.
<TABLE>
<CAPTION>
Cyprus Amax ASARCO
Common Stock Common Stock
------------ ------------
<S> <C> <C>
July 14, 1999......................................... $13.94 $19.00
August 19, 1999....................................... $14.50 $18.44
</TABLE>
Listing of Asarco Cyprus Common Stock
(See Page 97)
We intend to apply to have the Asarco Cyprus common stock listed on the New
York Stock Exchange. Prior to the completion of the business combination, there
will be no public market for the Asarco Cyprus common stock.
8
<PAGE>
Summary of Selected Historical and Unaudited Pro Forma Combined Financial
Information
We are providing the following selected historical financial information to
help you in analyzing the financial aspects of the business combination. This
information is only a summary and you should read it in conjunction with
ASARCO's and Cyprus Amax's historical financial statements (and related notes)
contained in the reports that have been filed with the Securities and Exchange
Commission. See "Where You Can Find More Information."
Cyprus Amax--Selected Historical Financial Information
<TABLE>
<CAPTION>
At or For the
Six Months
Ended
June 30, At or For the Year Ended December 31,
-------------- -------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------- ------- ------- ------- -------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data(a)
Revenue................. $ 561 $ 870 $ 1,661 $ 1,978 $ 1,584 $ 1,908 $ 1,540
Operating Income
(loss)................. (13) 18 52 249 63 485 202
Income (loss) from
Continuing
Operations(b).......... (77) (53) (134) 89 15 367 104
Net Income (loss)(c).... (74) (32) (75) 69 77 124 175
Earnings (loss) per
Common Share
Income (loss) from
Continuing
Operations(b)......... $(0.95) $(0.67) $ (1.65) $ 0.76 $ (0.04) $ 3.75 $ 0.92
Net Income (loss)(c)... (0.92) (0.44) (1.02) 0.54 0.62 1.13 1.69
Cash Dividends per
Common Share........... $ 0.25 $ 0.40 $ 0.80 $ 0.80 $ 0.80 $ 0.80 $ 0.90
Balance Sheet Data
Cash and Cash
Equivalents........... $1,275 $ 180 $ 353 $ 250 $ 193 $ 191 $ 139
Working Capital........ 970 232 250 297 304 292 423
Total Assets........... 4,746 5,441 5,341 6,459 6,786 6,196 5,407
Long-Term Debt and
Capital Lease
Obligations........... 1,525 1,791 1,718 2,202 2,554 1,877 1,391
Stockholders' Equity... 2,059 2,264 2,157 2,330 2,360 2,365 2,329
Other Financial Data
Book Value Per Common
Share................. $20.17 $22.21 $ 21.32 $ 22.99 $ 23.43 $ 23.62 $ 23.39
Long-Term Debt/Total
Capitalization(d)..... 42.3% 43.8% 43.9% 46.9% 50.4% 42.6% 37.4%
Net Long-Term
Debt/Total
Capitalization(d)(e).. 10.7% 41.2% 38.4% 44.0% 48.4% 40.0% 34.9%
Cash Provided by
Operating Activities.. $ 47 $ 129 $ 237 $ 481 $ 440 $ 675 $ 110
</TABLE>
- --------
(a) The Cyprus Amax historical consolidated income statement data has been
restated to reflect the Domestic Coal Division as a Discontinued Operation
due to its sale effective June 30, 1999.
(b) Income (loss) from Continuing Operations reflects net after-tax copper
charges of $94 for environmental remediation liabilities and write-downs,
net after-tax gains of $123 from the sale of the lithium business, an
Oakbridge coal mine in Australia, and real estate, a net after-tax charge
of $22 for legal settlements, a net after-tax charge of $37 for Cyprus
Amax's share of the Kinross asset impairment and the sale by Kinross of the
pre-merger Amax Gold hedging portfolio, and an after-tax charge of $4 for
various special items in 1998; an after-tax charge of $13 for the write-
down of Oakbridge's Clarence mine in Australia, favorable tax adjustments
of $38, an after-tax gain of $19 on the sale of Kubaka to Amax Gold, and an
after-tax charge of $5 for the costs of redeeming the 9 7/8% Notes in 1997;
an after-tax charge of $74 for environmental remediation liabilities, costs
to temporarily close a copper mine, the write-down of the net assets of the
Guanaco gold mine, and an unrelated favorable tax adjustment for Amax Gold
in 1996; an after-tax charge of $4 to write-down assets of an Oakbridge
mine in Australia in 1995; and an after-tax gain of $21 for various special
items in 1994.
(c) Discontinued Operations for the six months ended June 30, 1999 included
earnings from the domestic coal business of $16 after-tax and a $13 after-
tax loss on the sale of the coal assets. In addition, for the six months
ended June 30, 1998 and for the years 1994 through 1998, the results have
been restated to reflect the Domestic Coal Division as a discontinued
operation. Discontinued Operations included for the six months ended 1998
after-tax earnings of $21; after-tax earnings of $59 that reflects a loss
on the sale of certain eastern and midwestern coal properties of $12 and
favorable legal settlements of $5 for 1998; after-tax loss of $20 that
reflects charges of $66 for write-downs for 1997; after-tax earnings of $62
for 1996; after-tax loss of $243 that reflects a charge of $334 for the
write-down of certain coal assets and provisions for associated liabilities
for 1995; and after-tax earnings of $62 that reflects a write-down of $8
for the Orchard Valley mine for 1994. Also in 1994 Discontinued Operations
included income from the Oil and Gas business for the first quarter of 1994
of $7 after-tax and a $2 after-tax gain on the sale of Cyprus Amax-owned
oil and gas assets.
(d) Total Capitalization includes Debt, Minority Interest and Stockholders'
Equity.
(e) Net Long-Term Debt includes Long-term debt less Cash and Cash Equivalents.
9
<PAGE>
ASARCO--Selected Historical Financial Information
<TABLE>
<CAPTION>
At or for the
Six Months
Ended
June 30, At or for the Year Ended December 31,
-------------- --------------------------------------------------------
1999 1998 1998 1997 1996 1995(f) 1994
------ ------ ------- ------- ------- --------- -------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Sales.................... $ 966 $1,186 $ 2,233 $ 2,721 $ 2,717 $ 3,198 $ 2,032
Operating income (loss).. (49) (33) (118)(a) 275 (b) 303 (d) 487 (g) 18 (h)
Earnings (loss) before
minority interests...... (52) (31) (104) 234 226 299 65
Minority interests....... (4) (15) (27) (91) (88) (130) (1)
Net earnings (loss)...... (56) (46) (131) 143 (c) 138 (e) 169 64 (i)
Earnings (loss) per
Common Share
Net earnings (loss)--
Basic.................. $(1.42) $(1.17) $ (3.29) $ 3.42 $ 3.24 $ 4.00 $ 1.53
Net earnings (loss)--
Diluted................ (1.42) (1.17) (3.29) 3.42 3.23 3.98 1.52
Cash Dividend per Common
Share................... $ 0.10 $ 0.40 $ 0.70 $ 0.80 $ 0.80 $ 0.70 $ 0.40
Balance Sheet Data
Cash and marketable
securities.............. $ 156 $ 285 $ 216 $ 416 $ 193 $ 281 $ 18
Working capital.......... 335 502 502 726 511 565 282
Total assets............. 3,977 4,020 4,024 4,110 4,120 4,327 3,291
Inventories--replacement
cost in excess of LIFO
inventory costs......... 80 78 74 86 115 137 143
Stockholders' Equity..... 1,459 1,623 1,525 1,694 1,737 1,707 1,517
Other Financial Data
Book value per common
share................... $36.68 $40.92 $ 38.45 $ 42.71 $ 40.56 $ 40.11 $ 36.04
Debt as a % of
capitalization (j)...... 34.8% 30.0% 33.7% 28.3% 26.7% 34.1% 38.1%
Debt as a % of
capitalization, net of
excess cash (j)......... 32.4% 24.3% 30.0% 20.2% 24.1% 32.1% 38.1%
Cash provided from (used
for) operating
activities.............. $ 74 $ 65 $ 62 $ 321 $ 267 $ 489 $ (10)
</TABLE>
- --------
(a) Includes charges of $20.0 to reflect the effect of the sale of ASARCO's
Missouri Lead Division and $10.0 related to Southern Peru Copper
Corporation's $30.0 cost reduction program. Includes charges of $9.5 for
the three year suspension of operations at ASARCO's copper smelter in El
Paso, Texas, $9.8 to write down the book value and provide for the closure
costs of ASARCO's Black Cloud lead-zinc mine in Leadville, Colorado, $10.9
for the transfer of Southern Peru Copper Corporation's ownership of the Ilo
townsite to its worker occupants and the city of Ilo, Peru and $7.7 to
increase reserves for certain employee benefit plans and for severance and
other costs related to ASARCO's cost reduction program. Includes a charge
of $33.2 ($54 in charges offset by $20.8 in anticipated insurance and other
recoveries) to increase reserves for closed plants and environmental
matters.
(b) Environmental charges of $22.1 in 1997, include charges of $30.0 offset
entirely by anticipated insurance recoveries.
(c) Includes a $47.6 after-tax gain ($73.3 pre-tax) from the sale of shares of
Grupo Mexico, S.A. de C.V.
(d) Includes a $15.0 charge ($67.7 in charges offset by $52.7 in insurance
settlements and other recoveries) for closed plant and environmental
matters.
(e) Includes a $39.0 after-tax gain ($60.1 pre-tax) from the sale of ASARCO's
remaining interest in MIM and a $7.2 after-tax gain ($11.1 pre-tax) from
the sale of a 25% interest in ASARCO's Silver Bell project.
(f) On April 5, 1995, ASARCO acquired an additional 10.7% interest in Southern
Peru Copper Corporation for $116.4 increasing its ownership from 52.3% to
63%. The additional shares acquired enabled ASARCO to elect a majority of
the directors of Southern Peru Copper Corporation. As a result, ASARCO has
consolidated Southern Peru Copper Corporation in its financial statements
based on its 52.3% ownership, effective January 1, 1995, and 63% ownership,
effective April 5, 1995. ASARCO previously accounted for its investment in
Southern Peru Copper Corporation by the equity method. As of June 30, 1999,
ASARCO's ownership interest in Southern Peru Copper Corporation was 54.3%.
(g) Includes a $139.4 charge to add to ASARCO's reserve for closed plant and
environmental matters, to provide for asset impairments and plant closures
and to write down certain in-process inventory to net realizable value.
(h) Includes a $65.5 pre-tax charge to add to ASARCO's reserve for closed plant
and environmental matters.
(i) Includes a $31.9 after-tax gain ($58.5 pre-tax) from the sale of ASARCO's
remaining interest in ASARCO Australia Limited.
(j) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
10
<PAGE>
Unaudited Selected Pro Forma Combined Financial Information
We have presented below unaudited selected pro forma combined financial data
that reflect the business combination using the purchase method of accounting.
For a more detailed description of the purchase method of accounting, see "The
Business Combination--Accounting Treatment." The pro forma adjustments are
preliminary and based on estimates of ASARCO and Cyprus Amax of the fair value
of the assets acquired and liabilities assumed. Consequently, the amounts
reflected in the unaudited selected pro forma combined financial information
are subject to change, and the final amounts may differ substantially. In
addition, the managements of ASARCO and Cyprus Amax are in the process of
assessing and formulating their integration plans to capture synergies which
are expected to result in employee separations, elimination of duplicative
facilities, employee relocations and other restructuring actions. The final
result of these plans could result in material revisions to the estimated
liabilities reflected in the accompanying unaudited selected pro forma combined
financial information. While the exact amount of the restructuring charge is
not known, the managements of ASARCO and Cyprus Amax believe that the costs
could range between $30 million and $50 million. These synergies, cost savings
and restructuring charges are not included in the unaudited selected pro forma
combined financial information.
The unaudited selected pro forma combined income statement data for the six-
month period ended June 30, 1999 and for the year ended December 31, 1998 give
effect to the business combination as if it were completed on January 1, 1998.
The unaudited selected pro forma combined balance sheet data as of June 30,
1999 gives effect to the business combination as if it were completed on that
date. The Cyprus Amax historical consolidated income statement data for the
year ended December 31, 1998 and the six months ended June 30, 1999, have been
restated to reflect the Domestic Coal Division as a Discontinued Operation due
to its sale effective June 30, 1999.
You should not rely on the unaudited selected pro forma combined financial
information as being indicative of the historical results that Asarco Cyprus
would have had or the future results that Asarco Cyprus will experience after
the business combination. See "Unaudited Pro Forma Combined Financial
Statements" on page 54.
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
---------------------------------------------
Historical Asarco Cyprus
------------------ Pro Forma Pro Forma
Cyprus Amax ASARCO Adjustments Combined
----------- ------ ----------- -------------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Income Statement Data
Revenue......................... $ 561 $ 966 $-- $1,527
Income (loss) from continuing
operations..................... $ (77) $ (56) $ 19(a) $ (114)
Basic earnings (loss) per common
share from continuing
operations..................... $(0.95) $(1.42) $-- $(1.13)
Diluted earnings (loss) per
common share from continuing
operations..................... $(0.95) $(1.42) $-- $(1.13)
Cash dividends per common
share.......................... $ 0.25 $ 0.10 $-- $ 0.24 (b)
<CAPTION>
Year Ended December 31, 1998
---------------------------------------------
Historical Asarco Cyprus
------------------ Pro Forma Pro Forma
Cyprus Amax ASARCO Adjustments Combined
----------- ------ ----------- -------------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Income Statement Data
Revenue......................... $1,661 $2,233 $-- $3,894
Income (loss) from continuing
operations..................... $ (134) $ (131) $ 34(a) $ (231)
Basic earnings (loss) per common
share from continuing
operations..................... $(1.65) $(3.29) $-- $(2.26)
Diluted earnings (loss) per
common share from continuing
operations..................... $(1.65) $(3.29) $-- $(2.26)
Cash dividends per common
share.......................... $ 0.80 $ 0.70 $-- $ 0.92 (b)
</TABLE>
- --------
(a) Reflects the amortization of Other assets and the decrease in Depreciation
expense due to the purchase accounting adjustments to the historical
carrying values, additional Interest expense resulting from the fair value
adjustment of ASARCO's Long-term debt and the increase in Income taxes to
provide taxes on Historical ASARCO resulting from assumption of
applicability of AMT and on pro forma adjustments at the anticipated
effective tax rate.
(b) Pro forma cash dividends per share have been computed by dividing the
aggregate historical dividends of Cyprus Amax and ASARCO by the total
number of outstanding shares expected to be issued by Asarco Cyprus. These
amounts are not indicative of the future dividend policy of Asarco Cyprus.
11
<PAGE>
<TABLE>
<CAPTION>
As of June 30, 1999
-----------------------------------------------
Historical Asarco Cyprus
------------------ Pro Forma Pro Forma
Cyprus Amax ASARCO Adjustments Combined
----------- ------ ----------- -------------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Balance Sheet Data
Total assets................... $4,746 $3,977 $ (554)(a) $8,169
Total cash and marketable
securities.................... $1,275 $ 157 $ (9)(a) $1,423
Long-term debt and capital
lease obligations............. $1,525 $1,017 $ (53)(b) $2,489
Stockholders' equity........... $2,059 $1,458 $ (710)(c) $2,807
Book value per common share.... $20.17 $36.68 $(6.52) $23.61
Long-term debt/Total
capitalization(d)............. 42.3% 33.8% -- 42.5%
Net long-term debt/Total
capitalization(e)............. 10.7% 30.9% -- 24.6%
</TABLE>
- --------
(a) Reflects acquisition adjustments using the purchase method of accounting to
record assets acquired and liabilities assumed at estimated fair value and
allocation of the excess of remaining book value over the purchase price to
Properties and Other assets assuming an exchange ratio of one share of
Asarco Cyprus common stock for each share of ASARCO common stock.
(b) Reflects adjustment of Long-term debt to fair value.
(c) Reflects the issuance of 39.8 million shares of Asarco Cyprus common stock.
Each share of ASARCO common stock will be converted into one share of
Asarco Cyprus common stock and each share of Cyprus Amax common stock will
be converted into 0.765 shares of Asarco Cyprus common stock. Also reflects
the elimination of ASARCO equity accounts.
(d) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
(e) Net long-term debt includes Long-term debt less Cash and Cash Equivalents.
For further discussion of the pro forma adjustments and more detailed pro forma
combined financial statements, see "Unaudited Pro Forma Combined Financial
Statements."
12
<PAGE>
Comparative Per Share Information
We have summarized below the per share information for our respective
companies on a historical, and equivalent combined pro forma basis. You should
read the comparative per share information below in conjunction with the
selected historical financial data on pages 9 and 10 and the unaudited pro
forma combined financial statements appearing on pages 54 through 61 of this
joint proxy statement and prospectus.
<TABLE>
<CAPTION>
At or For the Six At or For the
Months Ended Year Ended
June 30, December 31,
1999 1998
----------------- -------------
(Unaudited)
<S> <C> <C>
Asarco Cyprus Common Stock(a)
Pro forma income (loss) from continuing opera-
tions per common share:
--Basic and Diluted....................... $(1.13) $(2.26)
Pro forma cash dividends declared per common
share(d)..................................... $ 0.24 $ 0.92
Pro forma book value per common share......... $23.61 N/A
Cyprus Amax Common Stock(a)(b)
Income (loss) from continuing operations per
common share:
Historical
--Basic and Diluted....................... $(0.95) $(1.65)
Equivalent combined pro forma
--Basic and Diluted....................... $(0.86) $(1.73)
Cash dividends declared per common share:
Historical.................................. $ 0.25 $ 0.80
Equivalent combined pro forma(d)............ $ 0.19 $ 0.70
Book value per common share:
Historical.................................. $20.17 $21.32
Equivalent combined pro forma............... $18.06 N/A
ASARCO Common Stock(a)(c)
Income (loss) from continuing operations per
common share:
Historical
--Basic and Diluted....................... $(1.42) $(3.29)
Equivalent combined pro forma
--Basic and Diluted....................... $(1.13) $(2.26)
Cash dividends declared per common share:
Historical.................................. $ 0.10 $ 0.70
Equivalent combined pro forma(d)............ $ 0.24 $ 0.92
Book value per common share:
Historical.................................. $36.68 $38.45
Equivalent combined pro forma............... $23.61 N/A
</TABLE>
- --------
(a) Per share information does not include the effect of synergies, cost
savings and restructuring charges anticipated from the business
combination.
(b) Equivalent combined pro forma per share information for Cyprus Amax is
obtained by calculating the corresponding combined pro forma per share
amount for Asarco Cyprus, and multiplying that amount by 0.765.
(c) For purposes of calculating equivalent combined pro forma per share data,
each share of ASARCO common stock is exchanged for one share of Asarco
Cyprus common stock and each share of Cyprus Amax common stock is exchanged
for 0.765 shares of Asarco Cyprus common stock.
(d) Pro forma cash dividends per share have been computed by dividing the
aggregate historical dividends of Cyprus Amax and ASARCO by the total
number of outstanding shares expected to be issued by Asarco Cyprus. These
amounts are not indicative of the future dividend policy of Asarco Cyprus.
13
<PAGE>
Ratios of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------- ------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ---- ---- ---- ---- ----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cyprus Amax Historical
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividend Requirements.............. (b) (b) (b) 1.3 (b) 3.4 1.9
ASARCO Historical
Ratio of Earnings to Fixed
Charges(a)......................... (c) (c) (c) 4.5 4.9 5.2 1.6
Asarco Cyprus Pro Forma
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividend Requirements.............. (d) -- (d) -- -- -- --
</TABLE>
- --------
(a) ASARCO has not issued any shares of preferred stock.
(b) Earnings for the six months ended June 30, 1999 and 1998 and the years
ended December 31, 1998 and 1996 were insufficient to cover fixed charges
and preferred stock dividend requirements by $83,100, $70,100, $105,200 and
$108,300, respectively.
(c) Earnings for the six months ended June 30, 1999 and 1998 and the year ended
December 31, 1998 were insufficient to cover fixed charges by $82,200,
$50,500 and $166,600, respectively.
(d) Pro forma earnings for the six months ended June 30, 1999 and the year
ended December 31, 1998 were insufficient to cover fixed charges and
preferred stock dividend requirements by $131,400 and $209,200,
respectively.
For purposes of the ratio of earnings to fixed charges, "earnings" includes
income from continuing operations before income taxes and fixed charges. "Fixed
charges" consist of interest on all indebtedness and that portion of rental
expense that management believes to be representative of interest. For purposes
of calculating the ratio of earnings to combined fixed charges and preferred
stock dividends, the preferred stock dividend requirements were assumed to be
equal to the pre-tax earnings which would be required to cover such dividend
requirements. The amount of such pre-tax earnings required to cover preferred
stock dividends was computed using tax rates for the applicable year.
14
<PAGE>
RISK FACTORS
In addition to the other information included in this joint proxy statement
and prospectus (including the matters addressed in "Cautionary Statement
Concerning Forward-Looking Statements" at page 21), you should consider the
following in determining whether to vote in favor of the mergers.
The operations of Asarco Cyprus will be subject to a number of risks and
hazards, some inherent to the mining industry, and to which ASARCO and Cyprus
Amax are already subject, which may materially and adversely affect the
company's financial condition or results of operations. The following list
outlines some, but not all, of these risks and hazards.
Metals Prices Are Highly Volatile
Most of ASARCO's and Cyprus Amax's revenues are derived from the sale of
copper and other nonferrous minerals. Thus, following the business combination,
the business, financial condition, results of operations, and cash flows of
Asarco Cyprus will be very sensitive to changes in the prices of these
commodities. Metals prices fluctuate widely and are affected by numerous
factors beyond Asarco Cyprus' control or ability to predict. These factors
include domestic and international economic and political conditions, inventory
levels and capacity, global and regional demand and production, the
availability and costs of substitute materials, financial market speculation,
and inflationary expectations.
The following table illustrates the volatility of copper prices. This table
sets forth the average daily closing prices for copper on the COMEX Division of
the New York Mercantile Exchange (COMEX) for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
Six Months
Ended
June 30, 1999 1998 1997 1996 1995 1994 1993
------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Copper Price ($ per pound)......... .65 .75 1.04 1.06 1.35 1.07 .85
</TABLE>
As of August 19, 1999, the price of copper on the COMEX was $0.75 per pound.
While ASARCO and Cyprus Amax historically have used limited financial risk
management techniques to reduce a portion of their exposure to the volatility
of commodity market prices, there can be no assurance that Asarco Cyprus will
continue to be able to do so effectively in the future. In addition, depending
upon the specific techniques employed, market conditions and other factors,
these activities could reduce the earnings or cash flow that Asarco Cyprus
otherwise would realize or could result in losses.
Mine Operations and Development Will Be Subject To Risks Beyond Our Control
The business operations of our companies are (and the business operations of
Asarco Cyprus will be) subject to risks and hazards inherent in the mining
industry. These risks and hazards include the following:
. unanticipated changes in ore grade or other geological problems,
. unfavorable water conditions,
. unfavorable surface or underground conditions,
. metallurgical and other processing problems,
. mechanical equipment performance problems,
. the unavailability of materials and equipment,
. accidents, labor force and force majeure factors,
. unanticipated transportation costs and delays,
. unfavorable weather conditions,
15
<PAGE>
. prices and production levels of by-products,
. environmental regulations and requirements,
. changes in laws and regulations, including laws and regulations related
to taxes, applicable to mining activities or the markets for our
products, and
. actions or inactions of, or changes to, foreign governments.
In addition to the foregoing items, in the case of development projects, in
general we have no operating history upon which to base estimates of future
operating costs and capital requirements. The economic feasibility of any
individual project is based upon, among other things:
. the interpretation of geological data obtained from drill holes and
other sampling techniques,
. feasibility studies, which derive estimates of cash operating costs
based upon anticipated tonnage and grade of ore to be mined and
processed,
. the configuration of the ore body,
. expected recovery rates of metals from the ore,
. comparable facility and equipment costs,
. environmental and regulatory requirements,
. anticipated climatic conditions, and
. estimates of labor productivity.
Such development projects also are subject to the successful completion of
final feasibility studies, issuance of necessary permits, and receipt of
adequate financing. Accordingly, uncertainties related to development projects
are more significant than those pertaining to existing operations.
As a result of the foregoing risks, among other things, expenditures,
production quantities and rates, and cash operating costs may be affected
materially and adversely and may differ materially from anticipated
expenditures, production quantities and rates, and costs. Additionally, the
estimated date of initial production may be delayed materially in development
projects. Any of these events can affect materially and adversely Asarco
Cyprus' business, financial condition, results of operations, and cash flows.
Asarco Cyprus Will Compete Intensely With Mining Companies As Well As
Manufacturers of Substitute Materials
All of ASARCO and Cyprus Amax products are sold in highly competitive
markets. Marketing of our companies' products is influenced by price,
materials substitution, product quality, transportation costs, general
economic conditions, imports, and competition in related markets. The two
companies currently compete with numerous other copper and molybdenum
producers. Following the business combination, Asarco Cyprus will face these
same competitive pressures.
Copper and molybdenum markets generally are characterized by cyclical and
volatile prices, little product differentiation, and strong competition.
Prices are influenced by production costs of domestic and foreign competitors,
worldwide economic conditions, world supply/demand balances, inventory levels,
the United States dollar exchange rate, and other factors. Copper and
molybdenum prices also are affected by the demand for end-use products in, for
example, the construction, transportation, and durable goods markets.
While the long-term demand for copper has been growing, it can be affected
adversely by substitution of materials such as aluminum, plastics, and optical
fibers. Copper is an internationally traded commodity, and its price is
determined on two major metals exchanges: the COMEX and the London Metal
Exchange (LME). These prices broadly reflect the worldwide balance of copper
supply and demand, but also are influenced by speculative activities. COMEX
copper prices averaged $.65 per pound in the first six months of 1999,
16
<PAGE>
compared with full-year averages of $.75 per pound in 1998, and $1.04 per pound
in 1997. World refined copper consumption rose for the thirteenth consecutive
year in 1998, with estimated growth of approximately two percent. Copper
production increased at a higher rate, estimated at five percent. Weak copper
prices have resulted in a significant number of production curtailments,
beginning in 1998 and continuing into 1999. The supply of copper is determined
largely by development and production decisions of those entities controlling
mines and reserves and availability of secondary materials. Some major foreign
producers have cost advantages resulting from higher ore grades and lower labor
rates.
Molybdenum consumption depends heavily on worldwide demand from the specialty
steel industry and, to a lesser extent, on chemical applications. World
molybdenum consumption remained at record levels in the first half of 1998,
continuing the growth trend begun in 1994. Beginning in the second half of
1998, molybdenum consumption declined as a result of the economic downturn in
Asia. Overall 1998 molybdenum worldwide consumption declined an estimated four
percent primarily in metallurgical applications. The molybdenum market remained
oversupplied during the second half of 1998, and production curtailments were
announced in China and at three primary mines in North America during the
fourth quarter. The molybdenum market continued to be oversupplied in the first
half of 1999. Western World metallurgical grade molybdenum dealer oxide prices
averaged about $2.65 per pound in the first half of 1999 compared with full-
year averages of about $3.40 per pound in 1998 and an average of about $4.30
per pound in 1997. Cyprus Amax molybdenum realizations averaged $4.11 per pound
in the first half of 1999 compared with full-year averages of $4.95 per pound
in 1998 and $5.50 per pound in 1997, with realizations positively impacted by
higher-valued molybdenum chemical products. A substantial portion of world
molybdenum production is a by-product of copper mining, which is relatively
insensitive to molybdenum price levels. Exports to the Western World,
especially from China, can also influence competitive conditions.
Some Employees Will Be Covered by Union Contracts
A substantial proportion of ASARCO employees are covered by union contracts.
These employees will continue to be covered by the union contracts after the
business combination. Excluding its mining operations in Peru, ASARCO employs
about 3,400 persons covered by contracts with various unions, most of which are
affiliated with the AFL-CIO. Substantially all of the employees at ASARCO's and
Cyprus Amax's operations in Peru are covered by labor contracts, as are the
employees at Cyprus Amax's 51% owned El Abra operations in Chile.
Asarco Cyprus May Incur Significant Expenses To Comply With Environmental
Regulation
The mining and mineral processing industries are subject to extensive
regulation for the protection of the environment in the United States as well
as in foreign countries. Much of this regulation relates to air and water
quality, mine reclamation, remediation, solid and hazardous waste handling and
disposal, and the promotion of occupational safety. This regulation sets forth
requirements for parties to fund remedial action or to pay damages regardless
of fault. Environmental laws also often impose liability with respect to
divested or terminated operations, even if the operations were divested or
terminated many years ago. Insurance for environmental risks is not generally
available at a reasonable price to companies in our industry. If Asarco Cyprus
is subject to environmental liabilities, the costs associated with such
liabilities would reduce funds otherwise available to us to conduct our
business and could have a material adverse effect on Asarco Cyprus.
As a result of environmental regulation both of our companies often are
required to engage in substantial investigatory and remedial activities. Our
companies believe that Asarco Cyprus will have appropriate reserves with
respect to environmental matters following the business combination. However,
we cannot assure that any expenses incurred to comply with environmental
regulation will not exceed the amounts reflected in Asarco Cyprus' reserves or
will not have a material adverse effect on Asarco Cyprus' business, financial
condition, results of operations, or cash flows. From time to time, our
companies are cited for noncompliance with applicable environmental laws and
regulations. However, we expect that Asarco Cyprus will be able to comply in
all material respects with existing laws and regulations.
17
<PAGE>
Southern Peru Copper Corporation, a 54.3% owned subsidiary of ASARCO, has
begun a modernization of its smelter at Ilo, Peru. The modernization project
must be completed by January 31, 2007 pursuant to an agreement with the
government of Peru. The total capital cost of the project is estimated at $875
million, of which approximately $45 million had been incurred as of June 30,
1999.
The mining operations of ASARCO and Cyprus Amax also are subject to
inspection and regulation by the United States and foreign governments under a
variety of laws and regulations. Current and future regulations or regulatory
interpretations may require significant expenditures for compliance that may
increase Asarco Cyprus' expected mine development and operating costs and may
require Asarco Cyprus to modify or curtail its operations. We cannot predict
the likely impact of future or pending legislation on Asarco Cyprus' business,
financial condition, results of operations, or cash flows following the
business combination.
Reserve Levels Are Subject To Uncertainty Beyond Our Control
There are a number of uncertainties inherent in estimating quantities of
reserves, including many factors beyond the control of ASARCO, Cyprus Amax, and
Asarco Cyprus. The reserve data, incorporated by reference in this joint proxy
statement and prospectus, are in large part only estimates. We cannot assure
that the volume and grade of reserves recovered and rates of production will
not be less than anticipated. Declines in the market price of a particular
metal also may render reserves containing relatively lower grades of
mineralization uneconomic to exploit. If the price realized by Asarco Cyprus
for a particular commodity were to decline substantially below the price at
which ore reserves were calculated for a sustained period of time, Asarco
Cyprus potentially could experience reductions in reserves and asset write-
downs. Under certain such circumstances, Asarco Cyprus may discontinue the
development of a project or mining at one or more of its properties. Further,
changes in operating and capital costs and other factors, including but not
limited to short-term operating factors such as the need for sequential
development of ore bodies and the processing of new or different ore grades,
may materially and adversely affect reserves.
Asarco Cyprus Will Face Uncertainty and Competition As It Replaces Older Mining
Properties
Since mines have limited lives based on ore reserves, ASARCO and Cyprus Amax
have continually sought to replace and expand their reserves. These replacement
and expansion efforts will be continued by Asarco Cyprus. Mineral exploration,
at both newly acquired properties and existing mining operations, is highly
speculative in nature, involves many risks, and frequently is nonproductive.
Once mineral deposits are discovered, it may take a number of years from
initial preparatory work until production is possible, during which time the
economic feasibility of production may change. Substantial expenditures are
required to establish ore reserves through drilling and through metallurgical
test work to determine processes required for extraction from ore and, in the
case of new properties, to construct mining and processing facilities and
infrastructure.
Our companies encounter strong competition from other mining companies in
connection with the acquisition of economically attractive properties producing
or capable of producing metals. As a result of this competition, some of which
is with companies with greater financial resources than our companies, Asarco
Cyprus may be unable to acquire attractive mining properties on terms it
considers acceptable. In addition, there are a number of uncertainties inherent
in any program relating to the location of economic ore reserves, the
development of appropriate metallurgical processes, the receipt of necessary
governmental permits, and the construction of mining and processing facilities.
Accordingly, we cannot assure that Asarco Cyprus' acquisition and exploration
programs will yield new reserves to replace and expand current reserves.
Foreign Operations Are Subject To Political and Economic Risks That Are Beyond
Our Control
ASARCO and Cyprus Amax maintain reserves and facilities located in foreign
countries, including Chile, Peru and throughout Europe, Asia and Australia.
Following the business combination, therefore, the foreign reserves and
facilities of Asarco Cyprus may be affected materially and adversely by
exchange controls,
18
<PAGE>
currency fluctuations, ownership limitations, expropriation, taxation and laws
or policies of particular countries, as well as the laws or policies of the
United States affecting foreign trade, investment, and taxation. Asarco Cyprus
also may be affected materially and adversely by the policies and practices of
multinational political or financial institutions.
Merger Consideration Is Fixed Despite Potential Changes in Stock Prices
When the business combination is completed, each share of ASARCO common
stock will be converted into one share of Asarco Cyprus common stock and each
share of Cyprus Amax common stock will be converted into 0.765 shares of
Asarco Cyprus common stock. The merger agreement does not contain any
provision that would adjust these exchange ratios based on fluctuations in the
price of either company's common stock. Accordingly, you are unable to
determine the value of the consideration you will receive if the business
combination is completed. The value of the consideration you receive depends
on the market price of Asarco Cyprus common stock at the time the business
combination is completed. The market price of Asarco Cyprus common stock will,
in turn, be affected by the value of the ASARCO and Cyprus Amax common stock
at the time the business combination is completed. On July 14, 1999, the last
full trading day prior to the public announcement of the proposed business
combination, the closing price on the New York Stock Exchange Composite
Transaction Tape was $19.00 per share of ASARCO common stock and $13.94 per
share of Cyprus Amax common stock. On August 19, 1999, the closing price on
the New York Stock Exchange Composite Transaction Tape was $18.44 per share of
ASARCO common stock and $14.50 per share of Cyprus Amax common stock. We urge
you to obtain current market quotations before voting your shares.
Integration of ASARCO and Cyprus Amax Operations May Be Difficult
The business combination involves the integration of two companies that have
previously operated independently. We cannot assure you that we will be able
to integrate our operations without encountering difficulties or experiencing
the loss of key employees, customers or suppliers, or that the benefits we
expect from such integration will be realized.
Members of ASARCO and Cyprus Amax Management and Boards of Directors May Have
Interests in The Mergers That Differ From the Interests of Their Stockholders
Certain members of ASARCO's and Cyprus Amax's management and boards of
directors have interests in the business combination that may be different
from the interests of ASARCO and Cyprus Amax stockholders. The business
combination will give rise to entitlements and benefits for some members of
management and the boards of directors of ASARCO and Cyprus Amax. See
"Interests of Certain Persons in the Mergers."
Anti-Takeover Provisions in The Asarco Cyprus Charter and By-laws May Delay Or
Prevent A Change of Control
The following provisions of the certificate of incorporation and by-laws of
Asarco Cyprus could discourage potential acquisition proposals and delay or
prevent a change of control of Asarco Cyprus:
. classified board of directors who may only be removed for cause;
. ability of the board of directors to fix the rights and preferences of
one or more series of preferred stock of Asarco Cyprus;
. prohibition of stockholder action by written consent; and
. prohibition on ability of stockholders to call a special meeting of
stockholders.
In addition, the merger agreement provides that a stockholder rights plan
will be adopted by Asarco Cyprus upon completion of the business combination.
The rights agreement governing that plan will cause substantial dilution to a
person or group that attempts to acquire 15% or more of the Asarco Cyprus
common stock. Asarco Cyprus is also subject to Section 203 of the Delaware
corporation law which generally prohibits a corporation from engaging in a
broad range of business combinations with an "interested stockholder" for a
period of three years following the date that stockholder became an
"interested stockholder."
19
<PAGE>
Asarco Cyprus Will Rely On Key Personnel
ASARCO and Cyprus Amax depend heavily on the abilities and continued
participation of certain key management personnel. Following the business
combination, Asarco Cyprus will be dependent on its key personnel. If Asarco
Cyprus were to lose the services of these employees, this loss could have a
material adverse effect on the company.
Year 2000 Poses Potential Risks
Risks to Asarco Cyprus resulting from failure of its computer based systems
or from failure of the computer based systems of third parties are essentially
the same as for other firms in the mining industry. The following list
enumerates representative types of risks that could result in the event of one
or more major failures of Asarco Cyprus' information systems, mining sites, or
facilities to be Year 2000 ready, or similar major failures by one or more
major third party suppliers or customers of Asarco Cyprus.
1. Information systems--could include disruptions of business and
transaction processing such as customer billing, payroll, accounts payable,
purchasing, and other information processes until the systems can be
remedied or replaced;
2. Mining facilities--could include disruptions of mining processes and
facilities resulting in delays in delivery of products until non-compliant
components can be remedied;
3. Major suppliers--could include disruptions in the provision of
supplies and components and transportation that could cause subsequent
interruptions of mining activities and delays in product deliveries; and
4. Major customers--could include disruptions in sales, revenue, and cash
inflow as a particular customer may not be Year 2000 compliant or one of
their suppliers may experience failures that could impact the amount of
copper, molybdenum, or coal they require.
To minimize the risks associated with the Year 2000 issue, ASARCO and Cyprus
Amax have been working (1) to identify scenarios involving possible failures of
their critical systems and critical systems of third party vendors and
customers and (2) to develop contingency plans for mitigating the impact of
these scenarios. This involves determining the most reasonably likely worst
case Year 2000 scenarios. These efforts are in process; however, ASARCO and
Cyprus Amax believe that their largest potential risks involve third parties
since ASARCO and Cyprus Amax cannot control the Year 2000 efforts of third
parties. Although there are many areas of potential risk, at present ASARCO and
Cyprus Amax believe that the highest potential risks are problems with the
provision of power to their operations, transportation-related problems, and
the potential failure or undue degradation of customer demand or markets for
their products, any of which could have an adverse impact on Asarco Cyprus'
operations and financial results.
ASARCO and Cyprus Amax believe that they are taking the necessary steps to
resolve Year 2000 issues; however, there can be no assurance that any one or
more such failures would not have a material adverse effect on Asarco Cyprus.
Actual outcomes and results could be affected by future factors including,
but not limited to, availability of skilled personnel, ability to identify and
remediate software problems, critical suppliers and subcontractors meeting
commitments, and timely actions by customers and suppliers.
Additionally, the business combination itself involves the risk that
difficulties could arise combining the operations and systems of ASARCO and
Cyprus Amax.
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CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
In this document (and in documents that are incorporated by reference), we
have made forward-looking statements. These statements are based on our
estimates and assumptions and are subject to a number of risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of each of our companies and
Asarco Cyprus (see the following captions: "Summary," "The Business
Combination--Reasons for the Business Combination; Recommendations of the
Boards," "--Opinion of ASARCO's Financial Advisor" and "--Opinion of Cyprus
Amax's Financial Advisor"). Forward-looking statements also include those
preceded or followed by the words "anticipates," "believes," "estimates,"
"expects," "hopes," "targets" or similar expressions. For each of these
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
The future results of Asarco Cyprus, ASARCO and Cyprus Amax could be
affected by subsequent events and could differ materially from those expressed
in the forward-looking statements. If further events and actual performance
differ from our assumptions, our actual results could vary significantly from
the performance projected in the forward-looking statements.
You should understand that the following important factors, along with those
discussed elsewhere in this joint proxy statement and prospectus and in the
documents which we incorporate by reference, could affect the future results
of Asarco Cyprus, ASARCO and Cyprus Amax, and could cause those results to
differ materially from those expressed in the forward-looking statements:
Economic and Industry Conditions Political/Governmental Factors
.changes in relevant metal . political and economic risk
prices associated with foreign activities
.development of new properties . the timing and receipt of
governmental permits and approvals
.changes in industrial demand
for products
. changes in laws or regulations or
.availability and cost of their interpretation and
substitute materials application
. changes in tax laws and
interpretations of tax laws can
impact projected economics
Operating Factors Transaction or Commercial Factors
. availability of materials and . the outcome of negotiations with
equipment governments, suppliers, customers
and others
. availability of financing for
Asarco Cyprus
. our ability to integrate the
businesses of ASARCO and Cyprus
. the occurrence of unusual Amax successfully after the
weather or operating conditions business combination
. lower than the expected ore . the challenges inherent in
grades or adverse metallurgical diverting management's focus and
characteristics resources from other strategic
opportunities during the
. the failure of equipment or integration process
processes to meet
specifications . the process of, or conditions
imposed in connection with,
. the success and expense of our obtaining regulatory approvals for
remediation efforts and those the business combination
of our suppliers, joint
venturers and customers in . the presence or absence of price
achieving Year 2000 compliance protection programs
. labor relations
. unexpected ground conditions or
hydrological conditions
. environmental risks
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THE ASARCO SPECIAL MEETING
This joint proxy statement and prospectus is being furnished in connection
with the solicitation of proxies from the holders of ASARCO common stock by
the ASARCO Board of Directors relating to the ASARCO merger proposal and other
matters to be voted upon at the ASARCO special meeting and at any adjournment
or postponement of the meeting. This joint proxy statement and prospectus is
also a prospectus for shares of Asarco Cyprus common stock to be issued in the
ASARCO merger. ASARCO mailed this joint proxy statement and prospectus to
stockholders beginning August 26, 1999. You should read this joint proxy
statement and prospectus carefully before voting your shares.
When and Where the ASARCO Special Meeting Will be Held
The ASARCO special meeting will be held at the New York Information
Technology Center, 55 Broad Street, 4th Floor, New York, New York, on
September 30, 1999, starting at 10:00 a.m., local time.
What Will be Voted Upon
At the ASARCO special meeting, you will be asked to consider and vote upon
the following items:
. to approve and adopt the merger agreement relating to the business
combination and to approve the ASARCO merger and the other transactions
described in the merger agreement; and
. such other matters as properly may come before the ASARCO special
meeting, including the approval of any adjournment or postponement of
the meeting.
Only ASARCO Stockholders of Record as of August 25, 1999 Are Entitled to Vote
ASARCO stockholders who hold their shares of record as of the close of
business on August 25, 1999, are entitled to notice of and to vote at the
ASARCO special meeting. On August 19, 1999, there were approximately 39.8
million shares of ASARCO common stock outstanding and entitled to vote at the
ASARCO special meeting.
Majority of Outstanding Shares Must be Represented For a Vote to be Taken
In order to have a quorum, a majority of the shares of ASARCO common stock
that are outstanding and entitled to vote at the ASARCO special meeting must
be represented in person or by proxy. If a quorum is not present, a majority
of shares that are represented may adjourn or postpone the ASARCO special
meeting.
Vote Required for Approval
The ASARCO merger proposal must be approved by the affirmative vote of at
least a majority of the shares of ASARCO Common Stock that are voted at the
ASARCO special meeting. Each share of ASARCO common stock is entitled to cast
one vote. As of June 30, 1999, ASARCO directors and executive officers owned
and were entitled to vote 363,235 shares (or 0.9%) of ASARCO common stock.
Voting Your Shares and Changing Your Vote
Voting Your Shares
The ASARCO Board of Directors is soliciting proxies from the ASARCO
stockholders. This will give you the opportunity to vote at the ASARCO special
meeting. When you deliver a valid proxy, the shares represented by that proxy
will be voted in accordance with your instructions.
To grant your proxy by mail, please complete your proxy card, sign, date and
return it in the enclosed envelope. To be valid, a returned proxy card must be
signed and dated. If you attend the ASARCO special meeting in person, you may
vote your shares by completing a ballot at the meeting.
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Changing Your Vote by Revoking Your Proxy
You may revoke your proxy at any time before the polls close at the ASARCO
special meeting. You may revoke your proxy by delivering notice in writing to
the Secretary of ASARCO, granting a later-dated proxy or appearing in person at
the ASARCO special meeting. You will not revoke your proxy by simply attending
the ASARCO special meeting unless you complete a ballot.
How Proxies Are Counted
If you return a signed and dated proxy card but do not indicate how the
shares are to be voted, those shares represented by your proxy card will be
voted as recommended by the ASARCO Board of Directors. A valid proxy also gives
the individuals named as proxies authority to vote in their discretion when
voting the shares on any other matters that are properly presented for action
at the ASARCO special meeting. A properly executed proxy marked "ABSTAIN" will
not be voted. However, it may be counted to determine whether there is a quorum
present at the ASARCO special meeting. Broker non-votes (i.e., shares held by
brokers or nominees which are represented at a meeting but with respect to
which the broker or nominee is not empowered to vote on a particular proposal)
will be counted for purposes of determining whether there is a quorum at the
ASARCO special meeting. The New York Stock Exchange rules do not permit brokers
and nominees to vote the shares that they hold beneficially either for or
against the ASARCO proposal without specific instructions from the person who
beneficially owns those shares. Abstentions and broker non-votes will not be
counted as votes cast FOR or AGAINST the ASARCO merger proposal.
Confidential Voting
ASARCO keeps all proxies, ballots and tabulations that identify the vote of
individual stockholders confidential if a stockholder elects on the proxy to
have such vote kept confidential, except as necessary to meet legal
requirements, in a contested proxy solicitation or where stockholders submit
consents with their proxies.
Cost of Solicitation
ASARCO will pay the cost of soliciting ASARCO proxies. However, ASARCO and
Cyprus Amax will share equally the cost of printing this joint proxy statement
and prospectus. In addition to solicitation by mail, telephone or other means,
ASARCO will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxy material to beneficial owners. ASARCO
will, upon request, reimburse these institutions for their reasonable expenses.
ASARCO has retained, for a fee of $12,000 plus expenses, Morrow & Co. to aid in
the solicitation of proxies and to verify certain records related to the
solicitation.
ASARCO stockholders should not send in their stock certificates with their
proxy cards. Soon after the mergers are completed, you will receive written
instructions on how to exchange your ASARCO stock certificates for shares of
Asarco Cyprus.
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THE CYPRUS AMAX SPECIAL MEETING
This joint proxy statement and prospectus is being furnished in connection
with the solicitation of proxies from the holders of Cyprus Amax common stock
by the Cyprus Amax Board of Directors relating to the Cyprus Amax merger
proposal and other matters to be voted upon at the Cyprus Amax special meeting
and at any adjournment or postponement of the meeting. This joint proxy
statement and prospectus is also a prospectus for shares of Asarco Cyprus
common stock to be issued in the Cyprus Amax merger. Cyprus Amax mailed this
joint proxy statement and prospectus to stockholders beginning August 23,
1999. You should read this joint proxy statement and prospectus carefully
before voting your shares.
When and Where the Cyprus Amax Special Meeting Will be Held
The Cyprus Amax special meeting will be held at the World Financial Center--
North Tower, 250 Vesey Street, New York, New York, on September 30, 1999,
starting at 10:00 a.m., local time.
What Will be Voted Upon
At the Cyprus Amax special meeting, you will be asked to consider and vote
upon the following items:
. to approve and adopt the merger agreement relating to the business
combination and to approve the Cyprus Amax merger and the other
transactions described in the merger agreement; and
. such other matters as properly may come before the Cyprus Amax special
meeting, including the approval of any adjournment or postponement of
the meeting.
Only Cyprus Amax Common Stockholders of Record as of August 25, 1999 Are
Entitled to Vote
Cyprus Amax common stockholders who hold their shares of record as of the
close of business on August 25, 1999, are entitled to notice of and to vote at
the Cyprus Amax special meeting. On August 18, 1999, there were approximately
90.5 million shares of Cyprus Amax common stock outstanding and entitled to
vote at the Cyprus Amax special meeting.
One-Third of Outstanding Shares Must be Represented For a Vote to be Taken
In order to have a quorum, at least one-third of the shares of Cyprus Amax
common stock that are outstanding and entitled to vote at the Cyprus Amax
special meeting must be represented in person or by proxy. If a quorum is not
present, a majority of shares that are represented may adjourn or postpone the
Cyprus Amax special meeting.
Vote Required for Approval
The Cyprus Amax merger proposal must be approved by the affirmative vote of
at least a majority of the shares of Cyprus Amax common stock that are
outstanding and entitled to vote at the Cyprus Amax special meeting. Each
share of Cyprus Amax common stock is entitled to cast one vote. As of August
18, 1999, Cyprus Amax directors and executive officers owned and were entitled
to vote 1,274,130 shares (or 1.4%) of Cyprus Amax common stock.
Voting Your Shares and Changing Your Vote
Voting Your Shares
The Cyprus Amax Board of Directors is soliciting proxies from the Cyprus
Amax stockholders. This will give you the opportunity to vote at the Cyprus
Amax special meeting. When you deliver a valid proxy, the shares represented
by that proxy will be voted in accordance with your instructions. If you do
not vote by
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proxy or attend the Cyprus Amax special meeting and vote in person, it will
have the same effect as voting against the Cyprus Amax merger proposal.
To grant your proxy by mail, please complete your proxy card, sign, date and
return it in the enclosed envelope. To be valid, a returned proxy card must be
signed and dated. If you attend the Cyprus Amax special meeting in person, you
may vote your shares by completing a ballot at the meeting.
Changing Your Vote by Revoking Your Proxy
You may revoke your proxy at any time before the polls close at the Cyprus
Amax special meeting. You may revoke your proxy by delivering notice in writing
to the Secretary of Cyprus Amax, granting a later-dated proxy or appearing in
person at the Cyprus Amax special meeting. You will not revoke your proxy by
simply attending the Cyprus Amax special meeting unless you complete a ballot.
How Proxies Are Counted
If you return a signed and dated proxy card but do not indicate how the
shares are to be voted, those shares represented by your proxy card will be
voted as recommended by the Cyprus Amax Board of Directors. A valid proxy also
gives the individuals named as proxies authority to vote in their discretion
when voting the shares on any other matters that are properly presented for
action at the Cyprus Amax special meeting. A properly executed proxy marked
"ABSTAIN" will not be voted. However, it may be counted to determine whether
there is a quorum present at the Cyprus Amax special meeting. Accordingly,
since the affirmative vote of a majority of the shares outstanding and entitled
to vote at the Cyprus Amax special meeting is required to approve the Cyprus
Amax merger proposal, a proxy marked "ABSTAIN" will have the effect of a vote
against this proposal. Broker non-votes (i.e., shares held by brokers or
nominees which are represented at a meeting but with respect to which the
broker or nominee is not empowered to vote on a particular proposal) will be
counted for purposes of determining whether there is a quorum at the Cyprus
Amax special meeting. The New York Stock Exchange rules do not permit brokers
and nominees to vote the shares that they hold beneficially either for or
against the Cyprus Amax proposal without specific instructions from the person
who beneficially owns those shares. Therefore, if your shares are held by a
broker or other nominee and you do not give them instructions on how to vote
your shares, this will have the same effect as voting against the Cyprus Amax
merger proposal.
Cost of Solicitation
Cyprus Amax will pay the cost of soliciting Cyprus Amax proxies. However,
ASARCO and Cyprus Amax will share equally the cost of printing this joint proxy
statement and prospectus. In addition to solicitation by mail, telephone or
other means, Cyprus Amax will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxy material to beneficial
owners. Cyprus Amax will, upon request, reimburse these institutions for their
reasonable expenses. Cyprus Amax has retained, for a fee of $12,000 plus
expenses, Georgeson Shareholder Communications Inc. to aid in the solicitation
of proxies and to verify certain records related to the solicitation.
Cyprus Amax stockholders should not send in their stock certificates with the
proxy cards. Soon after the mergers are completed, you will receive written
instructions on how to exchange your Cyprus Amax stock certificates for shares
of Asarco Cyprus.
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THE BUSINESS COMBINATION
The Companies
ASARCO Incorporated
ASARCO, a New Jersey corporation organized in 1899, is one of the world's
leading producers of copper. ASARCO also produces specialty chemicals and
aggregates. ASARCO's copper business includes integrated mining, smelting and
refining operations in North America and in Peru through its 54.3% owned
subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly owned
subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone.
ASARCO also operates a custom lead smelting business, a zinc mining business
and a specialty metals business. ASARCO owns Encycle, Inc., which operates a
waste recycling facility, and Hydrometrics, an environmental consulting and
construction firm. As of June 30, 1999, ASARCO and its subsidiaries employed
approximately 10,100 employees.
ASARCO has its principal executive offices at 180 Maiden Lane, New York, New
York 10038 (telephone number (212) 510-2000).
Cyprus Amax Minerals Company
Cyprus Amax Minerals Company, a Delaware corporation, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June of 1999. Cyprus
Amax still holds its Australian coal properties. As of June 30, 1999, Cyprus
Amax and its subsidiaries employed approximately 4,600 employees.
Cyprus Amax has its principal executive offices at 9100 East Mineral Circle,
Englewood, Colorado 80112, (telephone number (303) 643-5000).
Asarco Cyprus Incorporated
Asarco Cyprus Incorporated is a newly formed Delaware corporation that has
not, to date, conducted any activities other than those incident to its
formation, its execution of the merger agreement and related agreements, and
its participation in the preparation of this joint proxy statement and
prospectus. As a result of the mergers, each of ASARCO and Cyprus Amax will
become a wholly owned subsidiary of Asarco Cyprus. Accordingly, the business of
Asarco Cyprus, through its wholly owned subsidiaries ASARCO and Cyprus Amax,
will be the businesses currently conducted by ASARCO and Cyprus Amax.
Immediately upon completion of the business combination, based upon the number
of shares issued and outstanding on the record dates, the former stockholders
of ASARCO will own approximately 36.5% and the former common stockholders of
Cyprus Amax will own approximately 63.5% of the outstanding common stock of
Asarco Cyprus.
The headquarters of Asarco Cyprus will be located at 180 Maiden Lane, New
York, New York 10038 (telephone number (212) 510-2000).
Background of the Business Combination
On May 4, 1999, Mr. McAllister, Chairman of the Board and Chief Executive
Officer of ASARCO, telephoned Mr. Ward, the Chairman, President and Chief
Executive Officer of Cyprus Amax, to arrange a meeting to discuss possible
areas of mutual interest.
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On May 7, 1999, Mr. McAllister met with Mr. Ward at Cyprus Amax's offices in
Englewood, Colorado. The two discussed, among other things, the ongoing
consolidation in the United States copper mining industry, possible combination
transactions, partnerships and alliances. During the course of the discussions
Mr. Ward suggested the possibility of a strategic combination of the two
companies. Mr. McAllister agreed that such a transaction was worth exploring.
On May 18, 1999, the two companies entered into a confidentiality agreement,
and on May 19, 1999, Mr. McAllister and Mr. Morano, the President of ASARCO,
and Mr. Ward and Mr. Malys, the Chief Financial Officer of Cyprus Amax, met in
Teterboro, New Jersey, to continue discussions regarding a combination of the
two companies. Mr. McAllister and Mr. Ward determined that any business
combination should be structured as a merger of equals. Moreover, they agreed
that the transaction needed to be tax-free to each company's common
stockholders. They also discussed possible management and board composition for
the combined company. Mr. McAllister and Mr. Ward formulated a work plan to
facilitate the further consideration of a combination transaction and agreed
that each company would provide the other with appropriate information and
materials to conduct a thorough due diligence investigation. In addition, they
agreed to instruct their respective management teams and advisors to begin
conducting due diligence investigations and preparing the necessary
documentation for a merger of equals transaction.
During the period between May 18, 1999 and July 10, 1999, Mr. McAllister and
Mr. Ward continued to discuss the possible terms of a merger, including the
composition of the combined company's board of directors, its management
structure and management succession, and the location of its corporate
headquarters. In addition, during this period representatives of ASARCO and
Cyprus Amax met on several occasions to discuss the synergies that might be
achieved by combining the two companies, primarily in the form of cost savings,
and the administrative structure of the combined company.
The ASARCO Board of Directors was updated on the status of these discussions
at meetings held on May 26, June 3 and June 30. The Cyprus Amax Board of
Directors was updated on the status of these discussions and further considered
the transaction at meetings held on May 18, May 26, June 17, and July 8.
On July 10, 1999, Messrs. McAllister and Morano and Mr. Dowd, the Chief
Financial Officer of ASARCO, met with Messrs. Ward and Malys and Mr. Clevenger,
Executive Vice President of Cyprus Amax, to resolve the remaining open issues
with respect to the business combination. At that meeting, the parties
generally resolved the open issues and agreed to direct their respective
representatives to complete the definitive transaction documentation required
for the transaction.
From July 11 to the morning of July 15, 1999, representatives of ASARCO and
Cyprus Amax and their respective legal advisors negotiated the terms of the
proposed merger agreement.
On July 14 and 15, 1999, the ASARCO Board of Directors held a special meeting
to consider the proposed business combination. At the meeting, (1) Mr.
McAllister reviewed the status of the transaction, (2) representatives of
Credit Suisse First Boston made a financial presentation, which is more fully
described below under "Opinion of ASARCO's Financial Advisor," (3) ASARCO's
legal advisors outlined the terms of the proposed transaction and discussed
with the ASARCO Board of Directors their fiduciary responsibilities and (4) the
ASARCO Board of Directors, together with its financial and legal advisors,
discussed the reasons for the proposed business combination.
During the evening of July 14 and in the morning of July 15, 1999,
representatives of ASARCO and Cyprus Amax and their respective legal advisors
finalized the merger agreement.
On July 15, 1999, the ASARCO Board of Directors reconvened its special
meeting and reviewed the terms of the merger agreement that were revised from
the previous day's discussions. Credit Suisse First Boston rendered its written
opinion to the effect that, as of that date and based on and subject to the
matters described in its opinion, the exchange ratio (defined in the opinion
as, collectively, the ASARCO exchange ratio and the
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Cyprus Amax exchange ratio) was fair from a financial point of view to holders
of ASARCO common stock. At the special meeting the ASARCO Board of Directors
unanimously approved the transaction and recommended to the ASARCO
stockholders that they approve and adopt the merger agreement and the related
transactions.
On July 15, 1999, the Cyprus Amax Board of Directors held a special meeting
to consider the proposed business combination. At the meeting, (1) Mr. Ward
and other officers of Cyprus Amax reviewed the status of the transaction and
discussed with the directors the reasons for the transaction, (2)
representatives of Merrill Lynch made a financial presentation concerning the
transaction, which is more fully described below under "Opinion of Cyprus
Amax's Financial Advisor" and (3) Cyprus Amax's legal advisors outlined the
terms of the proposed transaction and discussed with the Cyprus Amax Board of
Directors their fiduciary responsibilities. Merrill Lynch rendered its written
opinion that, as of such date, and based upon and subject to the matters set
forth in their opinion, the exchange ratio (defined in the opinion as the
ratio of the Cyprus Amax exchange ratio to the ASARCO exchange ratio) was
fair, from a financial point of view, to the stockholders of Cyprus Amax. At
the special meeting, the Cyprus Amax Board of Directors, by the unanimous vote
of the directors present, approved the transaction and recommended to the
Cyprus Amax stockholders that they approve and adopt the merger agreement and
the related transactions.
Following the approval of their boards, on July 15, 1999, ASARCO and Cyprus
Amax executed the merger agreement and issued a joint press release following
the close of trading on the New York Stock Exchange.
On August 10, 1999, Messrs. McAllister and Ward each received a telephone
call from Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps
Dodge Corporation. In each call Mr. Yearley said Phelps Dodge wished to
propose a three-way combination of ASARCO, Cyprus Amax and Phelps Dodge and
requested a prompt meeting to discuss the proposal. Later that day, Messrs.
McAllister and Ward replied to the proposal with a letter saying that their
merger agreement prohibited both ASARCO and Cyprus Amax from discussing a
business combination with any third parties and declining Mr. Yearley's
request for a meeting.
On August 11, 1999, Messrs. McAllister and Ward received the following
letter from Phelps Dodge:
"August 11, 1999
"Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
"Mr. Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
"Dear Frank and Milt:
"We are disappointed that you have declined to meet with us. As you
know from our telephone conversations, we have considered your pending
business combination and would like to discuss with you our proposal,
described in more detail below, to combine all three of our companies
in a negotiated transaction.
"We believe that a three-way combination of Phelps Dodge, Asarco and
Cyprus Amax would create superior shareholder value for the
shareholders of Asarco and Cyprus Amax. A three-way combination, by
creating a lower-cost global competitor, would also benefit the
employees and customers of all three companies. For these reasons, we
are approaching you to discuss the concept of a three-way combination.
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"We propose that all of the outstanding common stock of both Asarco
and Cyprus Amax be exchanged for Phelps Dodge common stock. The
transaction would be tax-free to your shareholders.
"A combination of these businesses would result in cost savings well
in excess of the amounts you have indicated to be achievable through
your pending merger. Preliminarily we estimate that the annual cash
cost savings should reach at least $150 million.
"We propose to reward your shareholders for these substantial
incremental benefits by offering your shareholders an exchange ratio
of 0.3756 Phelps Dodge common shares for each Asarco common share and
0.2874 Phelps Dodge common shares for each Cyprus Amax common share.
These exchange ratios preserve the relative economics of your proposed
combination and imply premiums of approximately 25% based on current
market prices for Asarco and Cyprus Amax.
"We believe this proposal creates superior value for your
shareholders based on:
". the sizable premium we are offering which, in effect, represents
an up-front payment to your shareholders for the substantial
cost savings we expect to achieve;
". their opportunity to participate in the ongoing value creation of
the combined company; and
". our planned continuation of the current $2.00 per share Phelps
Dodge common stock dividend resulting in substantial dividend
increases for both Asarco and Cyprus Amax shareholders to 3.76
times the level contemplated in your pending merger.
"Our preference is for a combination of all three companies, which
would of course, involve the consent of both Asarco and Cyprus Amax to
a modification of your existing agreement.
"Since your merger agreement has not been publicly filed, we have
not had the opportunity to review its terms. Based on your August 10,
1999 letter, it is unclear to us whether discussions may proceed once
you receive a written proposal such as this letter. In any event, if
necessary under your merger agreement, we request that you grant one
another waivers to allow meetings with us on our proposal which, as
discussed below, would be far more favorable to your shareholders than
your proposed merger.
"We are confident that the market reaction to a three-way
combination would be positive. In particular we believe the market
would recognize:
". the significantly stronger ability of the combined company,
relative to the Asarco-Cyprus Amax combination, to integrate
southwest U.S. mining operations, administrative functions in
Chile and Peru and world-wide exploration and development
activities;
". the financial strength of the combined company and ability to
create a world class portfolio of cost competitive mining
assets;
". a strong and deep management team, at both the operating and
corporate levels, with strong credibility in the marketplace;
". the ability to eliminate substantial overhead, exploration,
purchasing and other expenses through the consolidation;
". the tremendous operating leverage of the combined company,
together with enough diversity in other businesses to mitigate
cyclical downtime;
". the ability of the combined company to reduce capital
expenditures;
". a strong liquid balance sheet, with excellent access to capital;
and
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". how all of these factors would build greater shareholder value,
on an ongoing basis, for the shareholders of all three
companies.
"This is intended to be a confidential proposal which is subject to
the execution of a definitive merger agreement and receipt of
customary approvals, including approval by our respective Boards of
Directors and shareholders. We have conducted in-depth analyses of the
proposed three-way combination from a regulatory perspective and have
concluded that it will be possible to obtain the necessary approvals
on a timely basis.
"We believe that our proposal is substantially more attractive to
your shareholders than your pending merger. In addition to the
sizeable premium we are offering, your shareholders would participate,
through their ongoing Phelps Dodge common stock ownership, in a larger
enterprise with greater realizable cost savings and synergies, a
stronger portfolio of cost competitive assets and a deep management
team with a strong operating record. We have no doubt that your
shareholders will enthusiastically embrace our proposal once they
learn of it.
"We have discussed this proposal with our Board, which fully
supports it. We are confident of our ability, with your cooperation,
to complete this transaction as quickly as your proposed two-party
Asarco-Cyprus Amax merger.
"We are firmly committed to moving forward quickly to consummate
this transaction. As we mentioned, we would be happy to meet with you
in New York or another mutually convenient location to amplify our
proposal. In any event, we would appreciate a response by 5:00 p.m.,
New York time, on Wednesday, August 18, 1999.
Sincerely,
/s/ /s/
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer"
On August 12, 1999, Messrs. McAllister and Ward telephoned Mr. Yearley in
response to his August 11 letter and reiterated that both ASARCO and Cyprus
Amax were prohibited from discussing a business combination with any third
parties pursuant to the terms of the existing merger agreement.
On August 12, 1999, Messrs. Yearley and J. Steven Whisler, President and
Chief Operating Officer of Phelps Dodge, sent substantially identical letters
to the ASARCO Board of Directors and the Cyprus Amax Board of Directors
describing the proposal outlined in the previous letter to the chief executive
officers, respectively, and asking once again that the Boards of ASARCO and
Cyprus Amax carefully consider the merger proposal and that they authorize the
commencement of negotiations.
On August 19, 1999, the ASARCO Board of Directors and the Cyprus Amax Board
of Directors, together with their respective legal and financial advisors, met
separately to consider the unsolicited proposal from Phelps Dodge. Both the
ASARCO Board of Directors and the Cyprus Amax Board of Directors unanimously
determined that pursuing the business combination was in best interests of
ASARCO and Cyprus Amax stockholders, respectively, and reconfirmed their
respective recommendations of the business combination.
Reasons for the Business Combination and Recommendations of the Boards
ASARCO Board of Directors' Reasons and Consideration and Approval of the
Transactions
The ASARCO Board of Directors believes that the terms of the mergers are fair
to and in the best interests of ASARCO and its stockholders, has approved the
merger agreement and recommends that stockholders vote FOR adoption of the
merger agreement.
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The ASARCO Board of Directors and ASARCO's senior management have from time
to time reviewed ASARCO's strategic position and its short-term and long-term
prospects. In particular, low copper prices in recent years have made it more
difficult for ASARCO to enhance stockholder value by growing its business as an
independent entity. Management believes that by forming Asarco Cyprus we can
operate more efficiently, compete more effectively on a global level and
provide enhanced value to our stockholders.
At a special meeting of the ASARCO Board of Directors held on July 14 and
July 15, 1999, members of ASARCO's management and representatives of Credit
Suisse First Boston, ASARCO's financial advisor, made presentations concerning
the potential business combination of ASARCO and Cyprus Amax. The ASARCO Board
of Directors also received presentations concerning and reviewed the terms of
the merger agreement with members of ASARCO's management and its legal counsel.
At that meeting, the ASARCO Board of Directors unanimously determined that the
terms of the ASARCO merger and the merger agreement and the transactions
contemplated thereby are fair to, and in the best interests of, ASARCO and its
stockholders. Accordingly, the ASARCO Board of Directors unanimously approved
the merger agreement and the related transactions, and recommends that ASARCO
stockholders approve and adopt the merger agreement.
In deciding whether to approve the ASARCO merger and the merger agreement,
the ASARCO Board of Directors considered a number of factors, including the
following:
1. The need for rationalization of copper mining operations in the United
States, highlighting the need to increase operational efficiency and
lower costs.
2. The Board of Directors considered alternatives to the business
combination with Cyprus Amax, including transactions with other
companies, and determined that a business combination with Cyprus Amax
created the best opportunity to realize substantial operational
efficiencies and lower costs.
3. The operating synergies and cost savings that we expect from the
business combination are significantly greater than ASARCO could achieve
on an individual basis, including annual cash cost savings of
approximately $100 million by 2001.
4. The use of the purchase accounting method to account for the mergers
will result in accounting adjustments that will reduce depreciation
expenses in the combined company by approximately $50 million annually.
5. The business combination is expected to have an accretive effect with
regard to earnings and cash flow for ASARCO stockholders in the first
year following completion of the business combination.
6. The expectation that the combination of the companies will result in
Asarco Cyprus having the financial capacity and resources necessary to
develop further and expand its copper properties.
7. The Board of Directors examined the copper and molybdenum mining
industries in which it operates. The Board of Directors determined that,
given the economic conditions and the competition in these industries, a
combined and larger company would be better positioned to succeed by
increasing copper production while lowering overhead costs. The Board of
Directors also concluded that the larger company resulting from the
business combination could more easily attract investors.
8. The Board of Directors assessed the prospective condition of the
combined company assuming a long period of depressed copper prices, and
concluded that in light of the combined company's cash position and
other sources of income, Asarco Cyprus would be better able to survive
such adverse conditions.
9. The combined company will have a strong global presence, enhanced in
particular by Cyprus Amax's presence in Chile.
10. The combined company will have a substantially larger equity base which
will enable Asarco Cyprus to better withstand fluctuations in copper
prices and provide a platform for future growth.
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11. The belief that the larger equity base will also allow the combined
company to attract additional investors who do not currently own shares
of either company.
12. The cash flow of the combined company will enhance the overall credit
quality of both companies.
13. Important considerations about ASARCO, Cyprus Amax and the proposed
combined company including:
. the financial condition, results of operations, cash flows and
prospects of ASARCO, Cyprus Amax and the combined company on both an
historical and prospective basis;
. the expectation that the combined company will be the largest
publicly traded copper company, the second largest producer of
copper in the world as well as the leading producer of molybdenum;
. the expectation that the combined company is likely to produce
greater stockholder returns than either company could produce on its
own; and
. the likelihood that the transaction would receive the necessary
regulatory approvals and the anticipated timing of and possible
conditions that may be imposed with respect to those approvals.
14. That the business combination is expected to be treated as a tax-free
reorganization for U.S. federal income tax purposes.
15. The proposed structure of the transactions, the provisions of the
merger agreement that ensure that the business combination will be a
merger of equals and the other terms and conditions of the merger
agreement, including the following:
. the representations and warranties of the parties;
. the covenants of the parties and the effect of those provisions on
the operation of ASARCO prior to the mergers;
. the provisions of the merger agreement that limit both ASARCO's and
Cyprus Amax's ability to solicit other offers for their company;
. the requirement that ASARCO and Cyprus Amax must pay the other a
termination fee of $45 million if the merger agreement is terminated
under circumstances specified in the merger agreement; and
. the provisions of the certificate of incorporation, by-laws and
proposed rights plan of Asarco Cyprus following the business
combination.
16. The financial presentation of Credit Suisse First Boston described
below under "Opinion of ASARCO's Financial Advisor," including its
opinion to the effect that, as of the date of its opinion and based on
and subject to the matters described in that opinion, the exchange
ratio (defined in the opinion as, collectively, the ASARCO exchange
ratio and the Cyprus Amax exchange ratio) was fair from a financial
point of view to holders of ASARCO common stock.
17. The impact of the transactions on ASARCO's customers, employees and
lenders.
In addition to these factors, the ASARCO Board of Directors also considered
the potential adverse impact of other factors on the proposed transactions.
These included the following:
. the challenges of combining the assets and workforces of two
companies of this size;
. the loss of autonomy of ASARCO, in light of the fact that the Asarco
Cyprus Board of Directors would be composed of sixteen directors,
eight of which would be appointed by Cyprus Amax; and
. the risk that the proposed merger would not be consummated.
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The foregoing discussion of the information and factors discussed by the
ASARCO Board of Directors is not meant to be exhaustive but is believed to
include all material factors considered by the ASARCO Board of Directors. The
ASARCO Board of Directors did not quantify or attach any particular weight to
the various factors that it considered in reaching its determination that the
merger agreement and the merger are fair to and in the best interests of ASARCO
and its stockholders. Rather, the ASARCO Board of Directors viewed its position
and recommendation as being based on the totality of the information presented
to and considered by it. In addition, individual members of the ASARCO Board of
Directors may have given different weights to different factors. As a result of
its consideration of the foregoing and other relevant considerations, the
ASARCO Board of Directors determined that the terms of the ASARCO merger and
the merger agreement and the transactions contemplated thereby are fair to, and
in the best interests of, ASARCO and its stockholders. Accordingly, the ASARCO
Board of Directors approved the merger agreement and the related transactions.
The ASARCO Board of Directors recommends that ASARCO stockholders vote FOR
the approval and adoption of the merger agreement.
Cyprus Amax Board of Directors' Reasons and Consideration and Approval of
the Transaction
The Cyprus Amax Board of Directors believes that the terms of the mergers are
fair to and in the best interests of Cyprus Amax and its stockholders, has
approved the merger agreement and recommends that stockholders vote FOR
adoption of the merger agreement.
The Cyprus Amax Board of Directors believes that the consummation of the
business combination presents a unique opportunity to combine two strong
companies to create a premier mining company focused on copper and molybdenum
with a continuing commitment to its stockholders and other constituencies.
In reaching its decision to approve the merger agreement, the Board of
Directors consulted with its financial and legal advisors, and considered a
variety of factors, including the following:
1. The Board of Directors reviewed the possible alternatives to the merger
with ASARCO, including pursuing other transactions as well as the
prospects of continuing to operate Cyprus Amax as an independent copper
and molybdenum mining company, the value to stockholders of such
alternatives and the timing and likelihood of achieving additional value
from these alternatives, and the possibility that equally suitable
partners for merger and consolidation would be available in the future.
The Board of Directors concluded that the merger with ASARCO was
superior to any alternatives, and that the merger with ASARCO resulted
in greater accretion in earnings, cash flow, copper reserves and annual
production for Cyprus Amax's stockholders than the other alternatives.
2. The Board of Directors reviewed the opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Cyprus Amax's financial advisor, that, as
of the date of such opinion, and based upon and subject to the factors
and assumptions set forth in the opinion, the exchange ratio was fair
from a financial point of view to the stockholders of Cyprus Amax and
the financial analyses conducted by Merrill Lynch in reaching its
opinion, as described below under "--Opinion of Cyprus Amax's Financial
Advisor."
3. The Board of Directors reviewed, with its legal and financial advisors,
the terms of the merger agreement, which are reciprocal in nature, and
concluded that those terms are fair to Cyprus Amax and its stockholders.
See "The Merger Agreement."
4. The Board of Directors considered the proposed arrangements with members
of management of Cyprus Amax and ASARCO, including the fact that Mr.
Ward and Mr. McAllister will serve as co-Chief Executive Officers
through the first annual meeting of Asarco Cyprus, and that Mr. Ward
will continue to be the Chairman of Asarco Cyprus through the end of
2000, until which time Mr. Ward will continue to participate actively in
managing the consolidation of the operations of ASARCO and Cyprus Amax,
realizing the synergies expected to be derived from the business
combination and exploring growth opportunities for Asarco Cyprus.
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5. The Board of Directors considered the historical trading prices of
Cyprus Amax common stock and ASARCO common stock and the common stock
of other copper companies. They considered the historical stock
performance of copper companies in both weak and strong markets and
concluded that the stock performance was superior for those copper
companies with the greatest leverage to copper production.
6. The Board of Directors studied the economic conditions and the
competitive environment for the copper mining and molybdenum mining
industries in which Cyprus Amax operates, and concluded that a combined
and larger company could better compete in these industries. A combined
and larger company would provide an increase in copper production while
keeping overhead costs at levels similar to that of Cyprus Amax.
7. The Board of Directors considered the fact that a larger, combined
company with larger copper production will have an improved ability to
meet the challenges of low copper prices. The business combination will
meet these challenges by increasing the leverage the companies have in
their purchasing power, enabling the combined company to lower costs.
The larger amount of produced copper should, in addition, generate
substantial cash flow during periods of strong copper prices.
8. The Board of Directors reviewed the viability of the combined company
assuming an extended period of depressed copper prices and determined
that given the company's cash position and additional sources of
liquidity from sales of assets, Asarco Cyprus would be able to
withstand such adverse conditions and achieve break-even earnings at
lower copper prices than the companies could attain separately.
9. The Board of Directors concluded that the business combination would be
accretive to Cyprus Amax stockholders, measured by earnings, cash flow,
copper reserves and copper production per share.
10. The Board of Directors considered the increase in capitalization of
Cyprus Amax, which is likely to provide stockholders with greater
liquidity.
11. The Board of Directors reviewed the opportunities created by the
combination of ASARCO's existing copper assets with the copper mining
operations of Cyprus Amax, which are expected immediately or over time
to include expense reductions which will allow Asarco Cyprus to lower
copper production costs and corporate overhead, administrative costs,
exploration costs, material and supply costs and certain general costs
in part as a result of operating synergies due to proximity of
properties in both North and South America. In addition, Asarco Cyprus
would optimize, integrate and implement the best practices of the
Cyprus Quest 21 program and the ASARCO Management System (AMS).
12. The Board of Directors considered that Asarco Cyprus would have the
opportunities to enhance operating efficiencies, expand or develop low
cost copper properties, and otherwise to rationalize operations and
achieve economic optimum operating levels.
13. The Board of Directors considered the business combination as an
opportunity to improve stockholder value as a result of becoming the
world's largest publicly traded copper producer.
14. The Board of Directors was apprised that Cyprus Amax stockholders would
share in the accounting benefits of the re-valuation of ASARCO's
balance sheet as a result of the application of purchase accounting.
Cyprus Amax's Board of Directors also considered certain countervailing
factors in its deliberations concerning the merger, including:
. The Board of Directors reviewed the environmental position of
ASARCO.
. The Board of Directors also was apprised of the capital requirements
of Southern Peru Copper Corporation, and was satisfied that the
company has adequate financial capacity as well as the ability to
extend the period of spending requirements beyond the current plan.
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. The Board of Directors considered the fact that Cyprus Amax has
historically achieved more success in lowering cash costs than
ASARCO, based on reported results, and accordingly that the combined
company may initially experience reduced results with respect to
this analytical measure as compared to Cyprus Amax. The Board of
Directors concluded that these short-term effects would be
outweighed by the longer-term benefits of the merger, including
potential stability in revenues and a more competitive position in
the marketplace attributable to larger copper reserves.
. The Board of Directors reviewed the proposed structure of the
transactions, the provisions of the merger agreement that ensure
that the business combination will be a merger of equals and the
other terms and conditions of the merger agreement, including the
following:
. the provisions of the merger agreement that limit both ASARCO's
and Cyprus Amax's ability to solicit other offers for their
company, or negotiate or exchange information with potential
bidders;
. the requirement that ASARCO and Cyprus Amax must pay the other a
termination fee of $45 million if the merger agreement is
terminated under circumstances specified in the merger agreement;
and
. the fact that the merger agreement does not give the Board of
Directors the right to terminate the merger agreement to
facilitate an alternative transaction.
While the Board of Directors thought that these provisions would
reduce the flexibility of the Board of Directors in connection with
proposals for alternative transactions, it accepted these provisions
as a means to obtain other terms favorable to Cyprus Amax, in
particular the covenants in the merger agreement which constrain
ASARCO in a similar way, and did not believe that such favorable
terms could be otherwise obtained in the negotiations with ASARCO.
The foregoing discussion of the information and factors discussed by the
Cyprus Amax Board of Directors is not meant to be exhaustive but is believed to
include all material factors considered by the Cyprus Amax Board of Directors.
The Cyprus Amax Board of Directors did not quantify or attach any particular
weight to the various factors that it considered in reaching its determination
that the merger agreement and the merger are fair to and in the best interests
of Cyprus Amax and its stockholders. Rather, the Cyprus Amax Board of Directors
viewed its position and recommendation as being based on the totality of the
information presented to and considered by it. In addition, individual members
of the Cyprus Amax Board of Directors may have given different weights to
different factors. As a result of its consideration of the foregoing and other
relevant considerations, the Cyprus Amax Board of Directors determined that the
merger agreement and the merger are advisable to and in the best interests of
Cyprus Amax and its stockholders and approved the merger agreement.
The Cyprus Amax Board of Directors recommends that Cyprus Amax stockholders
vote FOR the approval and adoption of the merger agreement.
Opinion of ASARCO's Financial Advisor
Credit Suisse First Boston has acted as exclusive financial advisor to ASARCO
in connection with the business combination. ASARCO selected Credit Suisse
First Boston based on Credit Suisse First Boston's experience, expertise and
familiarity with ASARCO and its business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, ASARCO requested
that Credit Suisse First Boston evaluate the fairness, from a financial point
of view, to the holders of ASARCO common stock of the
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exchange ratio (defined in the opinion as, collectively, the ASARCO exchange
ratio and the Cyprus Amax exchange ratio) provided for in the business
combination. On July 15, 1999, the date on which the merger agreement was
executed, Credit Suisse First Boston rendered to the ASARCO Board of Directors
a written opinion to the effect that, as of that date and based on and subject
to the matters described in the opinion, the exchange ratio was fair to the
holders of ASARCO common stock from a financial point of view.
The full text of Credit Suisse First Boston's written opinion, dated July 15,
1999, to the ASARCO Board of Directors, which sets forth the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken, is attached as Appendix B and is incorporated by reference into
this joint proxy statement and prospectus. Holders of ASARCO common stock are
urged to read this opinion carefully in its entirety. Credit Suisse First
Boston's opinion is addressed to the ASARCO Board of Directors and relates only
to the fairness of the exchange ratio from a financial point of view, does not
address any other aspect of the proposed business combination or any related
transaction and does not constitute a recommendation to any stockholder as to
any matter relating to the business combination.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and publicly available business and financial information relating to
ASARCO and Cyprus Amax. Credit Suisse First Boston also reviewed other
information relating to ASARCO and Cyprus Amax, including financial forecasts,
that ASARCO and Cyprus Amax provided to or discussed with Credit Suisse First
Boston, and met with the managements of ASARCO and Cyprus Amax to discuss the
businesses and prospects of ASARCO and Cyprus Amax.
Credit Suisse First Boston also considered financial and stock market data of
ASARCO and Cyprus Amax and compared those data with similar data for other
publicly held companies in businesses similar to ASARCO and Cyprus Amax, and
considered, to the extent publicly available, the financial terms of other
business combinations and other transactions recently effected. Credit Suisse
First Boston also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria which Credit Suisse
First Boston deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by it and relied on that information being complete
and accurate in all material respects. With respect to the financial forecasts,
Credit Suisse First Boston was advised, and assumed, that such forecasts were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of ASARCO and Cyprus Amax as to the future
financial performance of ASARCO and Cyprus Amax and the strategic benefits and
potential synergies, including the amount, timing and achievability of those
synergies, anticipated to result from the business combination. Credit Suisse
First Boston also assumed, with ASARCO's consent, that the business combination
would be treated as tax-free reorganizations for federal income tax purposes.
Credit Suisse First Boston was not requested to, and did not, make an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of ASARCO or Cyprus Amax, and was not furnished with any evaluations
or appraisals. Credit Suisse First Boston's opinion was necessarily based on
information available to it, and financial, economic, market and other
conditions as they existed and could be evaluated, on the date of its opinion.
Credit Suisse First Boston did not express any opinion as to the actual value
of the Asarco Cyprus common stock when issued in the business combination or
the prices at which the Asarco Cyprus common stock will trade or otherwise be
transferable after the business combination. In connection with its engagement,
Credit Suisse First Boston was not requested to, and did not, solicit third
party indications of interest in acquiring all or any part of ASARCO. Although
Credit Suisse First Boston evaluated the exchange ratio from a financial point
of view, Credit Suisse First Boston was not requested to, and did not,
recommend the specific consideration payable in the business combination, which
consideration was determined between ASARCO and Cyprus Amax. No other
limitations were imposed on Credit Suisse First Boston with respect to the
investigations made or procedures followed by Credit Suisse First Boston in
rendering its opinion.
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In preparing its opinion to the ASARCO Board of Directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying its opinion. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, a fairness opinion is not
readily susceptible to summary description. In arriving at its opinion, Credit
Suisse First Boston made qualitative judgments as to the significance and
relevance of each analysis and factor considered by it. Accordingly, Credit
Suisse First Boston believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors or focusing on
information presented in tabular format, without considering all analyses and
factors or the narrative description of the analyses, could create a misleading
or incomplete view of the processes underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of ASARCO and Cyprus Amax.
No company, transaction or business used in Credit Suisse First Boston's
analyses as a comparison is identical to ASARCO or Cyprus Amax or the proposed
business combination, nor is an evaluation of the results of those analyses
entirely mathematical; rather the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by the
analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Credit Suisse First
Boston's analyses and estimates are inherently subject to substantial
uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one of
many factors considered by the ASARCO Board of Directors in its evaluation of
the proposed business combination and should not be viewed as determinative of
the views of the ASARCO Board of Directors or management of ASARCO with respect
to the exchange ratio or the proposed business combination.
The following is a summary of the material analyses underlying Credit Suisse
First Boston's opinion dated July 15, 1999 delivered to the ASARCO Board of
Directors in connection with the business combination. The financial analyses
summarized below include information presented in tabular format. In order to
fully understand Credit Suisse First Boston's financial analyses, the tables
must be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses. Considering the
data set forth in the tables below without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of Credit Suisse First Boston's financial analyses.
ASARCO Financial Analyses
Discounted Cash Flow Analyses. Credit Suisse First Boston performed separate
discounted cash flow analyses on ASARCO's businesses and Southern Peru Copper
Corporation, a company in which ASARCO holds a 54.3% equity interest, in order
to estimate the present value of the unlevered after-tax free cash flows that
those businesses could produce on a stand-alone basis. With respect to ASARCO's
copper and lead, zinc and precious metals businesses and Southern Peru Copper
Corporation, Credit Suisse First Boston analyzed projected free cash flows over
the life of each mine based on production and ore reserve estimates provided by
ASARCO management. With respect to ASARCO's specialty chemicals and aggregates
businesses, Credit
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Suisse First Boston analyzed projected free cash flows over the period 1999
through 2008. Estimated financial data used in this analysis were based on
internal estimates of ASARCO management.
Ranges of terminal values for the discounted cash flow analyses were
estimated using multiples of terminal year 2008 earnings before interest,
taxes, depreciation and amortization, commonly known as EBITDA, of 7.0x to 8.0x
in the case of ASARCO's specialty chemicals business and 7.5x to 8.5x in the
case of ASARCO's aggregates business. With respect to ASARCO's copper and lead,
zinc and precious metals businesses and Southern Peru Copper Corporation, the
discounted cash flow estimates extended through the life of each mine and,
therefore, assumed no terminal value once the mine was expected to be depleted.
Credit Suisse First Boston then discounted to present value the free cash flow
streams and terminal values using discount rates of 10.0% to 11.0% in the case
of ASARCO's copper and lead, zinc and precious metals businesses and Southern
Peru Copper Corporation, 10.5% to 11.5% in the case of ASARCO's specialty
chemicals business and 9.5% to 10.5% in the case of ASARCO's aggregates
business.
Selected Companies Analyses. Credit Suisse First Boston reviewed the market
trading multiples of Southern Peru Copper Corporation and compared financial
and operating data for ASARCO's copper, specialty chemicals and aggregates
businesses with corresponding data of the following selected companies in
similar industries:
Selected Aggregates Selected Specialty
Selected Copper Companies Companies Chemicals Companies
- ------------------------- ------------------- -------------------
. Boliden Limited . Florida Rock . Air Products and
Industries, Inc. Chemicals, Inc.
. Freeport-McMoRan Copper
and Gold Inc. . Hanson plc . Albemarle
Corporation
. Grupo Mexico, S.A. de C.V. . Lafarge Corp.
. M.I.M. Holdings Limited . Martin Marietta . Arch Chemicals,
Materials, Inc. Inc.
. Phelps Dodge Corporation . Vulcan Materials
Company . Crompton & Knowles
. Rio Algom Limited Corporation
. Rio Tinto plc . Great Lakes
Chemical
Corporation
. Hercules
Incorporated
. Lilly Industries,
Inc.
. Praxair, Inc.
. Rohm & Haas Company
. RPM, Inc.
. Valspar Corp.
. Witco Corporation
Credit Suisse First Boston reviewed enterprise values, calculated as equity
market value, plus total debt, preferred stock and minority interests, less
cash and cash equivalents, of the selected companies as multiples of estimated
calendar years 1999 and 2000 EBITDA. Credit Suisse First Boston then applied a
range of selected multiples derived from the selected companies to estimated
calendar year 2000 EBITDA for ASARCO's copper business and estimated calendar
years 1999 and 2000 EBITDA for ASARCO's specialty chemicals and aggregates
businesses and applied to the financial and operating data of Southern Peru
Copper Corporation its market trading multiples. All multiples were based on
closing stock prices on July 9, 1999. Estimated financial data for the selected
companies were based on publicly available research analysts' estimates and
estimated financial data for ASARCO and Southern Peru Copper Corporation were
based on internal estimates of ASARCO management.
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Selected Mergers and Acquisitions Analyses. Using publicly available
information, Credit Suisse First Boston analyzed the purchase prices and
implied transaction multiples paid or proposed to be paid in the following
selected merger and acquisition transactions in the copper, specialty
chemicals and aggregates industries:
Selected Copper Transactions
Acquiror Target
. Broken Hill Proprietary Company . Magma Copper Company
Limited . Southern Peru Copper Corporation
. ASARCO
. Freeport-McMoRan Copper & Gold
. RTZ Corporation plc Inc.
. Empresa Minera Especial Tintaya
. Magma Copper Company S.A.
. Sociedad Minera Cerro Verde S.A.
. Cyprus Amax
. Olympic Dam (BP plc)
. Western Mining Corporation
. Minnova Inc.
. Metall Mining Corp.
. Hudson Bay Mining and Smelting
. Minorco (USA) (Anglo American Co.
Corp. of South Africa) . Cia Minera de Cananea S.A.
. Grupo Mexico, S.A. de C.V.
. Falconbridge Ltd.
. Noranda Inc. & Trelleborg AB
. Montana Copper Mining Business
. ASARCO (Montana Resources Inc.)
. Copper Range Co.
. Metall Mining Corp.
. Inspiration Consolidated Copper
. Cyprus Amax Co.
. Ray Mines Division (Kennecott
. ASARCO Corp.)
. Chino-Mines Co.
. Phelps Dodge Corp.
Selected Specialty Chemicals Transactions
Acquiror Target
. Rohm and Haas Co. . Morton International, Inc.
. Rohm and Haas Co. . LeaRonal Inc.
. Akzo Nobel NV . Courtaulds plc
. Ameron International Corp. . Croda International plc
. Industrial Chemical Industries . BTP plc--Mydrin (subsidiary)
plc/Total S.A.
. Max Meyer Duco S.p.A.
. PPG Industries Inc.
. Sovereign Specialty Chemicals . LaPorte plc--Adhesives and
Inc. Sealants
. Unilever plc--Chemicals Division
. Imperial Chemical Industries plc
. Sherwin-Williams Company . Thomson Minwax Holding Corp.
. Elf Atochem S.A. . LaPorte plc--European Adhesives
and Sealants
Selected Aggregates Transactions
Acquiror Target
. Vulcan Materials Co. . CalMat Co.
. Redland Stone Products Co.
. Martin Marietta Materials, Inc.
. Wulfrather Cement GmbH
. RMC Group plc
. Medusa Corporation
. Southdown, Inc.
. HG Fenton Materials Co.
. Hanson plc
. Cementos Molins S.A.
. Lafarge S.A.
. Redland plc
. Lafarge S.A.
. CAMAS plc
. Bardon Group plc
. American Aggregates Corp.
. Martin Marietta Materials, Inc.
. Tilcon Inc.
. CRH plc
Credit Suisse First Boston reviewed transaction values, calculated as the
amount paid in the transaction for the equity of the target company, plus
total debt, preferred stock and minority interests, less cash and cash
equivalents, of the selected transactions as multiples of latest 12 months
EBITDA. Credit Suisse First Boston then applied a range of selected multiples
derived from the selected transactions to calendar year 1998
39
<PAGE>
EBITDA for ASARCO's specialty chemicals and aggregates businesses and Southern
Peru Copper Corporation and to the average of calendar years 2000 and 2001
EBITDA for ASARCO's copper business. All multiples for the selected
transactions were based on financial information available at the time of the
announcement of the relevant transaction.
Cyprus Amax Financial Analyses
Discounted Cash Flow Analyses. Credit Suisse First Boston performed separate
discounted cash flow analyses on Cyprus Amax's copper and coal businesses in
order to estimate the present value of the unlevered after-tax free cash flows
that those businesses could produce on a stand-alone basis. With respect to
Cyprus Amax's copper business, Credit Suisse First Boston analyzed projected
free cash flows over the life of each mine based on production and ore reserve
estimates provided by Cyprus Amax management. With respect to Cyprus Amax's
retained coal business, Credit Suisse First Boston analyzed the projected free
cash flows over the period 1999 through 2008 of Springvale coal mine in which
Cyprus Amax holds a 50% interest and the businesses of Oakbridge Pty Limited, a
company in which Cyprus Amax holds a 48% equity interest. Oakbridge Pty Limited
holds interests in, among other things, three coal mines, Bulga Opencut, South
Bulga and Baal Bone. Estimated financial data used in this analysis were based
on internal estimates of Cyprus Amax management.
Ranges of terminal values for the discounted cash flow analyses were
estimated using multiples of terminal year 2008 EBITDA of 5.5x to 6.5x in the
case of Bulga Opencut, 4.5x to 5.5x in the case of South Bulga, 3.5x to 4.5x in
the case of Baal Bone, and 5.0x to 6.0x in the case of Springvale. With respect
to Cyprus Amax's copper business, the discounted cash flow estimates extended
through the life of each mine and, therefore, assumed no terminal value once
the mine was expected to be depleted. Credit Suisse First Boston then
discounted to present value the free cash flow streams and terminal values
using discount rates of 10.0% to 11.0%.
Selected Companies Analysis. Credit Suisse First Boston compared financial
and operating data of Cyprus Amax's copper business with corresponding data of
the following selected companies in the copper industry:
. Boliden Limited
. Freeport-McMoRan Copper and Gold Inc.
. Grupo Mexico, S.A. de C.V.
. M.I.M. Holdings Limited
. Phelps Dodge Corporation
. Rio Algom Limited
. Rio Tinto plc
Credit Suisse First Boston reviewed enterprise values, calculated as equity
market value, plus total debt, preferred stock and minority interests, less
cash and cash equivalents, of the selected companies as multiples of estimated
calendar years 1999 and 2000 EBITDA. Credit Suisse First Boston then applied a
range of selected multiples derived from the selected companies to
corresponding financial and operating data of Cyprus Amax's copper business.
All multiples were based on closing stock prices on July 9, 1999. Estimated
financial data for the selected companies were based on publicly available
research analysts' estimates and estimated financial data for Cyprus Amax were
based on internal estimates of Cyprus Amax management.
40
<PAGE>
Selected Mergers and Acquisitions Analysis. Using publicly available
information, Credit Suisse First Boston analyzed the purchase prices and
implied transaction multiples paid or proposed to be paid in the following
selected merger and acquisition transactions in the copper industry:
Acquiror Target
. Broken Hill Proprietary Company . Magma Copper Company
Limited . Southern Peru Copper
Corporation
. ASARCO
. Freeport-McMoRan Copper &
. RTZ Corporation plc Gold Inc.
. Empresa Minera Especial
. Magma Copper Company Tintaya S.A.
. Sociedad Minera Cerro
. Cyprus Amax Verde S.A.
. Olympic Dam (BP plc)
. Western Mining Corporation
. Minnova Inc.
. Metall Mining Corp.
. Hudson Bay Mining and
. Minorco (USA) (Anglo American Smelting Co.
Corp. of South Africa) . Cia Minera de Cananea S.A.
. Grupo Mexico, S.A. de C.V.
. Falconbridge Ltd.
. Noranda Inc. & Trelleborg AB
. Montana Copper Mining
. ASARCO Business
. Copper Range Co.
. Metall Mining Corp.
. Inspiration Consolidated
. Cyprus Amax Copper Co.
. Ray Mines Division
. ASARCO (Kennecott Corp.)
. Phelps Dodge Corp. . Chino-Mines Co.
Credit Suisse First Boston reviewed transaction values, calculated as the
amount paid in the transaction for the equity of the target company, plus total
debt, preferred stock and minority interests, less cash and cash equivalents,
of the selected transactions as multiples of latest 12 months EBITDA. Credit
Suisse First Boston then applied a range of selected multiples derived from the
selected transactions to the average of calendar years 1999 through 2001 EBITDA
for Cyprus Amax's copper business. All multiples for the selected transactions
were based on financial information available at the time of the announcement
of the relevant transaction.
Aggregate Reference Ranges and Implied Exchange Ratio Analysis
Aggregate Reference Ranges for ASARCO and Cyprus Amax. Based on the valuation
methodologies employed in the analyses described above, Credit Suisse First
Boston derived aggregate reference ranges for ASARCO's and Cyprus Amax's
businesses. In addition to ASARCO's and Cyprus Amax's businesses, Credit Suisse
First Boston valued ASARCO's interest in Grupo Mexico, S.A. de C.V. at its call
value, its proposed investment in Coeur d'Alene Mines Corporation at its market
value on July 9, 1999, and its interests in other investments at their
estimated book values on March 31, 1999, and Cyprus Amax's interest in Kinross
Gold Corporation at its market value on July 9, 1999. This analysis resulted in
the following implied aggregate and per share equity reference ranges for
ASARCO after adjustment for net debt, option proceeds and corporate overhead
net of ASARCO's Globe, Hydrometrics and Encycle businesses, and implied
aggregate and per share equity reference ranges for Cyprus Amax after
adjustment for net debt, option proceeds, royalty payments and corporate
overhead:
<TABLE>
<CAPTION>
Aggregate Equity Per Share Equity
Reference Range Reference Range
-------------------------------- ----------------
<S> <C> <C>
ASARCO..................... $ 802 million to $1,035 million $20.16 to $25.93
Cyprus Amax................ $1,436 million to $1,859 million $15.83 to $20.41
</TABLE>
41
<PAGE>
Exchange Ratio Analysis. Credit Suisse First Boston compared the per share
equity reference ranges derived for ASARCO and Cyprus Amax described above in
order to derive an implied exchange ratio reference range for ASARCO and Cyprus
Amax. This analysis resulted in the following implied exchange ratios, as
compared to the exchange ratio for Cyprus Amax in the proposed business
combination of 0.765x:
<TABLE>
<CAPTION>
Implied Per Share Equity Values
and
Implied Exchange Ratios
---------------------------------
Low Midpoint High
---------- ----------------------
<S> <C> <C> <C>
ASARCO....................................... $ 20.16 $ 23.04 $ 25.93
Cyprus Amax.................................. $ 15.83 $ 18.12 $ 20.41
Implied Cyprus Amax/ASARCO Exchange Ratio.... 0.7855x 0.7864x 0.7871x
</TABLE>
Pro Forma Analysis
Credit Suisse First Boston analyzed the potential pro forma effect of the
business combination on the earnings per share and free cash flow per share of
ASARCO and Cyprus Amax in calendar years 2000 and 2001, based on internal
estimates of the managements of ASARCO and Cyprus Amax, including the potential
synergies that ASARCO's and Cyprus Amax's managements anticipate will result
from the business combination. This analysis indicated that the business
combination would be accretive to the earnings per share and free cash flow per
share of ASARCO, and accretive to the earnings per share and dilutive to the
free cash flow per share of Cyprus Amax, in calendar years 2000 and 2001. The
actual results achieved by the combined company may vary from projected results
and the variations may be material.
Other Factors
In the course of preparing its opinion, Credit Suisse First Boston considered
other information and data, including the historical trading characteristics of
ASARCO common stock and Cyprus Amax common stock and the historical exchange
ratios of the closing prices of ASARCO common stock and Cyprus Amax common
stock over various trading periods.
Miscellaneous
Pursuant to the terms of Credit Suisse First Boston's engagement, ASARCO has
agreed to pay Credit Suisse First Boston for its financial advisory services
upon completion of the business combination an aggregate fee of $4.7 million.
ASARCO also has agreed to reimburse Credit Suisse First Boston for all of its
out-of-pocket expenses, including the fees and expenses for legal counsel and
any other advisor retained by Credit Suisse First Boston, and to indemnify
Credit Suisse First Boston and related persons and entities against
liabilities, including liabilities under the federal securities laws, arising
out of Credit Suisse First Boston's engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to ASARCO and Cyprus Amax unrelated to the proposed business
combination, for which services Credit Suisse First Boston and its affiliates
have received compensation. In the ordinary course of business, Credit Suisse
First Boston and its affiliates may actively trade the debt and equity
securities of both ASARCO and Cyprus Amax for their own accounts and for the
accounts of customers and, accordingly, may at any time hold long or short
positions in such securities.
Opinion of Cyprus Amax's Financial Advisor
Cyprus Amax retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to
act as its financial advisor in connection with a possible business
combination. On July 15, 1999, Merrill Lynch rendered its opinion to the Board
of Directors of Cyprus Amax that, as of such date, and based upon and subject
to the factors and assumptions set forth in the opinion, the exchange ratio
(defined in the opinion to mean the ratio of the Cyprus Amax exchange ratio to
the ASARCO exchange ratio) was fair from a financial point of view to the
42
<PAGE>
stockholders of Cyprus Amax. When we refer to this exchange ratio in this
section of the joint proxy statement and prospectus, we are referring to the
exchange ratio as it is defined in Merrill Lynch's opinion.
We have attached as Appendix C to this document a copy of the Merrill Lynch
opinion dated July 15, 1999, which sets forth the assumptions made, matters
considered and certain limitations on the scope of review undertaken by Merrill
Lynch. Each stockholder is urged to read the Merrill Lynch opinion in its
entirety. The Merrill Lynch opinion was intended for the use and benefit of the
Board of Directors of Cyprus Amax and was directed only to the fairness from a
financial point of view to the stockholders of Cyprus Amax. The Merrill Lynch
opinion did not address the merits of the underlying decision by Cyprus Amax to
engage in the business combination and does not constitute a recommendation to
any stockholder of Cyprus Amax as to how such stockholder should vote on the
proposed business combination or any related matter. The summary of the Merrill
Lynch opinion set forth in this document is qualified in its entirety by
reference to the full text of the opinion attached as Appendix C.
The exchange ratio was determined through an analysis by the managements of
both Cyprus Amax and ASARCO of current and projected financial and operating
data, in addition to negotiations between Cyprus Amax and ASARCO, and after
substantial analysis and consideration was authorized by the Board of Directors
of Cyprus Amax.
The summary set forth below does not purport to be a complete description of
the analyses underlying the Merrill Lynch opinion or the presentation made by
Merrill Lynch to the Board of Directors of Cyprus Amax. The preparation of a
fairness opinion is a complex and analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. In arriving at its opinion, Merrill Lynch did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor forming part of each such analysis. While each factor set
forth below is separate and none of the factors failed to support Merrill
Lynch's opinion, Merrill Lynch believes that its analysis must be considered as
a whole and that selecting portions of its analyses, without considering all of
its analyses, would create an incomplete view of the process underlying the
Merrill Lynch opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, Cyprus Amax or ASARCO. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. In
addition, Merrill Lynch's opinion was among several factors taken into
consideration by the Board of Directors of Cyprus Amax in making its
determination to approve the transactions contemplated in the merger agreement.
Consequently, the Merrill Lynch analyses described below should not be viewed
as determinative of the decision of the Cyprus Amax Board of Directors or
Cyprus Amax's management with respect to the fairness of the exchange ratio.
In arriving at its opinion, Merrill Lynch, among other things:
1. reviewed certain publicly available business and financial information
relating to ASARCO and Cyprus Amax that Merrill Lynch deemed to be
relevant;
2. reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
ASARCO and Cyprus Amax, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result from the
business combination furnished to Merrill Lynch by ASARCO and Cyprus
Amax, respectively;
43
<PAGE>
3. conducted discussions with members of senior management and
representatives of Cyprus Amax and conducted limited discussions with
members of senior management and representatives of ASARCO concerning
the matters described in clauses 1 and 2 above, as well as their
respective businesses and prospects before and after giving effect to
the business combination and the synergies expected to result from the
business combination;
4. reviewed the market prices and valuation multiples for ASARCO common
stock and Cyprus Amax common stock and compared them with those of
certain publicly traded companies that Merrill Lynch deemed to be
relevant;
5. reviewed the results of operations of ASARCO and Cyprus Amax and
compared them with those of certain publicly traded companies that
Merrill Lynch deemed to be relevant;
6. compared the proposed financial terms of the business combination with
the financial terms of certain other transactions that Merrill Lynch
deemed to be relevant;
7. participated in certain discussions and negotiations among
representatives of ASARCO and Cyprus Amax and their financial and legal
advisors;
8. reviewed the potential pro forma impact of the business combination;
9. reviewed a draft dated July 14, 1999 of the merger agreement; and
10. reviewed such other financial studies and analyses and took into
account such other matters as Merrill Lynch deemed necessary, including
Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available. Merrill Lynch did not assume any responsibility for independently
verifying such information, did not undertake an independent evaluation or
appraisal of any of the assets or liabilities of ASARCO or Cyprus Amax and was
not furnished with any such evaluation or appraisal. In addition, Merrill Lynch
did not conduct any physical inspection of the properties or facilities of
ASARCO or Cyprus Amax. With respect to the financial forecast information and
the synergies expected to result from the business combination furnished to or
discussed with Merrill Lynch by ASARCO or Cyprus Amax, Merrill Lynch assumed
that they were reasonably prepared and reflected the best currently available
estimates and judgment of ASARCO's or Cyprus Amax's management as to the
expected future financial performance of ASARCO or Cyprus Amax, as the case may
be, and the synergies expected to result from the business combination. Merrill
Lynch further assumed that the business combination will qualify as a tax-free
reorganization for U.S. federal income tax purposes. Merrill Lynch also assumed
that the final form of the merger agreement would be substantially similar to
the last draft reviewed by Merrill Lynch.
The Merrill Lynch opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the date of the Merrill
Lynch opinion. Merrill Lynch assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the business combination, no restrictions, including any divestiture
requirements or amendments or modifications, would be imposed that would have a
material adverse effect on the contemplated benefits of the business
combination.
In connection with the preparation of its opinion, Merrill Lynch was not
authorized by Cyprus Amax or the Board of Directors of Cyprus Amax to solicit,
nor did Merrill Lynch solicit, third-party indications of interest for the
acquisition of all or any part of Cyprus Amax. In addition, Merrill Lynch
expressed no opinion as to the prices at which Cyprus Amax common stock or
Asarco Cyprus common stock would trade following the announcement or
consummation of the business combination.
44
<PAGE>
Financial Analyses
The following is a summary of the material portions of the financial and
comparative analyses performed by Merrill Lynch that were presented to the
Board of Directors of Cyprus Amax in connection with the opinion delivered to
the Board of Directors of Cyprus Amax on July 15, 1999.
Cyprus Amax Valuation
Merrill Lynch calculated estimated per share equity valuation ranges for
Cyprus Amax by utilizing a historical trading performance analysis, a
comparable public company analysis and a discounted cash flow analysis.
Historical Trading Performance. Merrill Lynch reviewed publicly available
information and found that the closing prices of Cyprus Amax common stock over
a 52-week period ranged from $9.06 to $15.75.
Comparable Public Companies Analysis. Merrill Lynch reviewed publicly
available information to calculate specified financial and operating
information, market value as a multiple of 2000 estimated cash flow (which was
defined as net income plus depletion, depreciation and amortization), market
capitalization as a multiple of 2000 estimated earnings before interest, taxes,
depreciation and amortization ("EBITDA") and market capitalization adjusted for
non-copper equivalent businesses as a multiple of 1998 Production and 1998
Reserves. Merrill Lynch then compared the financial and operating information
and multiples of Cyprus Amax with the corresponding financial and operating
information and multiples for a group of publicly traded companies that Merrill
Lynch deemed comparable to Cyprus Amax. Merrill Lynch reviewed the following
selected copper companies in this analysis:
North American Copper Producers Non-North American Copper Producers
. Noranda Incorporated . Rio Tinto PLC
. M.I.M. Holdings Limited
. Freeport-McMoRan Copper & Gold, Inc.
. Antofagasta Holdings PLC
. Phelps Dodge Corporation
. Grupo Mexico, S.A. de C.V.
. Rio Algom Limited
Merrill Lynch also reviewed the following selected Australian coal companies in
this analysis:
Australian Coal Companies
. Centennial Coal Company Limited
. CIM Resources Limited
. Coal & Allied Industries Limited
. Portman Mining Limited
. QCT Resources Limited
Using this analysis, Merrill Lynch calculated the following ranges of per
share equity values of Cyprus Amax:
<TABLE>
<CAPTION>
Range of Implied Per
Measure Share Equity Values
------- --------------------
<S> <C>
1998 Reserves........................................... $ 6.70 - $14.80
1998 Production......................................... $ 9.00 - $11.00
2000 Estimated EBITDA................................... $ 9.70 - $15.80
2000 Estimated Cash Flow Per Share...................... $11.50 - $15.35
</TABLE>
None of the selected comparable companies listed above is identical to Cyprus
Amax. Accordingly, an analysis of the results of the foregoing analysis is not
purely mathematical. Rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
45
<PAGE>
comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
Sum of the Parts Analysis. Merrill Lynch performed a discounted cash flow
analysis for Cyprus Amax's copper mines for the life of such mines using Cyprus
Amax management's projections. The discounted cash flow analysis assumed real
discount rates ranging from 8.00% to 9.00% for Cyprus Amax's U.S. copper mines
and 9.00% to 10.00% for Cyprus Amax's South American copper mines. Merrill
Lynch also calculated values for Cyprus Amax's retained coal assets by using a
multiple of production and EBITDA and for Cyprus Amax's overhead costs by
applying a 6.0x-8.0x multiple on Cyprus Amax management's estimates of overhead
costs. Merrill Lynch valued Cyprus Amax's interest in Kinross Gold Corporation
based on share ownership and the closing stock price as of July 13, 1999. Using
this analysis, Merrill Lynch calculated a range of per share equity values for
Cyprus Amax of $15.60 to $17.45.
ASARCO Valuation
Merrill Lynch calculated estimated per share equity valuation ranges for
ASARCO by utilizing a historical trading performance analysis, a comparable
public company analysis and a discounted cash flow analysis.
Historical Trading Performance. Merrill Lynch reviewed publicly available
information and found that the closing prices of ASARCO common stock over a 52-
week period ranged from $13.13 to $23.75.
Comparable Public Companies Analysis. Merrill Lynch reviewed publicly
available information to calculate specified financial and operating
information, market value as a multiple of 2000 estimated cash flow, market
capitalization as a multiple of 2000 estimated EBITDA and market capitalization
adjusted for non-copper equivalent businesses as a multiple of 1998 Production
and 1998 Reserves. Merrill Lynch then compared the financial and operating
information and multiples of ASARCO with the corresponding financial and
operating information and multiples for a group of publicly traded companies
that Merrill Lynch deemed comparable to ASARCO. Merrill Lynch reviewed the
following selected copper companies in this analysis:
<TABLE>
<S> <C>
North American Copper Producers Non-North American Copper Producers
. Noranda Incorporated . Rio Tinto PLC
. Freeport-McMoRan Copper & Gold, Inc. . M.I.M. Holdings Limited
. Phelps Dodge Corporation . Antofagasta Holdings PLC
. Grupo Mexico, S.A. de C.V.
. Rio Algom Limited
</TABLE>
Merrill Lynch also reviewed the following selected aggregates, specialty
chemicals and zinc companies in this analysis:
<TABLE>
<CAPTION>
Aggregates Companies Specialty Chemicals Companies Zinc Companies
<S> <C> <C>
. Florida Rock Industries, Inc. . Ferro Corporation . Breakwater Resources, Ltd.
. Martin Marietta Materials, Inc. . Lilly Industries, Inc. . Cominco Ltd.
. Vulcan Materials Company . MacDermid, Incorporated . Pasminco Limited
. PPG Industries, Inc. . Western Metals Limited
. RPM, Inc.
. The Valspar Corporation
</TABLE>
Using this analysis, Merrill Lynch calculated the following ranges of per
share equity values of ASARCO:
<TABLE>
<CAPTION>
Range of Implied Per
Measure Share Equity Values
------- --------------------
<S> <C>
1998 Reserves........................................... $33.40 - $53.75
1998 Production......................................... $34.05 - $38.30
2000 Estimated EBITDA................................... $ 9.85 - $24.85
2000 Estimated Cash Flow Per Share...................... $24.05 - $32.10
</TABLE>
46
<PAGE>
None of the selected comparable companies listed above is identical to
ASARCO. Accordingly, an analysis of the results of the foregoing analysis is
not purely mathematical. Rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
Sum of the Parts Analysis. Merrill Lynch performed a discounted cash flow
analysis for ASARCO's copper mines for the life of such mines using ASARCO
management's projections. The discounted cash flow analysis assumed real
discount rates ranging from 8.00% to 9.00% for ASARCO's U.S. copper mines and
9.00% to 10.00% for Southern Peru Copper Corporation's copper mines. In
addition, the discounted cash flow analyses for lead, zinc and precious metals,
specialty chemicals and aggregates assumed terminal EBITDA multiples of 4.0x-
6.0x, 7.5x-8.5x and 6.0x-8.0x, respectively. Merrill Lynch calculated values
for other businesses, including Globe, Hydrometrics and Encycle, and values for
corporate overhead costs using a 6.0x-8.0x multiple. Merrill Lynch valued
ASARCO's interest in Grupo Mexico and its proposed investment in Coeur d'Alene
Mines Corporation based on share ownership and the closing stock prices as of
July 13, 1999. Merrill Lynch calculated values for various other equity
investments based on book value. Using this analysis, Merrill Lynch calculated
a range of per share equity values for ASARCO of $23.35 to $30.80.
Exchange Ratio Analysis
Historical Trading Performance. Merrill Lynch calculated the historical ratio
of the stock prices of Cyprus Amax to the stock prices of ASARCO. The
historical ratio over the last three years and the last three months ranged
from 0.528 to 0.960 and 0.732 to 0.911, respectively.
Comparable Public Company Valuation. Based on the comparable company analyses
described above, Merrill Lynch calculated a range of implied exchange ratios by
comparing the lowest estimated valuation of Cyprus Amax common stock to the
highest estimated valuation of ASARCO common stock and the highest estimated
valuation of Cyprus Amax common stock to the lowest estimated valuation of
ASARCO common stock. Using this analysis, Merrill Lynch calculated the
following ranges of implied exchange ratios:
<TABLE>
<CAPTION>
Range of Implied
Measure Exchange Ratios
------- ----------------
<S> <C>
1998 Reserves............................................... 0.125 - 0.443
1998 Production............................................. 0.235 - 0.323
2000 Estimated EBITDA....................................... 0.390 - 1.604
2000 Estimated Cash Flow Per Share.......................... 0.358 - 0.638
</TABLE>
Relative Contribution Analysis. Merrill Lynch compared the relative
contribution of Cyprus Amax and ASARCO to the combined company's estimated
earnings per share, cash flow per share, EBITDA and earnings before interest
and taxes ("EBIT") for the years 2000 to 2003. Using this analysis, Merrill
Lynch calculated a range of implied exchange ratios from 0.329 to 0.888.
Sum of the Parts Valuation. Based upon the discounted cash flow valuation
analyses described above, Merrill Lynch calculated a range of implied exchange
ratios by comparing the lowest estimated valuation of Cyprus Amax common stock
to the highest estimated valuation of ASARCO common stock and the highest
estimated valuation of Cyprus Amax common stock to the lowest estimated
valuation of ASARCO common stock. Using this analysis, the range of implied
exchange ratios calculated by Merrill Lynch was 0.507 to 0.747.
Merrill Lynch Financial Advisor Fee
Pursuant to the terms of a letter agreement between Cyprus Amax and Merrill
Lynch dated July 17, 1999, Cyprus Amax has agreed to pay Merrill Lynch $4.7
million for its financial advisory services upon the consummation of the
business combination. Cyprus Amax has also agreed to reimburse Merrill Lynch
for its reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of legal counsel, and to
47
<PAGE>
indemnify Merrill Lynch and certain related parties from and against certain
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.
Cyprus Amax retained Merrill Lynch to act as its financial advisor based upon
Merrill Lynch's experience and expertise. Merrill Lynch is an internationally
recognized investment banking and advisory firm. Merrill Lynch, as part of its
investment banking business, is continuously engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes.
Merrill Lynch has, in the past, provided financial advisory and financing
services to Cyprus Amax and/or its affiliates and may continue to do so and has
received, and may receive, fees for the rendering of such services. In
addition, in the ordinary course of Merrill Lynch's business, Merrill Lynch may
actively trade Cyprus Amax common stock and other securities of Cyprus Amax, as
well as ASARCO common stock and other securities of ASARCO, for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
Accounting Treatment
The business combination will be accounted for using the purchase method of
accounting for financial accounting purposes in accordance with U.S. generally
accepted accounting principles. The purchase method accounts for a merger as an
acquisition of one company by another, and Cyprus Amax will be deemed the
acquiring company principally because the common stockholders of Cyprus Amax
will receive 63.5% of the shares of Asarco Cyprus. Purchase accounting requires
that the purchase price and costs of the acquisition be allocated to all of the
assets acquired and liabilities assumed, based on their relative fair values.
This allocation will be made based upon valuations and other studies that have
not yet been finalized. Accordingly, the purchase accounting adjustments made
in connection with the development of the pro forma combined financial
information appearing elsewhere in the joint proxy statement and prospectus are
preliminary and have been made solely for purposes of developing such pro forma
combined financial information. If the purchase price exceeds the fair value of
the purchased company's net assets, the excess cost will be amortized.
Correspondingly, if the purchase price is less than the fair value of the
purchased company's net assets, the values otherwise assignable to non-current
assets acquired (except long-term investments in marketable securities) are
reduced by a proportionate part of the difference to determine the assigned
values. Earnings or losses of the purchased company are included in the buyer's
financial statements from the consummation date of the acquisition. See "Pro
Forma Condensed Combined Financial Information."
United States Federal Income Tax Consequences of the Business Combination
ASARCO Merger
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the ASARCO merger to holders of
ASARCO common stock who exchange such stock for Asarco Cyprus common stock in
the ASARCO merger. This discussion addresses only such stockholders who hold
their ASARCO common stock as a capital asset, and does not address all of the
United States federal income tax consequences that may be relevant to
particular stockholders in light of their individual circumstances or to
stockholders who are subject to special rules, such as:
. financial institutions,
. tax-exempt organizations,
. insurance companies,
. dealers in securities or foreign currencies,
. traders in securities who elect to apply a mark-to-market method of
accounting,
48
<PAGE>
. foreign holders,
. persons who hold such shares as a hedge against currency risk or as part
of a straddle, constructive sale or conversion transaction, or
. holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this proxy statement/prospectus, all of
which are subject to change, possibly with retroactive effect. Tax
consequences under state, local and foreign laws are not addressed.
Holders of ASARCO common stock are strongly urged to consult their tax
advisors as to the specific tax consequences to them of the ASARCO merger,
including the applicability and effect of federal, state, local and foreign
income and other tax laws in their particular circumstances.
We will not be obligated to complete the ASARCO merger unless ASARCO
receives an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to ASARCO, stating that the ASARCO merger, taken together with the
Cyprus Amax merger, will qualify for United States federal income tax purposes
as an exchange within the meaning of Section 351 of the Internal Revenue Code
and/or the ASARCO merger will qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code. The condition relating to that
opinion is not waivable by ASARCO or Cyprus Amax after receipt of either the
Cyprus Amax stockholder approval or the ASARCO stockholder approval unless
further stockholder approval is obtained with appropriate disclosure. That
opinion will be based on customary assumptions and representations made by,
among others, ASARCO, Cyprus Amax, Asarco Cyprus Incorporated, ACO Acquisition
Corp., and CAM Acquisition Corp. An opinion of counsel represents counsel's
best legal judgment and is not binding on the Internal Revenue Service or any
court. No ruling has been, or will be, sought from the Internal Revenue
Service as to the United States federal income tax consequences of the ASARCO
merger.
Assuming the ASARCO merger, taken together with the Cyprus Amax merger,
qualifies as an exchange within the meaning of Section 351 of the Internal
Revenue Code and/or the ASARCO merger qualifies as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, holders of ASARCO
common stock who exchange all of their ASARCO common stock solely for Asarco
Cyprus common stock in the ASARCO merger will not recognize gain or loss for
United States federal income tax purposes. Each such holder's aggregate tax
basis in the Asarco Cyprus common stock received in the ASARCO merger will be
the same as his or her aggregate tax basis in the ASARCO common stock
surrendered in the ASARCO merger. The holding period of the Asarco Cyprus
common stock received in the ASARCO merger by such holder of ASARCO common
stock will include the holding period of ASARCO common stock that he or she
surrendered in the ASARCO merger.
Cyprus Amax Merger
The following general discussion summarizes the anticipated material United
States federal income tax consequences of the Cyprus Amax merger to (i)
holders of Cyprus Amax common stock who exchange such stock for Asarco Cyprus
common stock in the Cyprus Amax merger and (ii) holders of Cyprus Amax Series
A convertible preferred stock who exchange such stock for Asarco Cyprus Series
A convertible preferred stock in the Cyprus Amax merger. This discussion
addresses only such stockholders who hold their Cyprus Amax common stock
and/or Cyprus Amax Series A convertible preferred stock as a capital asset,
and does not address all of the United States federal income tax consequences
that may be relevant to particular stockholders in light of their individual
circumstances or to stockholders who are subject to special rules, such as:
. financial institutions,
. tax-exempt organizations,
49
<PAGE>
. insurance companies,
. dealers in securities or foreign currencies,
. traders in securities who elect to apply a mark-to-market method of
accounting,
. foreign holders,
. persons who hold such shares as a hedge against currency risk or as part
of a straddle, constructive sale or conversion transaction,
. holders of Cyprus Amax Series A convertible preferred stock who exercise
appraisal rights, or
. holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this proxy statement/prospectus, all of
which are subject to change, possibly with retroactive effect. Tax
consequences under state, local and foreign laws are not addressed.
Holders of Cyprus Amax common stock and Cyprus Amax Series A convertible
preferred stock are strongly urged to consult their tax advisors as to the
specific tax consequences to them of the Cyprus Amax merger, including the
applicability and effect of federal, state, local and foreign income and other
tax laws in their particular circumstances.
We will not be obligated to complete the Cyprus Amax merger unless Cyprus
Amax receives an opinion from Wachtell, Lipton, Rosen & Katz, special counsel
to Cyprus Amax, stating that the Cyprus Amax merger, taken together with the
ASARCO merger, will qualify for United States federal income tax purposes as
an exchange within the meaning of Section 351 of the Internal Revenue Code.
The condition relating to that opinion is not waivable by Cyprus Amax or
ASARCO after receipt of either the Cyprus Amax stockholder approval or the
ASARCO stockholder approval unless further stockholder approval is obtained
with appropriate disclosure. That opinion will be based on customary
assumptions and representations made by, among others, ASARCO, Cyprus Amax,
Asarco Cyprus Incorporated, ACO Acquisition Corp., and CAM Acquisition Corp.
An opinion of counsel represents counsel's best legal judgment and is not
binding on the Internal Revenue Service or any court. No ruling has been, or
will be, sought from the Internal Revenue Service as to the United States
federal income tax consequences of the Cyprus Amax merger.
Assuming the Cyprus Amax merger, taken together with the ASARCO merger,
qualifies as an exchange within the meaning of Section 351 of the Internal
Revenue Code, holders of Cyprus Amax common stock who exchange all of their
Cyprus Amax common stock solely for Asarco Cyprus common stock in the Cyprus
Amax merger will not recognize gain or loss for United States federal income
tax purposes. Each such holder's aggregate tax basis in the Asarco Cyprus
common stock received in the Cyprus Amax merger will be the same as his or her
aggregate tax basis in the Cyprus Amax common stock surrendered in the Cyprus
Amax merger. The holding period of the Asarco Cyprus common stock received in
the Cyprus Amax merger by such holder of Cyprus Amax common stock will include
the holding period of Cyprus Amax common stock that he or she surrendered in
the Cyprus Amax merger.
Holders of Cyprus Amax Series A convertible preferred stock who exchange
their Cyprus Amax Series A convertible preferred stock for Asarco Cyprus
Series A convertible preferred stock in the Cyprus Amax merger will not
recognize gain or loss for United States federal income tax purposes, provided
that, as is expected to be the case, such Asarco Cyprus Series A convertible
preferred stock is treated for tax purposes as participating in corporate
growth to a significant extent by virtue of its conversion rights. If so, each
holder's aggregate tax basis in the Asarco Cyprus Series A convertible
preferred stock received in the Cyprus Amax merger will be the same as his or
her aggregate tax basis in the Cyprus Amax Series A convertible preferred
stock surrendered in the Cyprus Amax merger, and the holding period of the
Asarco Cyprus convertible preferred stock received in the Cyprus Amax merger
by a holder of Cyprus Amax Series A convertible preferred stock will include
the
50
<PAGE>
holding period of Cyprus Amax Series A convertible preferred stock that he or
she surrendered in the Cyprus Amax merger.
A holder of Cyprus Amax common stock who does not also own ASARCO common
stock and receives cash in lieu of fractional shares of Asarco Cyprus common
stock will recognize gain or loss equal to the difference between the amount of
cash received and his or her tax basis in the Asarco Cyprus common stock that
is allocable to the fractional share. That gain or loss generally will
constitute capital gain or loss. In the case of an individual stockholder, any
such capital gain will be subject to a maximum United States federal income tax
rate of 20% if the individual has held his or her Cyprus Amax common stock for
more than 12 months at the effective time of the Cyprus Amax merger. The
deductibility of capital losses is subject to limitations for both individuals
and corporations. A holder of Cyprus Amax common stock who also owns ASARCO
common stock should consult his or her tax advisor concerning the amount and
character of income or gain recognized upon receipt of cash in lieu of
fractional shares of Asarco Cyprus common stock.
Regulatory Matters
U.S. Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, and the related rules of the Federal Trade Commission, we cannot complete
the mergers until notifications have been given, certain information has been
furnished to the FTC and the Antitrust Division of the United States Department
of Justice and specified waiting period requirements have been satisfied. We
filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on July 30, 1999. If the FTC believes that the business
combination would violate the federal antitrust laws by substantially lessening
competition in any line of commerce affecting U.S. consumers, it has the
authority to challenge the business combination by seeking a federal court
order temporarily enjoining the transactions pending conclusion of
administrative hearings. The FTC may also proceed with an administrative
hearing if the injunction is denied, and if the business combination is found
to be anticompetitive, challenge the business combination after the fact. We
can give no assurance that a challenge to the business combination will not be
made or, if such a challenge is made, that it would be unsuccessful. Expiration
of the HSR Act waiting period is a condition to each of the mergers.
Other Laws. ASARCO and Cyprus Amax conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the business combination. ASARCO
and Cyprus Amax currently are in the process of reviewing whether other filings
or approvals may be required or desirable in these other jurisdictions. We
recognize that some of these filings may not be completed before the completion
of the mergers, and that some of these approvals, which are not as a matter of
practice required to be obtained prior to effectiveness of the mergers, may not
be obtained prior to the closing.
Appraisal Rights
Holders of ASARCO common stock are not entitled to appraisal rights under New
Jersey law in connection with the ASARCO merger. Holders of Cyprus Amax common
stock are not entitled to appraisal rights under Delaware law in connection
with the Cyprus Amax merger. See "Comparison of Stockholders Rights--Appraisal
Rights." Appraisal rights are available in connection with the Cyprus Amax
merger to the holders of Cyprus Amax Series A convertible preferred stock, if
such holders comply with the procedural requirements of the Delaware appraisal
rights statute. See "Appraisal Rights of Cyprus Amax Series A Preferred
Stockholders."
Federal Securities Laws Consequences; Stock Transfer Restriction Agreements
This joint proxy statement and prospectus does not cover any resales of the
Asarco Cyprus common stock or preferred stock to be received by the
stockholders of either ASARCO or Cyprus Amax upon completion of the mergers,
and no person is authorized to make any use of this joint proxy statement and
prospectus in connection with any such resale.
51
<PAGE>
All shares of Asarco Cyprus common stock received by ASARCO stockholders in
the ASARCO merger will be freely transferable, except that shares of Asarco
Cyprus common stock received by persons who are deemed to be "affiliates" of
ASARCO under the Securities Act of 1933 at the time of the ASARCO special
meeting may be resold by them only in transactions permitted by Rule 145 under
the Securities Act of 1933 or as otherwise permitted under the Securities Act
of 1933. Persons who may be deemed to be affiliates of ASARCO for such purposes
generally include individuals or entities that control, are controlled by or
are under common control with ASARCO and include directors and executive
officers of ASARCO. The merger agreement requires ASARCO to use its reasonable
best efforts to cause each of such affiliates to execute a written agreement to
the effect that such persons will not offer, sell or otherwise dispose of any
of the shares of Asarco Cyprus common stock issued to them in the ASARCO merger
in violation of the Securities Act of 1933 or the related Securities and
Exchange Commission rules.
All shares of Asarco Cyprus common or preferred stock received by Cyprus Amax
stockholders in the Cyprus Amax merger will be freely transferable, except that
shares of Asarco Cyprus common or preferred stock received by persons who are
deemed to be "affiliates" of Cyprus Amax under the Securities Act of 1933 at
the time of the Cyprus Amax special meeting may be resold by them only in
transactions permitted by Rule 145 under the Securities Act of 1933 or as
otherwise permitted under the Securities Act of 1933. Persons who may be deemed
to be affiliates of Cyprus Amax for such purposes generally include individuals
or entities that control, are controlled by or are under common control with
Cyprus Amax and include directors and executive officers of Cyprus Amax. The
merger agreement requires Cyprus Amax to use its reasonable best efforts to
cause each of such affiliates to execute a written agreement to the effect that
such persons will not offer, sell or otherwise dispose of any of the shares of
Asarco Cyprus common or preferred stock issued to them in the Cyprus Amax
merger in violation of the Securities Act of 1933 or the related Securities and
Exchange Commission rules.
52
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION
We are providing you with the high and low sale prices of Cyprus Amax common
stock and ASARCO common stock as reported on the New York Stock Exchange
Composite Transactions Tape for each calendar quarter during the past three
years.
Cyprus Amax common stock and ASARCO common stock are listed on the New York
Stock Exchange. The Cyprus Amax ticker symbol on the New York Stock Exchange is
"CYM." The ASARCO ticker symbol on the New York Stock Exchange is "AR." We
intend to apply to have the Asarco Cyprus common stock listed on the New York
Stock Exchange. Prior to the completion of the business combination, there will
be no public market for the Asarco Cyprus common stock.
<TABLE>
<CAPTION>
Cyprus Amax Common Stock ASARCO Common Stock
-------------------------------------- ---------------------------------
Market Price Cash Market Price Cash
---------------------- Dividends ------------------ Dividends
High Low Declared High Low Declared
-------- -------- ----------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter........... $ 24 7/8 $ 21 1/4 $ .20 $ 32 5/8 $ 25 1/8 $.20
Second Quarter.......... 26 3/8 21 5/8 .20 32 3/8 26 1/4 .20
Third Quarter........... 26 13/16 22 3/8 .20 34 1/4 29 3/8 .20
Fourth Quarter.......... 25 14 7/16 .20 32 1/4 21 3/4 .20
1998
First Quarter........... $ 17 7/8 $ 14 $ .20 $ 26 3/4 $ 20 1/2 $.20
Second Quarter.......... 17 7/8 13 .20 27 13/16 21 3/8 .20
Third Quarter........... 13 13/16 9 3/16 .20 24 15 7/16 .20
Fourth Quarter.......... 14 3/8 9 .20 23 14 7/8 .10
1999
First Quarter........... $ 13 1/8 $ 9 3/8 $ .20 $ 18 3/8 $ 13 11/16 $.05
Second Quarter.......... 16 1/16 11 3/8 .05 19 1/4 13 7/16 .05
Third Quarter (through
August 19, 1999)....... 14 1/2 13 1/2 .05 18 7/16 17 3/16 .05
</TABLE>
The following table sets forth the closing price of Cyprus Amax and ASARCO as
reported on the New York Stock Exchange Composite Transactions Tape, and the
equivalent price per share of Cyprus Amax common stock (which is the closing
sale price of ASARCO common stock multiplied by the Cyprus Amax exchange ratio
of 0.765) as of (i) July 14, 1999 (the last full trading day prior to the
public announcement of the proposed mergers) and (ii) August 19, 1999 (the last
full trading day prior to the date we filed with the Securities and Exchange
Commission the registration statement of which this joint proxy statement and
prospectus is a part):
<TABLE>
<CAPTION>
Equivalent Price Per Share of
Cyprus Amax ASARCO Cyprus Amax Common Stock at
Common Stock Common Stock the Cyprus Amax Exchange Ratio
------------ ------------ ------------------------------
<S> <C> <C> <C>
July 14, 1999......... $13.94 $19.00 $14.53
August 19, 1999....... $14.50 $18.44 $14.11
</TABLE>
We urge you to obtain current market quotations before voting your shares.
Because the exchange ratios are fixed in the merger agreement, the market value
of the shares of Asarco Cyprus that holders of Cyprus Amax common stock and
ASARCO common stock will have the right to acquire when the mergers become
effective may vary significantly from the market value of the shares of Cyprus
Amax common stock and ASARCO common stock that holders of Cyprus Amax common
stock and ASARCO common stock would receive if the mergers were consummated on
the date of this joint proxy statement and prospectus.
ASARCO currently pays dividends at a rate of $.20 per share each year, and
Cyprus Amax currently pays dividends at a rate of $.20 per share each year. The
dividend policy of Asarco Cyprus will be determined by its Board of Directors
following the business combination. Management expects the initial annualized
dividend rate to be $.20 per share. Assuming this is the case, because each
share of Cyprus Amax common stock will be converted into 0.765 of a share of
Asarco Cyprus common stock in the Cyprus Amax merger, Cyprus Amax stockholders
will experience a reduction in their aggregate dividends.
53
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
We have presented below unaudited pro forma combined financial statements
that reflect the business combination using the purchase method of accounting.
For a more detailed description of the purchase method of accounting, see "The
Business Combination--Accounting Treatment." The pro forma adjustments are
preliminary and based on management's estimates of the fair value of the assets
acquired and liabilities assumed and have been prepared to illustrate the
estimated effect of the business combination. Consequently, the amounts
reflected in the unaudited pro forma combined financial statements are subject
to change, and the final amounts may differ substantially. In addition, the
managements of ASARCO and Cyprus Amax are in the process of assessing and
formulating their integration plans, which are expected to include employee
separations, elimination of duplicative facilities, employee relocations and
other restructuring actions. The final result of these plans could result in
material revisions to the estimated liabilities reflected in the accompanying
unaudited pro forma combined financial statements. While the exact amount of
the restructuring charge is not known, the managements of ASARCO and Cyprus
Amax believe that the costs could range between $30 million and $50 million.
The pro forma combined financial statements do not reflect any of these
restructuring charges, anticipated cost savings or synergies resulting from the
business combination, and there can be no assurance that any such cost savings
or synergies will occur.
The unaudited pro forma combined income statements for the six-month period
ended June 30, 1999 and for the year ended December 31, 1998 give effect to the
business combination as if it were completed on January 1, 1998. The unaudited
pro forma combined balance sheet as of June 30, 1999 gives effect to the
business combination as if it were completed on that date. The pro forma
combined financial statements should be read in conjunction with the separate
historical consolidated financial statements and the notes thereto contained in
the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q of ASARCO
and Cyprus Amax, respectively, incorporated by reference in this joint proxy
statement and prospectus.
You should not rely on the unaudited pro forma combined financial statements
as being indicative of the historical results that Asarco Cyprus would have had
or the future results that Asarco Cyprus will experience after the business
combination.
54
<PAGE>
ASARCO CYPRUS INCORPORATED
PRO FORMA COMBINED BALANCE SHEET
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Cyprus Amax ASARCO Adjustments Combined
----------- ---------- ----------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............. $1,275,416 $ 124,744 $ (9,000)(A) $1,391,160
Marketable securities.... -- 31,688 -- 31,688
Accounts receivable
Trade, less allowance for
doubtful accounts....... 11,780 349,632 -- 361,412
Other.................... 25,271 54,111 -- 79,382
Notes receivable, net.... 45,419 -- -- 45,419
Inventories.............. 293,449 305,037 62,200 (B) 660,686
Deferred tax asset....... 31,822 33,078 (13,800)(B)
4,400 (C) 55,500
Prepaid expenses......... 28,359 70,558 -- 98,917
---------- ---------- --------- ----------
Total Current Assets..... $1,711,516 $ 968,848 $ 43,800 $2,724,164
Investments
Cost and available-for-
sale.................... 8,580 123,186 20,000 (B) 151,766
Equity method............ 327,781 66,675 -- 394,456
Properties--at cost, net.. 2,545,904 2,592,344 (827,200)(B) --
(136,917)(C) 4,174,131
Deferred tax asset........ -- -- 196,500 (C) 196,500
Other assets.............. 152,213 226,250 193,000 (B) --
(43,400)(C) $ 528,063
---------- ---------- --------- ----------
Total Assets............. $4,745,994 $3,977,303 $(554,217) $8,169,080
========== ========== ========= ==========
LIABILITIES
Current Liabilities:
Short-term debt.......... $ 248,560 $ 15,884 $ -- $ 264,444
Current portion of long-
term debt............... 78,996 31,462 -- 110,458
Accounts payable......... 43,727 270,823 -- 314,550
Accrued liabilities:
Payroll and benefits..... 44,365 38,105 -- 82,470
Interest................. 23,723 14,296 -- 38,019
Closure, reclamation and
environmental reserves.. 74,734 52,799 -- 127,533
Other accrued
liabilities............. 120,538 105,214 9,000 (A)
15,000 (D) 249,752
Taxes payable, other than
income taxes............ 16,315 14,998 -- 31,313
Income taxes payable..... 81,292 90,304 -- 171,596
Dividends payable........ 9,385 -- -- 9,385
---------- ---------- --------- ----------
Total Current
Liabilities............. $ 741,635 $ 633,885 $ 24,000 $1,399,520
Long-term debt............ 1,499,440 998,736 (53,300)(B) 2,444,876
Capital lease
obligations.............. 25,872 17,794 -- 43,666
Deferred income taxes..... 13,914 27,735 60,500 (B) 102,149
Deferred employee &
retiree benefits......... 179,388 143,109 -- 322,497
Closure, reclamation and
environmental reserves... 177,678 76,120 125,000 (E) 378,798
Other..................... 29,156 86,944 -- 116,100
---------- ---------- --------- ----------
Total Non-Current
Liabilities............. $1,925,448 $1,350,438 $ 132,200 $3,408,086
Minority Interest......... 20,007 534,463 -- 554,470
Shareholders' Equity
Preferred stock.......... 4,664 -- -- 4,664
Common stock............. 1,063 679,991 (679,991)(F) --
748,100 (F) 749,163
Paid in surplus.......... 2,912,605 -- -- 2,912,605
Retained earnings........ (767,776) 948,502 (948,502)(F) (767,776)
Accumulated other
comprehensive income.... (5,348) (15,097) 15,097 (F) (5,348)
Treasury stock........... (86,304) (154,879) 154,879 (F) (86,304)
---------- ---------- --------- ----------
Total Shareholders'
Equity.................. $2,058,904 $1,458,517 $(710,417) $2,807,004
---------- ---------- --------- ----------
Total Liabilities and
Shareholders' Equity.... $4,745,994 $3,977,303 $(554,217) $8,169,080
========== ========== ========= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
55
<PAGE>
ASARCO CYPRUS INCORPORATED
PRO FORMA COMBINED STATEMENT OF INCOME
For the six months ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Cyprus Amax ASARCO Adjustments Combined
------------ ------------ ------------- (A) ------------
(dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue................ $ 560,603 $ 966,011 $ -- $ 1,526,614
Operating costs and
expenses:
Cost of sales........ 428,518 858,955 1,700 (B) 1,289,173
Selling,
administrative and
other............... 33,792 72,092 -- 105,884
Depreciation,
depletion and
amortization........ 103,653 73,117 (38,200)(C) 138,570
Research and
exploration......... 7,569 10,676 -- 18,245
---------- ------------ ---------- ----- ------------
Total operating
costs and
expenses.......... 573,532 1,014,840 (36,500) 1,551,872
Operating income
(loss)................ (12,929) (48,829) 36,500 (25,258)
Interest income........ 7,113 5,580 -- 12,693
Interest expense....... (69,123) (42,024) (2,500)(D) (113,647)
Capitalized interest... 2,549 3,687 -- 6,236
Other income........... -- 1,860 -- 1,860
Earnings (loss) on
equity investments and
other................. (18,003) 2,144 -- (15,859)
---------- ------------ ---------- ----- ------------
Earnings (loss) from
continuing operations
before taxes on income
and minority
interest.............. (90,393) (77,582) 34,000 (133,975)
Income tax
(provision)
benefit............. 14,175 25,083 (15,000)(E) 24,258
Minority Interest.... (255) (3,882) -- (4,137)
---------- ------------ ---------- ----- ------------
Net income (loss) from
continuing
operations............ (76,473) (56,381) 19,000 (113,854)
Preferred Stock
Dividends........... (9,329) -- -- (9,329)
Net income (loss) from
continuing operations
applicable to common
shares................ $ (85,802) $ (56,381) $ 19,000 $ (123,183)
========== ============ ========== ===== ============
Earnings (loss) from
continuing operations
per common share:
Basic................ $ (0.95) $ -- $ -- $ (1.13)
========== ============ ========== ===== ============
Diluted.............. $ (0.95) $ -- $ -- $ (1.13)
========== ============ ========== ===== ============
Weighted average common
shares outstanding:
Basic................ 90,453 -- -- 108,908
========== ============ ========== ===== ============
Diluted.............. 100,340 -- -- 116,545
========== ============ ========== ===== ============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
56
<PAGE>
ASARCO CYPRUS INCORPORATED
PRO FORMA COMBINED STATEMENT OF INCOME
For the year ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical Cyprus
Amax Continuing Historical Pro Forma Pro Forma
Operations(F) ASARCO Adjustments Combined
----------------- ---------- ----------- (A) ----------
(dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue................ $1,660,550 $2,233,068 $ -- $3,893,618
Operating costs and
expenses:
Cost of sales........ 1,087,350 1,962,790 3,800 (B) 3,053,940
Selling,
administrative and
other............... 104,646 144,324 -- 248,970
Depreciation,
depletion and
amortization........ 254,547 144,636 (76,400)(C) 322,783
Research and
exploration......... 43,906 26,954 -- 70,860
Write-downs and
special charges..... 118,269 72,421 -- 190,690
---------- ---------- -------- ----------
Total operating
costs and
expenses.......... 1,608,718 2,351,125 (72,600) 3,887,243
Operating income
(loss)................ 51,832 (118,057) 72,600 6,375
Interest income...... 16,878 18,061 -- 34,939
Interest expense..... (157,351) (80,317) (5,000)(D) (242,668)
Capitalized
interest............ 1,498 12,530 -- 14,028
Other income......... -- 6,622 -- 6,622
Earnings (loss) on
equity investments
and other........... (52,554) 4,164 -- (48,390)
---------- ---------- -------- ----------
Earnings (loss) from
continuing operations
before taxes on income
and minority
interest.............. (139,697) (156,997) 67,600 (229,094)
Income tax
(provision)
benefit............. 5,037 53,016 (33,800)(E) 24,253
Minority Interest.... 646 (26,659) -- (26,013)
---------- ---------- -------- ----------
Net income (loss) from
continuing
operations............ (134,014) (130,640) 33,800 (230,854)
========== ========== ======== ==========
Preferred Stock
Dividends........... (18,657) -- -- (18,657)
Net income (loss) from
continuing operations
applicable to common
shares................ $ (152,671) $ (130,640) $ 33,800 $ (249,511)
========== ========== ======== ==========
Earnings (loss) from
continuing operations
per common share:
Basic................ $ (1.65) $ -- $ -- $ (2.26)
========== ========== ======== ==========
Diluted.............. $ (1.65) $ -- $ -- $ (2.26)
========== ========== ======== ==========
Weighted average common
shares outstanding:
Basic................ 92,395 -- -- 110,337
========== ========== ======== ==========
Diluted.............. 102,049 -- -- 117,724
========== ========== ======== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
57
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
Notes to the Pro Forma Condensed Combined Balance Sheet
(A) Estimated merger expenses include $9 million for Cyprus Amax's financial
advisory, legal, accounting, printing and similar costs. An additional $9
million in financial advisory, legal, accounting, printing and similar
costs are expected to be expensed by ASARCO as of the closing.
(B) Reflects acquisition adjustments as shown below, using the purchase method
of accounting, to record assets acquired and liabilities assumed at
estimated fair value.
<TABLE>
<CAPTION>
Amount
-----------
(thousands)
<S> <C>
Adjust Inventories to fair value.............................. $ 62,200
Adjust Deferred tax asset to realizable amount using
anticipated Asarco Cyprus effective tax rate (($13,800) in
current assets and $60,500 in non-current liabilities)....... (74,300)
Adjust Cost investments to fair value......................... 20,000
Adjust Properties to fair value............................... (827,200)
Adjust Other assets to fair value............................. 193,000
Adjust Long-term debt to fair value........................... 53,300
---------
Estimated acquisition adjustment.............................. $(573,000)
=========
</TABLE>
(C) Reflects allocation of the excess of book value over estimated fair value
to Properties and Other assets using the purchase method of accounting,
assuming an exchange ratio of one share of Asarco Cyprus common stock for
each share of ASARCO common stock.
<TABLE>
<CAPTION>
Amount
---------------
(thousands)
<S> <C> <C> <C>
ASARCO common stock (at closing market price on June 30,
1999 of
$18.8125 per share)..................................... $ 748,100
Transaction costs (see Notes (A) and (D))................ 24,000
Estimated acquisition adjustment (see Notes (B) and
(E)).................................................... 698,000
Deferred tax effect of acquisition adjustments ($4,400 in
current assets
and $196,500 in non-current assets)..................... (200,900)
Less: Net asset value of Historical ASARCO.... (1,458,517)
ASARCO merger expenses (see Note (A))..... 9,000 (1,449,517)
---------- ----------
Remaining book value in excess of the purchase price
($136,917 in Properties and $43,400 in Other Assets).... $ (180,317)
==========
</TABLE>
Assuming the ASARCO exchange ratio is 1.0, then each $1 per share increase
(decrease) in the price of ASARCO common stock will decrease (increase) the
amount of book value in excess of the purchase price by approximately $40
million (which would decrease (increase) pro forma net income for the year
ended December 31, 1998 and the six months ended June 30, 1999 by
approximately $1.5 million and $.7 million, respectively).
(D) Estimated transaction costs associated with the mergers include $15 million
in severance costs associated with reduced employment levels.
(E) Adjustment of $125,000 reflects estimated costs associated with the
rationalization of operations.
(F) Reflects issuance of 39.8 million shares of Asarco Cyprus common stock.
Each share of ASARCO common stock will be converted into one share of
Asarco Cyprus common stock and each share of Cyprus
58
<PAGE>
Amax common stock will be converted into 0.765 shares of Asarco Cyprus
common stock. The actual number of shares of Asarco Cyprus common stock to
be issued in exchange for the Cyprus Amax common stock in the business
combination will be determined by reference to the exchange ratios and the
actual number of shares of Cyprus Amax and ASARCO common stock issued and
outstanding immediately prior to the effective time of the mergers. See
"Summary--The Business Combination." These adjustments also reflect the
elimination of ASARCO equity accounts.
Notes to Pro Forma Condensed Combined Statement of Income
(A) These pro forma adjustments do not reflect the significant operating
efficiencies and annual cost savings that Asarco Cyprus expects to
achieve. Expense reductions are expected to be realized in corporate
overhead, administrative costs, material and supply costs and from
operating synergies. See "The Business Combination--Reasons for the
Business Combination and Recommendation of the Boards." A final
determination of the required purchase accounting adjustments will be made
after the closing, and may vary significantly from these pro forma
statements shown.
As a result of the business combination, Asarco Cyprus is expected to incur
approximately $30 million to $50 million of nonrecurring, indirect expenses
within the first twelve months after the business combination that are not
reflected in the pro forma statements. These expenses include severance
costs and transition and other expenses expected to be incurred as a result
of the business combination.
Notes (B) through (F) described below result from acquisition adjustments as
shown in Notes (B) and (C) to the Pro Forma Condensed Combined Balance Sheet:
(B) Reflects amortization of Other assets as a result of the purchase
accounting adjustments.
(C) Reflects decrease in Depreciation expense due to the reduction of the
historical carrying values.
(D) Represents additional interest expense resulting from the fair value
adjustment of ASARCO's Long-term debt.
(E) Reflects increase in Income taxes to provide taxes on pro forma
adjustments at the anticipated effective tax rate. The amount also
includes an increase in Income taxes on Historical ASARCO resulting from
assumption of applicability of AMT.
(F) The Cyprus Amax historical consolidated statement of income for the year
ended December 31, 1998 has been adjusted to reflect the Domestic Coal
Division as a Discontinued Operation due to its sale effective June 30,
1999.
59
<PAGE>
CYPRUS AMAX MINERALS COMPANY
PRO FORMA STATEMENT OF INCOME
For the year ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical Historical Cyprus
Historical Domestic Coal Amax Continuing
Cyprus Amax Division Operations
------------------ ---------------- --------------------
(dollars in thousands, except for per share amounts)
<S> <C> <C> <C>
Revenue................ $ 2,566,421 $ 905,871 $ 1,660,550
Operating costs and
expenses:
Cost of sales........ 1,787,465 700,115 1,087,350
Selling,
administrative and
other............... 119,423 14,777 104,646
Depreciation,
depletion and
amortization........ 360,902 106,355 254,547
Research and
exploration......... 44,416 510 43,906
Write-downs and
special charges..... 118,269 -- 118,269
------------------ ---------------- ------------------
Total operating
costs and
expenses.......... 2,430,475 821,757 1,608,718
Operating income
(loss)................ 135,946 84,114 51,832
Interest income...... 17,114 236 16,878
Interest expense..... (167,865) (10,514) (157,351)
Capitalized
interest............ 4,549 3,051 1,498
Earnings (loss) on
equity investments
and other........... (52,781) (227) (52,554)
------------------ ---------------- ------------------
Earnings (loss) before
taxes on income and
minority interest..... (63,037) 76,660 (139,697)
Income tax
(provision)
benefit............. (13,361) (18,398) 5,037
Minority Interest.... 872 226 646
------------------ ---------------- ------------------
Net income (loss)...... (75,526) 58,488 (134,014)
Preferred Stock
Dividends........... (18,657) -- (18,657)
------------------ ---------------- ------------------
Income (loss)
applicable to common
shares................ $ (94,183) $ 58,488 $ (152,671)
Earnings (loss) per
common share:
Basic................ $ (1.02) $ -- $ (1.65)
Diluted.............. $ (1.02) $ -- $ (1.65)
Weighted average common
shares outstanding:
Basic................ 92,395 -- 92,395
Diluted.............. 102,049 -- 102,049
</TABLE>
60
<PAGE>
PRO FORMA COMBINED CAPITALIZATION
The consolidated capitalization of Cyprus Amax at June 30, 1999, and the pro
forma consolidated capitalization of Asarco Cyprus giving effect to the
business combination and related transactions are set forth below. See
"Unaudited Pro Forma Combined Financial Statements."
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ----------
(In thousands)
<S> <C> <C>
Long-Term Debt:
Cyprus Amax Minerals:
10 1/8% Notes Dues 2002............................... $ 150,000 $ 150,000
9 7/8% Notes Due 2001................................. 95,711 95,711
8 3/8% Notes Due 2023................................. 148,699 148,699
7 3/8% Notes Due 2007................................. 247,600 247,600
6 5/8% Notes Due 2005................................. 249,053 249,053
Cyprus Amax Term Loan Due 2001........................ 100,000 100,000
Capital Lease Obligations............................. 25,872 25,872
El Abra Project Financing............................. 375,789 375,789
Cerro Verde Project Financing......................... 86,000 86,000
Pollution Control/Industrial Revenue Bonds............ 46,588 46,588
ASARCO Business to be Merged (a):
8.5% Debentures Due 2025.............................. 149,031 129,904
7.9% Secured Export Notes Due 2007.................... 148,657 143,127
7.875% Debentures Due 2013............................ 99,758 87,278
7.375% Notes Due 2003................................. 99,757 94,928
7.0% Notes Due 2001................................... 50,000 48,166
Pollution Control Bonds............................... 189,800 183,021
8.25% Bonds Due 2004.................................. 50,000 48,295
Capital Lease Obligations............................. 17,794 17,794
Revolving Credit Agreements........................... 180,000 180,000
Other................................................. 31,733 30,717
---------- ----------
Total Long-Term Debt................................... $2,541,842 $2,488,542
========== ==========
Shareholders' Equity:
Preferred Stock, $1 Par Value, 20,000,000 Shares
Authorized:
Series A Junior Participating Preferred Stock,
1,500,000 Shares Authorized,
None Issued or Outstanding........................... $ -- $ --
$4.00 Series A Convertible Preferred Stock, $1 Par
Value, $50 Liquidation Preference,
4,666,667 Shares Authorized, 4,664,302 Issued and
Outstanding (Actual),
4,664,302 Issued and Outstanding (Pro Forma)......... 4,664 4,664
Preferred Stock, No Par Value, 10,000,000 Shares
Authorized,
None Issued or Outstanding........................... -- --
Common Stock, Without Par Value, 150,000,000 Shares
Authorized,
90,510,484 Shares Issued (Actual), 109,008,004 Shares
Issued (Pro Forma)................................... 1,063 749,163
Paid-In Surplus....................................... 2,912,605 2,912,605
Accumulated Deficit................................... (767,776) (767,776)
---------- ----------
2,150,556 2,898,656
Treasury Stock at Cost................................ (86,304) (86,304)
Other Comprehensive Income............................ (5,348) (5,348)
---------- ----------
Total Shareholders' Equity............................. $2,058,904 $2,807,004
========== ==========
</TABLE>
- --------
(a) Pro forma amounts of indebtedness reflect the principal amount of ASARCO
indebtedness assumed, adjusted to decrease such principal amount to fair
value.
61
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The executive officers of ASARCO and Cyprus Amax and the members of the
ASARCO and Cyprus Amax boards of directors have interests in the business
combination that are different from, or in addition to, the interests of
stockholders generally. Several executive officers of ASARCO and Cyprus Amax,
including some officers who are also directors, have employment or severance
agreements and are or may become entitled to specific benefits under employee
benefit plans as a result of the business combination. Each of the employee-
directors of ASARCO and Cyprus Amax may be entitled to receive compensation if
the business combination is completed. The ASARCO and Cyprus Amax boards of
directors were aware of and discussed these potentially conflicting interests
when they approved the business combination.
ASARCO Employment Agreements
ASARCO has entered into change of control employment agreements with nine of
its executive officers, including Messrs. McAllister, Morano, Dowd, Kinsolving
and Paul, which provide for severance payments following termination of their
employment with ASARCO. The employment agreements are for a term of one year,
renewable automatically on a year-to-year basis unless terminated by ASARCO at
least nine months prior to the anniversary date. The employment agreements
continue in effect for not less than three years following occurrence of a
change of control of ASARCO. The ASARCO merger will constitute a change of
control for purposes of the ASARCO employment agreements.
If, as a result of a change of control, the executive's employment is
involuntarily terminated within three years of the change of control, the
executive is entitled to receive from ASARCO as severance pay a lump-sum
payment equal to the total of three times such executive's:
. annual base salary,
. average incentive compensation payments received for the highest of
either the three-year or five-year period immediately preceding the date
of termination or the change of control, and
. the annual cost to ASARCO of certain benefits such executive is entitled
to receive immediately preceding the date of termination.
Involuntary termination following a change of control includes instances
where:
. the executive's responsibilities or status are materially diminished
without his consent,
. the executive's annual base salary is reduced or not increased by a
minimum percentage following a change of control, or the executive is
not paid an annual bonus in accordance with bonus policies in effect
prior to the change of control,
. ASARCO (or a successor) fails to continue any incentive, bonus,
compensation, pension or other employee benefit plan prior to or
following the change of control,
. ASARCO's principal executive offices are relocated outside the Borough
of Manhattan,
. the executive's vacation days are reduced,
. ASARCO (or a successor) fails to pay the executive's compensation or
deferred compensation, or
. the successor corporation does not assume and agree to perform the
employment agreement.
The executive would also be entitled to continuation of health and other
insurance benefits for a period of three years following termination. Upon such
a termination after a change of control, each executive is also entitled to
payment from ASARCO of the value of the executive's stock options. The amount
of the severance payment from ASARCO will also include any amount necessary to
make whole the executive with respect to any excise taxes imposed by section
4999 of the Internal Revenue Code in respect of the payments described above.
The amounts Messrs. McAllister, Morano, Dowd, Kinsolving and Paul would
receive (exclusive of amounts payable under ASARCO's non-qualified supplemental
retirement benefit plans which are separately
62
<PAGE>
described below) if their employment were involuntarily terminated immediately
following approval of the ASARCO merger proposal by ASARCO stockholders
including the estimated payment for excise taxes imposed by section 4999 of the
Internal Revenue Code are $4.99 million; $2.54 million; $1.32 million; $2.08
million; and $1.28 million, respectively. The aggregate amount the four other
executive officers with change of control employment agreements would receive
if their employment were involuntarily terminated immediately following
approval of the ASARCO merger proposal by ASARCO stockholders is $4.95 million.
As provided for in the merger agreement, Mr. McAllister will serve as President
and Co-Chief Executive Officer of Asarco Cyprus and Mr. Morano will serve as
Executive Vice President and Chief Financial Officer of Asarco Cyprus following
the mergers.
ASARCO Stock Based Plans
When ASARCO stockholders approve the ASARCO merger proposal, all outstanding
options awarded prior to the announcement of the proposed ASARCO merger will
become fully vested and exercisable. Any option that is not exercised before
the date the ASARCO merger becomes effective will be converted into an
immediately exercisable option to purchase the number of shares of Asarco
Cyprus common stock equal to the number of shares of ASARCO common stock which
could have been obtained upon the exercise of the option immediately prior to
the time the ASARCO merger becomes effective.
The estimated number of ASARCO shares underlying unvested options that will
become exercisable by Messrs. McAllister, Morano and Dowd as a result of the
approval of the ASARCO merger proposal by ASARCO stockholders is 22,000; 3,000;
and 11,000, respectively. Messrs. Kinsolving and Paul do not hold any unvested
options. The estimated aggregate number of ASARCO shares underlying unvested
options that will become exercisable by all other executive officers as a
result of the approval of the ASARCO merger proposal by ASARCO stockholders is
7,800.
In addition, upon stockholder approval of the ASARCO merger proposal, all
outstanding awards of restricted stock will become fully vested. The number of
ASARCO shares awarded as restricted stock to Messrs. McAllister, Morano, Dowd,
Kinsolving and Paul that will vest as a result of stockholder approval of the
ASARCO merger proposal is 31,820; 17,520; 6,440; 8,340; and 5,460,
respectively, and 19,270 for all other executive officers.
Other ASARCO Plans
ASARCO Supplemental Retirement Benefit Plan
The supplemental retirement benefit plan is a non-qualified supplemental
retirement benefit plan under which any benefits not payable under ASARCO's tax
qualified pension plans because of limitations imposed by the Internal Revenue
Code, or due to the deferrals of salaries made under ASARCO's deferred income
benefit system and the compensation deferral plan are paid from ASARCO's
general corporate funds. The supplemental retirement benefit plan provides that
the participants, including the executives named above, will receive a lump sum
payment of their accrued benefits under the plan, discounted for present value,
when a change of control occurs. The business combination will constitute a
change of control for the purposes of the supplemental retirement benefit plan.
Unless participants waive their rights to immediate payment under the plan,
they will receive their benefits in a lump sum payment immediately following
stockholder approval of the ASARCO merger.
ASARCO Supplemental Pension Plan for Designated Officers Hired in Mid-Career
The supplemental pension plan for designated officers hired in mid-career
provides supplemental retirement benefits for officers holding the rank of vice
president or higher who are determined by the compensation committee of ASARCO
to have
. prior business or professional experience valuable to ASARCO and
relevant to the positions for which they were employed by ASARCO, and
63
<PAGE>
. who at retirement or termination of employment with the consent of
ASARCO will have been an employee of ASARCO as a vice president or
higher for 10 years or more.
The supplemental pension plan for designated officers hired in mid-career
provides for annual benefits equal to 55% of the executive's final average
compensation which is the average of the sixty highest monthly amounts of the
executive's compensation in the 120 months preceding his retirement or
termination. This amount will be reduced by any benefits payable by ASARCO or
any other employer under any other pension plan not attributable to the
employee's contributions, and by all Social Security benefits payable at the
time of retirement or early termination.
The supplemental pension plan for designated officers hired in mid-career
provides that the executives will receive a lump sum payment of their accrued
benefits under the plan, discounted for present value and early commencement
of benefits, when a change of control occurs. The business combination will
constitute a change of control for purposes of the supplemental pension plan.
Unless participating executives waive their right to immediate payment under
the plan, they will receive their benefits in a lump sum payment immediately
following stockholder approval of the ASARCO merger.
Deferred Compensation Plans
The Deferred Fee Plan for Directors permits non-employee directors, and the
Compensation Deferral Plan permits eligible employees of ASARCO, to defer
payment of portions of their compensation until retirement or termination from
ASARCO. ASARCO also maintains a Directors' Deferred Payment Plan for non-
employee directors which provides for deferred benefits payable following
termination of service. Each of the plans provide that plan participants will
receive a lump sum payment of the value of their account upon a change of
control of ASARCO. The approval of the ASARCO merger proposal by stockholders
of ASARCO will constitute such a change of control. Unless participants waive
their rights to immediate payment under the plans, they will receive their
account balances under the plans in a lump sum payment immediately following
stockholder approval of the ASARCO merger.
Cyprus Amax Employment Arrangements
Change of control severance agreements are in effect between Cyprus Amax and
its eight executive officers, including Messrs. Ward, Malys, Clevenger, Philip
C. Wolf and John Taraba.
Under the change of control severance agreements, if, during the three-year
period following a change of control, the employment of a covered executive is
terminated by Cyprus Amax other than for cause or due to death or disability,
or employment is terminated by the covered executive for good reason
(including a termination for any reason during the 30-day period following the
first anniversary of a change of control, other than in the case of Mr. Taraba
and two of the three other executive officers), the covered executive will be
entitled to receive a cash severance payment consisting of the following
amounts:
. a pro rata annual bonus through the date of termination, based on the
higher of (1) the target annual bonus for the year prior to the change
of control and (2) the annual bonus earned in the most recent fiscal
year following the change of control (the "highest annual bonus") and,
in the case of Mr. Taraba and two of the three other executive officers,
based on the highest target annual bonus for the year prior to the
change of control (the "target annual bonus"), plus
. three times (two times in the case of Mr. Taraba and two of the three
other executive officers) the sum of the covered executive's base salary
and the highest annual bonus (target annual bonus in the case of Mr.
Taraba and two of the three other executive officers).
The change of control severance agreements also provide for the payment of
any unpaid amounts due the executive under other benefit plans of Cyprus Amax
and any employment agreements between Cyprus Amax and the executive, but not
for duplicate benefits. If any amounts payable to the executives under the
change of
64
<PAGE>
control severance agreements or otherwise would be subject to the excise tax
under section 4999 of the U.S. tax code, an additional payment will be made so
that after the payment of all income and excise taxes, the covered executive
will be in the same after-tax position as if no excise tax under section 4999
had been imposed. However, if the executive would not receive a net after-tax
benefit of at least $50,000 after making these additional payments, no
additional payments will be made on account of the excise tax, and, instead,
the payments otherwise due to the covered executive will be reduced as
necessary to prevent the application of the excise tax.
The transactions contemplated by the merger agreement will not constitute a
change of control within the meaning of the change of control severance
agreements. However, in connection with the business combination, the Cyprus
Amax Board took action to ensure that in the event a covered executive is not
employed by Asarco Cyprus, he will be entitled to receive the benefits as if
his employment was terminated other than for "cause" or was terminated by the
executive for "good reason" under the change of control severance agreements.
Assuming the Cyprus Amax merger occurs on September 30, 1999, if the employment
of Messrs. Ward, Malys, Clevenger, Wolf and Taraba were to be terminated
immediately following the effective time of the Cyprus Amax merger, the
estimated amounts of the cash severance payments (as described above) payable
to each of these executive officers would be $8.93 million; $2.06 million;
$2.09 million; $1.55 million; and $820,000, respectively. Assuming the Cyprus
Amax merger occurs on September 30, 1999, if the employment of the three other
executive officers were to be terminated immediately following the effective
time of the Cyprus Amax merger, the estimated aggregate amount of the cash
severance payments (as described above) payable to these executive officers as
a group would be $2.60 million. As provided for in the merger agreement, Mr.
Ward will serve as the Chairman of the Board and Co-Chief Executive Officer of
Asarco Cyprus and Mr. Clevenger will serve as Executive Vice President and
Chief Operating Officer of Asarco Cyprus following the mergers. See "The Merger
Agreement--Asarco Cyprus Following the Mergers."
Employment agreements are also in effect between Cyprus Amax and each of
Messrs. Ward, Malys, Clevenger, Wolf and Taraba. Pursuant to Mr. Ward's
employment agreement, if his employment is terminated by Cyprus Amax other than
due to breach of covenant, or by Mr. Ward for good reason, he will be entitled
to receive a payment equal to his salary and bonus through December 31, 2000,
plus the actuarial equivalent of the retirement benefits under the Cyprus Amax
retirement plans calculated as if he had remained employed through December 31,
2000. Pursuant to the employment agreements with each of Messrs. Malys,
Clevenger, Wolf and Taraba, if the employment of the executive is terminated by
Cyprus Amax other than for cause, or by the executive for good reason, the
executive will be entitled to receive a payment equal to the accrued benefit
under the Cyprus Amax retirement plans calculated as if the executive had
remained employed until the date he would have first been eligible to receive
an immediately payable retirement benefit (but for no less than an 18-month
period). The factors and assumptions used to calculate these amounts vary over
time; however, based on reasonable factors and assumptions and assuming the
Cyprus Amax merger occurs on September 30, 1999, if the employment of Messrs.
Ward, Malys, Clevenger, Wolf and Taraba were to be terminated immediately
following the effective time of the Cyprus Amax merger, the estimated amounts
of the additional retirement benefits payable pursuant to the terms of the
employment agreements to each of the executive officers is $3.92 million,
$424,000, $1.14 million, $633,000, and $585,000, respectively. In addition, the
employment agreements provide that the executives will be entitled to receive
retiree welfare benefit coverage and outplacement services. The payments under
the employment agreements may not duplicate any amounts payable under the
change of control severance agreements. As provided for in the merger
agreement, Mr. Ward will serve as the Chairman of the Board and Co-Chief
Executive Officer of Asarco Cyprus and Mr. Clevenger will serve as Executive
Vice President and Chief Operating Officer of Asarco Cyprus following the
mergers. See "The Merger Agreement--Asarco Cyprus Following the Mergers."
Other Cyprus Amax Plans
Cyprus Amax Supplemental Retirement Plans
Under the Cyprus Amax supplemental retirement plan, on a change of control of
Cyprus Amax, participants will be entitled to receive immediately, unless
otherwise elected by the participant, the actuarial
65
<PAGE>
equivalent of a participant's vested accrued benefit under the plan. Under the
Cyprus Amax full retirement benefit plan, on a change of control of Cyprus
Amax, benefits under the plan will fully vest and participants will be
entitled to receive, unless otherwise elected by the participant, the
actuarial equivalent of the participant's benefit under the plan computed as
of the date of the change of control. The transactions provided for by the
merger agreement will constitute a change of control for purposes of the
supplemental retirement plan and the full retirement plan.
Cyprus Amax Stock-Based Rights
Any option or stock appreciation right to acquire shares of Cyprus Amax
stock that is not exercised before the completion of the Cyprus Amax merger
will be converted into an option to purchase or right with respect to the
number of shares of Asarco Cyprus common stock equal to the number of shares
of Cyprus Amax common stock which would have been obtained upon the exercise
of the option immediately prior to the time the Cyprus Amax merger becomes
effective.
Under Cyprus Amax's stock-based plans, unvested stock options will become
fully vested and exercisable and all restrictions (including all performance
goals) on restricted stock awards will lapse or be considered to be earned in
full upon a change of control of Cyprus Amax. In addition, pursuant to one of
the Cyprus Amax stock-based plans, upon a change of control of Cyprus Amax,
each participant will be entitled to the immediate payment of the deferred
cash incentive award, to be used as a tax reimbursement, that was granted in
connection with restricted stock awarded under the plan. The transactions
provided for by the merger agreement will constitute a change of control under
the Cyprus Amax stock-based plans. Assuming that stockholder approval of the
Cyprus Amax merger occurs on September 30, 1999, in connection with such
change of control:
. the estimated number of shares of Cyprus Amax common stock underlying
awards of stock options held by Messrs. Ward, Malys, Clevenger, Wolf and
Taraba and the three other executive officers as a group that will vest
as a result of the Cyprus Amax merger is 1,241,667; 185,000; 187,500;
124,000; 73,000; and 191,000, respectively;
. the estimated number of shares of Cyprus Amax restricted stock held by
Messrs. Ward, Malys, Clevenger, Wolf and Taraba and the three other
executive officers as a group that will become free of restrictions as a
result of the Cyprus Amax merger is 350,000; 114,850; 104,460; 70,798;
49,900; and 109,223, respectively; and
. the estimated aggregate number of shares of Cyprus Amax common stock
underlying stock options held by nonemployee directors that will vest as
a result of the Cyprus Amax merger is 27,000.
Indemnification and Insurance
The merger agreement requires Asarco Cyprus to provide officers and
directors of ASARCO and Cyprus Amax with liability insurance arrangements that
are at least comparable to those in effect at the time the merger agreement
was signed for a period of three years following the business combination.
Asarco Cyprus will not be required to expend in any one year more than 150% of
the annual premiums currently paid by ASARCO or Cyprus Amax, as the case may
be. If the annual premiums of such insurance coverage exceed the 150% limit,
Asarco Cyprus only will be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding the limit. Asarco Cyprus is
entitled to meet these obligations by covering the relevant persons under its
own insurance policies. The merger agreement also requires Asarco Cyprus to
indemnify officers and directors of ASARCO and Cyprus Amax to the fullest
extent permitted by applicable law, and to the same extent that they were
indemnified while working on behalf of Cyprus Amax or ASARCO, for a period of
six years following the business combination. See "The Merger Agreement--
Indemnification; Directors' and Officers' Insurance."
66
<PAGE>
THE MERGER AGREEMENT
We believe this summary describes the material terms of the merger agreement.
However, we recommend that you read carefully the complete agreement for the
precise legal terms of the merger agreement and other information that may be
important to you. The merger agreement is included in this joint proxy
statement and prospectus as Appendix A.
Form of Mergers
If all the conditions to the mergers are satisfied or waived in accordance
with the merger agreement, one wholly owned subsidiary of Asarco Cyprus will
merge with and into ASARCO and a second wholly owned subsidiary of Asarco
Cyprus will merge with and into Cyprus Amax. As a result of the mergers, each
of Cyprus Amax and ASARCO will become a wholly owned subsidiary of Asarco
Cyprus. Each of the mergers will become effective when the applicable
certificate of merger is filed with the appropriate Secretary of State. It is
currently anticipated that the mergers will become effective during the fourth
quarter of 1999.
Consideration to be Received in the Mergers
ASARCO Merger. At the time the mergers become effective, each share of ASARCO
common stock will be converted into one share of Asarco Cyprus common stock.
Cyprus Amax Merger. At the time the mergers become effective, each share of
Cyprus Amax common stock will be converted into 0.765 shares of Asarco Cyprus
common stock. Each share of Cyprus Amax Series A convertible preferred stock,
other than shares held by stockholders seeking appraisal rights, will be
converted into one share of Asarco Cyprus Series A convertible preferred stock
with terms nearly identical to the terms of the Cyprus Amax Series A
convertible preferred stock.
Exchange Agent; Procedures for Exchange of Certificates
Exchange Agent. We have jointly appointed The Bank of New York to be the
exchange agent under the merger agreement. The Bank of New York will exchange
certificates representing shares of ASARCO common stock and Cyprus Amax common
stock for certificates representing shares of Asarco Cyprus common stock and,
if applicable, certificates representing shares of Cyprus Amax Series A
convertible preferred stock for certificates representing shares of Asarco
Cyprus Series A convertible preferred stock. At the time the mergers become
effective, Asarco Cyprus will deposit with the exchange agent certificates
representing the number of whole shares of Asarco Cyprus common stock issuable
pursuant to the merger agreement in exchange for outstanding shares of ASARCO
common stock, Cyprus Amax common stock, as the case may be, and, if applicable,
certificates representing the number of shares of Asarco Cyprus Series A
convertible preferred stock issuable pursuant to the merger agreement in
exchange for outstanding shares of Cyprus Amax Series A convertible preferred
stock. Soon after the completion of the mergers, we will send a letter to each
person who was an ASARCO stockholder or Cyprus Amax stockholder at the time the
mergers become effective. The letter will contain instructions on how to
surrender ASARCO or Cyprus Amax stock certificates to the exchange agent and
receive shares of Asarco Cyprus. See "--Consideration to be Received in the
Mergers."
Dividends. Holders of ASARCO common stock or Cyprus Amax common stock or, if
applicable, Cyprus Amax Series A convertible preferred stock will not be
entitled to receive any dividends or other distributions payable by Asarco
Cyprus until they exchange their ASARCO or Cyprus Amax stock certificates for
certificates representing shares of Asarco Cyprus common stock or, if
applicable, Asarco Cyprus Series A convertible preferred stock. Once they
deliver their ASARCO or Cyprus Amax stock certificates to the exchange agent,
those stockholders will receive, subject to applicable laws, accumulated
dividends and distributions, without interest.
Fractional Shares. No fractional shares of Asarco Cyprus common stock will be
issued upon the surrender of certificates representing shares of ASARCO common
stock or Cyprus Amax common stock. No
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dividend or other distribution of Asarco Cyprus will relate to any such
fractional shares and no such fractional shares will entitle the owner thereof
to any voting or other rights of a stockholder of Asarco Cyprus.
Holders of Cyprus Amax common stock otherwise entitled to fractional shares
of Asarco Cyprus common stock will receive a cash payment instead of such
fractional shares. Following the Effective Time, the exchange agent will
determine the excess of the number of whole shares of Asarco Cyprus common
stock delivered to the exchange agent by Asarco Cyprus for distribution to
Cyprus Amax Stockholders over the aggregate number of whole shares of Asarco
Cyprus common stock to be distributed to Cyprus Amax stockholders. The exchange
agent will then, on behalf of the former stockholders of Cyprus Amax, sell the
excess shares at then prevailing prices on the New York Stock Exchange, all in
the manner provided in the merger agreement.
As soon as practicable after the determination of the amount of cash to be
paid to holders of Cyprus Amax common stock with respect to any fractional
share interests, the exchange agent will make available such amounts to such
holders of Cyprus Amax common stock subject to and in accordance with the terms
of the merger agreement.
Asarco Cyprus following the Mergers
Board of Directors. The Asarco Cyprus Board of Directors will have 16
members, divided into two classes of five directors each, and one class of six
directors, with each class serving a staggered three-year term (other than two
of the initial three classes which will serve one and two years, respectively).
These initial members include eight current directors of ASARCO and seven
current directors of Cyprus Amax in addition to Mr. Clevenger. Messrs.
McAllister, Ward, Clevenger and Morano will be on the initial Asarco Cyprus
Board of Directors.
Succession. The merger agreement provides that, from the time the mergers
become effective, Mr. Ward will be Chairman of the Board and Co-Chief Executive
Officer of Asarco Cyprus, and Mr. McAllister will serve as President and Co-
Chief Executive Officer of Asarco Cyprus. At the first annual meeting of Asarco
Cyprus expected to be held in April of 2000, Mr. McAllister will become the
sole Chief Executive Officer of Asarco Cyprus and will continue to serve as
President of Asarco Cyprus, and Mr. Ward will continue to serve as Chairman of
the Board of Asarco Cyprus. Mr. Ward will continue, through the end of 2000, to
participate actively in managing the consolidation of the operations of ASARCO
and Cyprus Amax, realizing the synergies expected to be derived from the
mergers and exploring growth opportunities for Asarco Cyprus. Mr. McAllister
will become Chairman, President and Chief Executive Officer of Asarco Cyprus
following Mr. Ward's retirement on December 31, 2000. Mr. Ward will continue to
serve as a non-employee director following his retirement. In addition, Mr.
Clevenger will be Executive Vice President and Chief Operating Officer of
Asarco Cyprus, and Mr. Morano will be Executive Vice President and Chief
Financial Officer of Asarco Cyprus, following the completion of the business
combination. Both Messrs. Clevenger and Morano will also be directors of Asarco
Cyprus. The remaining key executive officers of Asarco Cyprus will be jointly
designated by Messrs. McAllister and Ward, with the advice and consent of the
Asarco Cyprus Board of Directors. Any changes to the above arrangements between
the effective time of the mergers and the annual meeting of Asarco Cyprus
stockholders in 2002 will require the affirmative vote of 75% of the Asarco
Cyprus Board of Directors.
Headquarters. After the mergers, Asarco Cyprus will have its corporate
headquarters at 180 Maiden Lane, New York, New York 10038, the current
headquarters of ASARCO. The operations headquarters for Asarco Cyprus will be
in Tempe, Arizona. We currently expect to close a number of ASARCO and Cyprus
Amax offices as a result of the business combination.
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Representations and Warranties in the Merger Agreement
In the merger agreement we make representations and warranties to each other
about our companies with respect to, among other things:
. their organization, existence, good standing, corporate power,
subsidiaries and similar corporate matters;
. their capitalization;
. their authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters;
. the absence of defaults or violations under their certificates of
incorporation and by-laws and certain other agreements and laws as a
result of the contemplated transactions;
. filings with the Securities and Exchange Commission and the accuracy and
completeness of the information contained in such filings;
. environmental matters;
. employee benefit matters;
. this joint proxy statement and prospectus and the accuracy of the
information contained in this document;
. the inapplicability of their shareholder rights plans to the mergers;
. tax matters;
. the receipt of fairness opinions from our financial advisors;
. required stockholder approvals with respect to the contemplated
transactions;
. the absence of certain material changes in our businesses since December
31, 1998;
. the absence of undisclosed material liabilities; and
. labor relations.
All representations and warranties of Cyprus Amax and ASARCO expire at the
time the mergers become effective.
Covenants in the Merger Agreement
The merger agreement provides that, until the mergers have been completed,
neither of us will take certain actions without the consent of the other party
or as otherwise permitted by the merger agreement. More specifically, we have
agreed to the following with respect to ourselves and, where applicable, our
subsidiaries, except as otherwise permitted by the merger agreement:
. Conduct of Operations. We will conduct our business operations according
to their ordinary and usual course of business in substantially the same
manner as conducted prior to the merger agreement.
. Preserve Organizations. We will use our reasonable best efforts to
preserve intact our business organizations and goodwill, keep available
the services of our current officers and other key employees, and
preserve our business relationships.
. Parties to Confer. We will confer with each other and report on material
operational matters and the general status of ongoing operations.
. Notice of Certain Events. We will notify each other of certain changes
or events which would have a material adverse effect on ASARCO or Cyprus
Amax, as the case may be.
. Dividends and Reclassifications. We will not declare or pay any
dividends on or make any distribution with respect to our outstanding
shares of stock other than regular quarterly dividends on, in the case
of Cyprus Amax, its common stock and preferred stock, and, in the case
of ASARCO, its
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common stock and the common stock of its majority owned subsidiary
Southern Peru Copper Corporation, and we will not split, combine or
reclassify any shares of our stock.
. Amendments to Plans. We will not enter into or amend our employee
benefit plans or employment agreements, except in the ordinary course of
business consistent with past practice, as otherwise provided in the
merger agreement or as required by law.
. Business Combinations; Assets. We will not enter into any business
combinations, acquisitions or dispositions of material amounts of assets
or securities, or release any material contract rights, in each case not
in the ordinary course of business.
. Governing Documents. We will not propose or adopt any amendments to our
corporate charters or by-laws.
. Issuance of Capital Stock. We will not issue or authorize the issuance
of any shares of our capital stock of any class, except that each of us
is permitted to issue shares of our common stock upon the exercise of
stock options or other rights outstanding on the date of the merger
agreement and in accordance with the terms of such options or other
rights in effect on the date of the merger agreement.
. Repurchase of Stock. We will not purchase or redeem any shares of our
stock or any rights, warrants or options to acquire any such shares,
except in the ordinary course of business in connection with employee
incentive and benefit plans or arrangements in existence on the date of
the merger agreement.
. Indebtedness. We will not incur, assume or prepay any indebtedness or
other material liabilities, other than indebtedness with a wholly owned
subsidiary or between wholly owned subsidiaries.
. Properties and Assets. We will not sell, lease, license, mortgage or
otherwise encumber or subject to any lien or otherwise dispose of any of
our properties or assets (including securitizations), other than in the
ordinary course of business consistent with past practice.
. Tax Treatment. We will not take any actions that would reasonably be
expected to cause the mergers not to constitute transactions described
in Section 351 or Section 368(a) of the Internal Revenue Code.
. Tax Election. We will not make any material tax election or settle or
compromise any material tax liability, other than in the ordinary course
of business consistent with past practice. Cyprus Amax may make an
election under Section 338(h)(10) of the tax code relating to the
completed sale of Cyprus Amax Coal Company.
. Agree to Take Actions. We agree not to take any of the foregoing actions
or take any action which would:
. make any of our representations or warranties contained in the
merger agreement untrue or incorrect, or
. result in any of the conditions to the mergers set forth in the
merger agreement not being satisfied.
Investigation. We have agreed that, subject to applicable laws or regulations,
prior to the time the mergers become effective we will afford one another's
authorized representatives full and complete access to our properties, books,
contracts, commitments and records and any document filed or received by us
pursuant to applicable securities laws. Also, we will each use our reasonable
best efforts to cause our representatives to furnish promptly to one another
any additional information about our respective businesses and properties as
the other or its duly authorized representatives may reasonably request.
However, neither of us will be required to disclose information to the other
that would cause significant competitive harm to the disclosing party or its
affiliates if the mergers are not completed. All confidential information
obtained by Cyprus Amax or ASARCO will be kept confidential pursuant to the
terms of our existing confidentiality agreement.
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Stockholder Approvals and Other Cooperation. We have agreed that we will
together:
. prepare and file with the Securities and Exchange Commission, as soon as
is reasonably practicable, this document and the related registration
statement;
. use our reasonable best efforts to have the registration statement
declared effective by the Securities and Exchange Commission;
. as soon as is reasonably practicable, take all actions required under
state blue sky or securities laws in connection with the issuance of
shares of Asarco Cyprus common stock in the mergers;
. promptly prepare and file stock exchange listing applications covering
the shares of Asarco Cyprus common stock issuable under the merger
agreement and use our reasonable best efforts to obtain, prior to the
time the mergers become effective, approval for the listing of Asarco
Cyprus common stock, subject only to official notice of issuance;
. cooperate with one another in order to lift any injunctions or remove
any other impediment to the consummation of the contemplated
transactions; and
. cooperate with one another in obtaining opinions of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to ASARCO, and Wachtell, Lipton,
Rosen & Katz, counsel to Cyprus Amax, concerning certain tax matters.
Each of us has also agreed:
. to cause this joint proxy statement to be mailed to our respective
stockholders as promptly as practicable after the related registration
statement is declared effective under the Securities Act of 1933;
. as soon as practicable following the date of the merger agreement, to
duly call and hold a meeting of our respective stockholders to obtain
approval of the mergers and the other contemplated transactions;
. subject to our ability to change our recommendation as described under
"--No Solicitation" below, through our boards of directors, to recommend
to our respective stockholders that they approve the mergers and the
other contemplated transactions;
. to use our best efforts to hold our stockholders meetings on the same
date and as soon as practicable after the date of the merger agreement;
and
. to cause Asarco Cyprus to adopt the merger agreement and to take all
additional necessary actions to effect the contemplated transactions.
In addition, the merger agreement contains general covenants requiring each
of us to take any further action necessary or desirable to carry out the
purposes of the merger agreement and to use reasonable efforts to take all
actions necessary, proper or advisable to consummate the contemplated
transactions. These general requirements are limited so that neither of us will
be required to undertake divestitures which would have material adverse effects
on our companies.
No Solicitation of Alternative Takeover Proposals
We have agreed that neither we nor any of our respective directors, officers,
employees or any representative retained by us will, directly or indirectly
through another person:
. solicit, initiate or encourage (whether by furnishing information or
otherwise), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes or reasonably
could be expected to lead to any Takeover Proposal (as defined below),
or
. participate in any discussions or negotiations regarding any Takeover
Proposal.
A "Takeover Proposal" means, other than the transactions contemplated by the
merger agreement,
. any inquiry, proposal or offer, or any improvement, restatement,
amendment, renewal or reiteration of any such inquiry, proposal or
offer, from any person relating to any direct or indirect acquisition of
a business or equity securities of a party or any of its subsidiaries,
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. any tender offer or exchange offer that if consummated would result in
any person beneficially owning any class of equity securities of a party
or any of its subsidiaries, or
. any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving a party or any
of its subsidiaries.
Except as provided in the next two paragraphs, neither of our boards of
directors nor any committees of such boards will do any of the following:
. withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to the other party, the approval or recommendation by the
board of directors or any committee, of the mergers or the merger
agreement,
. approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal, or
. cause either party to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to
any Takeover Proposal.
However, either of our boards of directors may withdraw its favorable
recommendation of the merger agreement and recommend that stockholders vote
against the mergers and the merger agreement if it determines in good faith,
based on advice of outside counsel, that its failure to do so would be a breach
of its fiduciary duties under applicable law. In the event that either of our
boards of directors changes their recommendation to their stockholders, our
boards of directors remain obligated to submit the merger agreement to our
respective stockholders in order to obtain stockholder approval of the merger
agreement.
The merger agreement does not prohibit us
. from taking and disclosing to our respective shareholders a position
with respect to a tender offer required by law, or
. from making any disclosure to our respective shareholders if, in the
good faith judgment of the board of directors, after consultation with
outside counsel, failure to disclose would be inconsistent with its
obligations under applicable law.
Each of us has agreed to notify promptly the other party orally and in
writing of any request for information or of any Takeover Proposal, the
material terms and conditions of such request or proposal and the identity of
the person making such request or proposal, and will keep the other party
reasonably informed of the status and details of any such request or proposal.
Stock Options and Other Stock-Based Awards
At the time the mergers become effective, each outstanding option and related
stock appreciation right (SAR), if any, will be converted into an option
(together with an SAR, if applicable) to acquire:
. in the case of an option to purchase ASARCO common stock, the number of
shares of Asarco Cyprus common stock equal to the number of shares of
ASARCO common stock which could have been obtained upon the exercise of
the option immediately prior to the time the mergers become effective,
and
. in the case of an option to purchase Cyprus Amax common stock, the
number of shares of Asarco Cyprus common stock equal to the number of
shares of Cyprus Amax common stock which could have been obtained upon
the exercise of the option immediately prior to the time the mergers
become effective multiplied by 0.765.
In the case of an option to purchase ASARCO common stock, the exercise price
per share of Asarco Cyprus common stock will not be adjusted at the time the
mergers become effective. In the case of an option to purchase Cyprus Amax
common stock, the exercise price per share of Asarco Cyprus common stock will
be adjusted to equal the exercise price for such option as in effect
immediately prior to the time the mergers
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become effective divided by 0.765. Asarco Cyprus will assume the obligations of
Cyprus Amax and ASARCO with respect to such options. Asarco Cyprus will assume
the obligations of ASARCO and Cyprus Amax under their respective option plans
and, except as described above, the terms of such options (and SARs) shall
continue to apply in accordance with the terms of the plans and agreements
under which they were issued, including any provisions for acceleration.
Following the completion of the business combination, Asarco Cyprus will
reserve for issuance and delivery a sufficient number of shares of Asarco
Cyprus common stock upon the exercise of any ASARCO stock options or Cyprus
Amax stock options.
Simultaneously with each of the mergers, each outstanding award (including
restricted stock, performance units, share units and performance shares) under
any employee incentive or benefit plan or arrangement and non-employee director
plan presently maintained by either of us will be converted into a similar
instrument of Asarco Cyprus, with appropriate adjustments to preserve the
inherent value of the awards with no detrimental effects on the holders. The
other terms of each award will continue to apply, including any provisions
providing for acceleration. With respect to any restricted stock awards as to
which the restrictions will have lapsed on or prior to the time the mergers
become effective, shares of such previously restricted stock will be converted
in accordance with the conversion provisions applicable to other shares of
common stock.
Benefits Matters
It is the intention of the parties that for a period of one year following
the completion of the business combination, Asarco Cyprus will maintain the
employee benefit plans of ASARCO and Cyprus Amax generally in accordance with
their terms in effect at the completion of the business combination. In
addition, following the completion of the business combination, Asarco Cyprus
will guarantee the performance of certain existing employment agreements and
benefit plans of each of ASARCO and Cyprus Amax.
Asarco Cyprus has also agreed that it will
. waive any limitations regarding pre-existing conditions and eligibility
waiting periods under any welfare or employee benefit plan maintained by
ASARCO or Cyprus Amax following the completion of the business
combination;
. provide employees of ASARCO and Cyprus Amax with credit for any co-
payments and deductibles paid in the calendar year prior to the
completion of the business combination; and
. generally, treat all service by employees of ASARCO and Cyprus Amax
prior to the completion of the business combination as service with
Asarco Cyprus under all compensation and benefit plans and policies of
ASARCO and Cyprus Amax.
Indemnification; Directors' and Officers' Insurance
Asarco Cyprus has agreed that all exculpation and indemnification provisions
now existing in favor of the current or former directors or officers of each of
Cyprus Amax or ASARCO as provided in their respective charter or by-laws or in
any agreement will survive the business combination. Asarco Cyprus has agreed
that, for six years from the time the business combination becomes effective,
it will indemnify such indemnified parties to the same extent as they were
entitled while working on behalf of either Cyprus Amax or ASARCO.
Asarco Cyprus has also agreed that, for three years from the time the
business combination becomes effective, it will maintain in effect ASARCO's and
Cyprus Amax's current directors' and officers' liability insurance policies for
those persons who are currently covered by the policies. However, Asarco Cyprus
will not be required to expend in any one year more than 150% of the annual
premiums currently paid by ASARCO or Cyprus Amax, as the case may be. If the
annual premiums of such insurance coverage exceed the 150% limit, Asarco Cyprus
only will be obligated to obtain a policy with the greatest coverage available
for a cost not exceeding the limit. Asarco Cyprus is entitled to meet its
obligations under this paragraph by covering the relevant persons under its own
insurance policies.
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Conditions Precedent to the Mergers
The merger agreement contains certain conditions to our obligations to
complete the mergers. We will not be obligated to complete the business
combination unless at or prior to the time the business combination becomes
effective:
. Stockholder Approval. The approvals of the stockholders of ASARCO and
Cyprus Amax have been obtained in accordance with applicable law.
. Legality. No statute, rule, regulation, executive order, decree, ruling
or injunction by any tribunal or governmental authority prohibits the
consummation of the mergers substantially on the terms contemplated by
the merger agreement.
. Registration Statement. The registration statement relating to this
joint proxy statement and prospectus is effective, and no stop order
suspending effectiveness has been issued.
. New York Stock Exchange Listing. The shares of Asarco Cyprus common
stock issuable in the mergers are approved for listing on the New York
Stock Exchange, subject only to official notice of issuance.
. HSR Act. Any waiting period under the Hart-Scott-Rodino Act has expired
or been terminated.
. Regulatory Matters. All required statutory approvals (which failure to
obtain would have a material adverse effect on either of the companies)
have been obtained.
. Consents. All required third party consents have been obtained.
. Legal Opinions. ASARCO and Cyprus Amax have received an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP and Wachtell, Lipton, Rosen &
Katz, respectively, relating to certain tax matters. This condition may
not be waived after the ASARCO stockholders and the Cyprus Amax
stockholders approve their respective merger proposals unless further
stockholder approval is obtained by ASARCO and Cyprus Amax.
. Comfort Letters. Each of ASARCO and Cyprus Amax has received the
required comfort letters from the other's independent accountants.
Cyprus Amax will not be obligated to complete the Cyprus Amax merger unless:
. Representations and Warranties. The representations and warranties of
ASARCO contained in the merger agreement are true and correct both when
made and as of the time the mergers become effective, except where the
failure of the representations and warranties to be true and correct
would not have a material adverse effect on ASARCO.
. Agreements and Covenants. ASARCO has performed in all material respects
all obligations and has complied with all covenants required by the
merger agreement prior to the time the mergers become effective.
. Certificate. ASARCO has delivered to Cyprus Amax a certificate of its
chairman of the board and chief executive officer dated as of the day
the mergers become effective certifying to the effect of the two
preceding clauses.
ASARCO will not be obligated to complete the ASARCO merger unless:
. Representations and Warranties. The representations and warranties of
Cyprus Amax contained in the merger agreement are true and correct both
when made and as of the time the mergers become effective, except where
the failure of the representations and warranties to be true and correct
would not have a material adverse effect on Cyprus Amax.
. Agreements and Covenants. Cyprus Amax has performed in all material
respects all obligations and has complied with all covenants required by
the merger agreement prior to the time the mergers become effective.
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. Certificate. Cyprus Amax has delivered to ASARCO a certificate of its
chairman of the board, chief executive officer and president dated the
time the mergers become effective certifying to the effect of the two
preceding clauses.
Termination
The merger agreement may be terminated at any time prior to the time the
mergers become effective, in any of the following circumstances:
. by our mutual written consent;
. by either of us if the mergers have not become effective on or before
June 30, 2000, provided that the terminating party has not breached in
any material respect its obligations under the merger agreement in any
manner that has proximately contributed to the failure to complete the
mergers on or before the deadline date;
. by either of us if a statute, rule, regulation or executive order has
been enacted, entered or promulgated prohibiting the consummation of the
mergers substantially on the terms contemplated by the merger agreement;
. by either of us if a final and non-appealable order, decree, ruling or
injunction has been entered permanently restraining, enjoining or
otherwise prohibiting the consummation of the mergers substantially on
the terms contemplated by the merger agreement, if the terminating party
has used its reasonable best efforts to remove such order, decree,
ruling or injunction, provided, however, that the terminating party is
not required to agree to hold separate or divest any of its businesses,
product lines or assets if taking such action would have a material
adverse effect on the terminating party;
. by either of us if the approvals of the stockholders of ASARCO or Cyprus
Amax contemplated by the merger agreement have not been obtained because
of the failure to obtain the required vote at a duly held shareholders
meeting or at any adjournment thereof;
. by either Cyprus Amax, on the one hand, or ASARCO, on the other hand, if
the other party has breached the covenants described under "--No
Solicitation of Alternative Takeover Proposals" above; or
. by either of us if there has been a material breach by the other of any
of its representations, warranties, covenants or agreements contained in
the merger agreement and such breach has not been cured within 30 days
after notice of the breach is received by the allegedly breaching party.
Termination Fees
Each of us is liable to the other for a termination fee of $45 million if the
merger agreement is terminated under certain circumstances.
In general, the termination fee is payable by one party if the stockholders
of the other party have not voted to disapprove the merger agreement and:
. prior to the date of the first party's stockholder meeting a Takeover
Proposal is made known to that first party or is made directly to its
stockholders generally or any person has publicly announced an intention
to make a Takeover Proposal and thereafter the merger agreement is
terminated because of the failure of that first party to obtain the
requisite stockholder approval, or
. the merger agreement is terminated by the other party because the first
party breached the covenants described under "--No Solicitation of
Alternative Takeover Proposals" above.
However, no termination fee is payable unless within eighteen months of the
termination the first party enters into an agreement for or consummates a
transaction whereby a third party acquires twenty percent of any class of stock
of the first party, or a business that constitutes twenty percent or more of
the revenues, net income or assets of the first party, or otherwise consummates
a Takeover Proposal.
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The merger agreement also provides that if one party fails to pay any
termination fee which is judged to be due, the defaulting party must pay the
costs and expenses of any action taken to collect payment, together with
interest on the termination fee.
Costs and Expenses
Each of us will pay our own costs and expenses in connection with the merger
agreement and the contemplated transactions whether or not the mergers are
completed, except that we will equally share
. the filing fee in connection with any HSR Act filing or any other
required statutory approval,
. the commissions and other out-of-pocket transaction costs, including the
expenses and compensation of the exchange agent, incurred in connection
with the sale of shares of Asarco Cyprus common stock to generate cash
to pay in lieu of fractional shares,
. the expenses of printing and mailing this joint proxy statement and
prospectus (including Securities and Exchange Commission filing fees),
and
. all transfer taxes.
Amendment
At any time prior to the time the mergers become effective, we may amend or
supplement any of the terms of the merger agreement in writing by both of us,
except that following approval by our respective stockholders we may not amend
the conversion ratio of shares of ASARCO capital stock or Cyprus Amax capital
stock into shares of Asarco Cyprus capital stock or make any other change not
permitted under applicable law without further approval by our respective
stockholders.
Waiver
At any time prior to the time the mergers become effective, the merger
agreement permits either of us in writing to:
. extend the time for the performance of any of the obligations or other
acts of the other party,
. waive any inaccuracies in the representations and warranties of the
other party; and
. waive compliance with any of the agreements or conditions of the other
party contained in the merger agreement.
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APPRAISAL RIGHTS OF CYPRUS AMAX
SERIES A CONVERTIBLE PREFERRED STOCKHOLDERS
Delaware law entitles the holders of record of shares of Cyprus Amax Series
A convertible preferred stock who follow the procedures specified in Section
262 of the Delaware corporate law to have their shares appraised by the
Delaware Court of Chancery and to receive the "fair value" of such shares as
of the effective time of the Cyprus Amax merger as determined by the court in
place of Asarco Cyprus Series A convertible preferred stock that the holder
would otherwise receive in the Cyprus Amax merger. In order to exercise
appraisal rights, a stockholder must demand and perfect the rights in
accordance with Section 262 of the Delaware corporate law. The following is a
summary of Section 262 of the Delaware corporate law and is qualified in its
entirety by reference to Section 262 of the Delaware corporate law, a copy of
which is attached hereto as Appendix D. Cyprus Amax Series A convertible
preferred stockholders should carefully review Section 262 of the Delaware
corporate law as well as information discussed below to evaluate their rights
to appraisal.
If a holder of Cyprus Amax Series A convertible preferred stock elects to
exercise the right to an appraisal under Section 262 of the Delaware corporate
law, such stockholder must:
1. file with Cyprus Amax at its main office in Englewood, Colorado, a
written demand for appraisal of the shares of Cyprus Amax Series A
convertible preferred stock held (which demand must identify the
stockholder and expressly request an appraisal) before the vote is taken
on the Cyprus Amax merger agreement at the special meeting; and
2. continuously hold such shares through the effective time of the Cyprus
Amax merger.
All written demands for appraisal should be addressed to: Philip C. Wolf,
Secretary, Cyprus Amax Minerals Company, 9100 East Mineral Circle, Englewood,
Colorado 80112, before the vote is taken on the merger agreement at the Cyprus
Amax special meeting, and should be executed by, or on behalf of, the holder
of record. Such demand reasonably must inform Cyprus Amax of the identity of
the stockholder and that such stockholder is thereby demanding appraisal of
such stockholder's shares.
Within 10 days after the effective time of the Cyprus Amax merger, Asarco
Cyprus will give written notice of the effective time to each holder of Cyprus
Amax Series A convertible preferred stock who has satisfied the requirements
of Section 262 of the Delaware corporate law (a "Dissenting Stockholder").
Within 120 days after the effective time, Asarco Cyprus or any Dissenting
Stockholder may file a petition in the court demanding a determination of the
fair value of the shares of Cyprus Amax Series A convertible preferred stock
of all Dissenting Stockholders. Any Dissenting Stockholder desiring the filing
of such petition is advised to file such petition on a timely basis unless the
Dissenting Stockholder receives notice that such a petition has been filed by
Asarco Cyprus or another Dissenting Stockholder.
If a petition for appraisal is timely filed, the court will determine which
stockholders are entitled to appraisal rights and thereafter will determine
the fair value of the shares of Cyprus Amax Series A convertible preferred
stock held by Dissenting Stockholders, exclusive of any element of value
arising from the accomplishment or expectation of the Cyprus Amax merger, but
together with a fair rate of interest, if any, to be paid on the amount
determined to be fair value. In determining such fair value, the court shall
take into account all relevant factors. The court may determine such fair
value to be more than, less than or equal to the consideration that such
Dissenting Stockholder would otherwise be entitled to receive pursuant to the
merger agreement. If a petition for appraisal is not timely filed, then the
right to an appraisal shall cease. The costs of the appraisal proceeding shall
be determined by the court and taxed against the parties as the court
determines to be equitable under the circumstances. Upon the application of
any stockholder, the court may determine the amount of interest, if any, to be
paid upon the value of the stock of stockholders entitled thereto. Upon
application of a stockholder, the court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal.
77
<PAGE>
After the effective time of the Cyprus Amax merger, no Dissenting Stockholder
shall have any rights of a Cyprus Amax stockholder with respect to such
holder's shares for any purpose, except to receive payment of its fair value
and to receive payment of dividends or other distributions on such holder's
shares, if any, payable to Cyprus Amax Series A convertible preferred
stockholders of record as of a date prior to the effective time. If a
Dissenting Stockholder delivers to Asarco Cyprus a written withdrawal of the
demand for an appraisal within 60 days after the effective time of the Cyprus
Amax merger or thereafter with the written approval of Asarco Cyprus, or if no
petition for appraisal is filed within 120 days after the effective time, then
the right of such Dissenting Stockholder to an appraisal will cease and such
Dissenting Stockholder will be entitled to receive only the shares of preferred
stock of Asarco Cyprus as provided in the merger agreement.
78
<PAGE>
DIRECTORS AND MANAGEMENT FOLLOWING THE BUSINESS COMBINATION
Directors
The merger agreement provides that, immediately following the completion of
the business combination, the Asarco Cyprus Board of Directors will have 16
members divided into three classes with each class serving a staggered three
year term (other than two of the initial three classes which will serve one and
two years, respectively). Two classes of directors will consist of five
directors each and one class of directors will consist of six directors. Eight
members will be designated by ASARCO and eight members will be designated by
Cyprus Amax. ASARCO and Cyprus Amax will select their designees from the
current members of the board of directors of ASARCO and Cyprus Amax,
respectively. If an individual selected consents to serve as a director of
Asarco Cyprus, he or she will be elected as a director of Asarco Cyprus.
Messrs. Ward, McAllister, Clevenger and Morano will serve as directors of
Asarco Cyprus, and Mr. Ward will serve as Chairman of the Board. ASARCO and
Cyprus Amax have not yet selected the other directors who will serve on the
Asarco Cyprus Board.
Committees of the Board of Directors
Under the Asarco Cyprus by-laws, membership on each of the committees of the
Asarco Cyprus board initially will consist of an equal number of the directors
designated by ASARCO and Cyprus Amax. Committee structure and membership will
be determined by the Asarco Cyprus Board of Directors at or shortly after the
completion of the business combination.
Compensation of Directors
Directors who are employees of Asarco Cyprus will not receive any
compensation for service on the Asarco Cyprus board. The specific terms of the
compensation to be paid to non-employee directors of Asarco Cyprus have not yet
been determined.
Management
The merger agreement provides that from the time the mergers become
effective, Mr. Ward, Chairman, President and Chief Executive Officer of Cyprus
Amax, and Mr. McAllister, President and Chief Executive Officer of ASARCO, will
share responsibility for the management of Asarco Cyprus, as Chairman of the
Board and Co-Chief Executive Officer, and President and Co-Chief Executive
Officer, respectively. At the next annual meeting of Asarco Cyprus expected to
be held in April 2000, Mr. McAllister will become the sole Chief Executive
Officer and President of Asarco Cyprus. Following the first annual meeting of
Asarco Cyprus expected to be held in April 2000, and until December 31, 2000,
Mr. Ward will continue to participate actively in managing the consolidation of
the operations of ASARCO and Cyprus, realizing the synergies expected to be
derived from the mergers and exploring growth opportunities for Asarco Cyprus.
Mr. McAllister will become Chairman, President and Chief Executive Officer of
Asarco Cyprus following Mr. Ward's retirement on December 31, 2000. In
addition, Mr. Clevenger will be Executive Vice President and Chief Operating
Officer of Asarco Cyprus, and Mr. Morano will be Executive Vice President and
Chief Financial Officer of Asarco Cyprus, following the completion of the
mergers. Both Messrs. Clevenger and Morano will also be directors of Asarco
Cyprus. The remaining key executive officers of Asarco Cyprus will be jointly
designated by Messrs. McAllister and Ward, with the advice and consent of the
Asarco Cyprus Board of Directors. Any changes to the above arrangements between
the effective time of the mergers and the annual meeting of Asarco Cyprus
stockholders in 2002 will require the affirmative vote of 75% of the Asarco
Cyprus Board of Directors.
79
<PAGE>
OWNERSHIP OF COMMON STOCK
Beneficial Ownership of ASARCO Stock
Beneficial Ownership of Directors and Management of ASARCO
The following table sets forth the beneficial ownership of ASARCO common
stock as of June 30, 1999, by (a) each current director, (b) the five most
highly compensated executive officers of ASARCO, and (c) all directors and
officers as a group. Unless otherwise specified, the directors and officers
have sole voting and investment power with respect to these securities.
<TABLE>
<CAPTION>
Shares of ASARCO Additional
Common Stock Shares Deemed
Beneficially Beneficially Percent
Name Owned (a) Owned (b) Total of Class
---- ---------------- ------------- --------- --------
<S> <C> <C> <C> <C>
Vincent A. Calarco (c)...... 600 -- 600 (d)
James C. Cotting (c)........ 2,200 -- 2,200 (d)
William Dowd (f)............ 10,228 42,300 52,528 (d)
David C. Garfield (c) (e)... 18,300 -- 18,300 (d)
E. Gordon Gee (c)........... 1,800 -- 1,800 (d)
James W. Kinnear (c)........ 2,000 -- 2,000 (d)
Francis R. McAllister (f)... 65,724 202,340 268,064 0.7%
Kevin R. Morano (f)......... 32,468 124,500 156,968 (d)
Michael T. Nelligan (c)..... 2,215 -- 2,215 (d)
John D. Ong (c)............. 1,600 -- 1,600 (d)
Richard de J. Osborne (c)
(g)........................ 112,730 377,450 490,180 1.2%
Manuel T. Pacheco (c)....... 615 -- 615 (d)
William L. Paul (f)......... 8,184 41,400 49,584 (d)
James Wood (c).............. 28,800 -- 28,800 (d)
Augustus B. Kinsolving (f).. 18,351 83,300 101,651 (d)
All directors and officers
as a group (23 individuals)
(f)........................ 340,835 939,554 1,280,389 3.2%
</TABLE>
- --------
(a) Information with respect to beneficial ownership is based upon information
furnished by each director or officer. Except as noted below, all
directors and officers have sole voting and investment power over the
shares beneficially owned by them.
(b) Consists of shares deemed beneficially owned under regulations of the
Securities and Exchange Commission because such shares may be acquired
within 60 days after June 30, 1999, through the exercise of options
granted under ASARCO's 1996 Stock Incentive Plan or the previous Stock
Incentive Plan.
(c) See also the information below on Common Stock Equivalents.
(d) Less than 0.5%.
(e) Does not include 2,000 shares owned by Mr. Garfield's wife. Mr. Garfield
disclaims beneficial ownership of these shares.
(f) Includes restricted shares of ASARCO common stock awarded under ASARCO's
1996 Stock Incentive Plan or the previous Stock Incentive Plan to certain
of ASARCO's executive officers, and still subject to restrictions, as
follows: 31,820 to Mr. McAllister; 17,520 to Mr. Morano; 6,440 to Mr.
Dowd; 8,340 to Mr. Kinsolving; 5,460 to Mr. Paul; and 19,270 to other
executive officers. All restricted shares will vest upon the occurrence of
a change of control.
(g) Includes 5,027 shares of ASARCO common stock over which Mr. Osborne and
his wife share voting and investment power.
80
<PAGE>
Beneficial Ownership of Certain Stockholders
The following table sets forth information about stockholders we know are
beneficial owners of more than 5% of ASARCO common stock. This information is
based on information from public filings as of August 20, 1999. Percentages
shown are based on shares outstanding on July 30, 1999.
<TABLE>
<CAPTION>
Shares of ASARCO
Common Stock Percent
Name and Address of Beneficial Owner Beneficially Owned of Class
- ------------------------------------ ------------------ --------
<S> <C> <C>
Grupo Mexico, S.A. de C.V. ......................... 3,816,300 (a) 9.6%
Baja California 200
06760 Mexico City, Mexico
Merrill Lynch & Co., Inc. ("ML&Co.")................ 2,764,493 (b) 7.0%
(on behalf of Merrill Lynch Asset
Management Group ("AMG"))
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381
Donald Smith & Co., Inc. ........................... 2,003,000 (c) 5.0%
East 80 Route 4
Paramus, New Jersey 07652
</TABLE>
- --------
(a) Information is provided as of December 31, 1998, in reliance upon
information provided to ASARCO by Grupo Mexico, S.A. de C.V.
(b) Information is provided in reliance upon information included in Amendment
No. 4, dated February 14, 1999, to a Schedule 13G, filed with respect to
holdings by Merrill Lynch Asset Management, L.P., and Fund Asset
Management, L.P., each of which is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, and acts as an
investment adviser to investment companies registered under Section 8 of the
Investment Company Act of 1940. The investment advisers are indirectly
owned by ML&Co. through AMG, one of its operating divisions. The investment
advisers exercise voting and investment powers over portfolio securities
independently from the other direct and indirect subsidiaries of ML&Co.
ML&Co. disclaims beneficial ownership of such shares.
(c) Information is provided in reliance upon information included in a Schedule
13G, dated February 4, 1999, filed by Donald Smith & Co., Inc.
81
<PAGE>
Common Stock Equivalents
The following table sets forth the per share number of common stock
equivalents credited as of June 30, 1999 to the accounts of ASARCO's non-
employee directors under the ASARCO's Deferred Fee Plan for Directors and under
its Directors' Deferred Payment Plan. Under both plans, payments are made in
cash following retirement based on the market value of the common stock at that
time.
<TABLE>
<CAPTION>
Common Stock
Name Equivalents (a)
---- ---------------
<S> <C>
Vincent A. Calarco........................................ 3,996
James C. Cotting.......................................... 3,461
David C. Garfield......................................... 4,029
E. Gordon Gee............................................. 2,499
James W. Kinnear.......................................... 23,419
Michael T. Nelligan....................................... 4,934
John D. Ong............................................... 5,830
Richard de J. Osborne..................................... 87
Manuel T. Pacheco......................................... 3,862
James Wood................................................ 11,502
------
Total................................................... 63,619
</TABLE>
- --------
(a) Amounts shown reflect the number of share equivalents credited to the
Deferred Fee Plan and the Directors' Deferred Payment Plan plus share
equivalents of dividends credited.
Beneficial Ownership of Southern Peru Copper Corporation
The following table sets forth the beneficial ownership of Southern Peru
Copper Corporation common stock by (a) each current director, (b) the five most
highly compensated executive officers of ASARCO, and (c) all directors and
executive officers as a group. Southern Peru Copper Corporation is a publicly-
traded subsidiary of ASARCO. This information is stated as of June 30, 1999
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Name Beneficially Owned (a) of Class
---- ---------------------- --------
<S> <C> <C>
Vincent A. Calarco...................... -- (b)
James C. Cotting........................ -- (b)
William Dowd............................ 1,200 (b)
David C. Garfield....................... -- (b)
E. Gordon Gee........................... -- (b)
James W. Kinnear........................ -- (b)
Francis R. McAllister................... 3,286 (b)
Kevin R. Morano......................... 2,286 (b)
Michael T. Nelligan..................... 1,000 (b)
John D. Ong............................. -- (b)
Richard de J. Osborne (c)............... 3,455 (b)
Manuel T. Pacheco....................... -- (b)
William L. Paul......................... 500 (b)
James Wood.............................. -- (b)
Augustus B. Kinsolving (d).............. 1,263 (b)
All directors and officers as a group
(23 individuals)....................... 18,713 (b)
</TABLE>
- --------
(a) Information with respect to beneficial ownership is based upon information
furnished by each director or executive officer. Except as noted below, all
directors and officers have sole voting and investment power over the
shares beneficially owned by them.
(b) Less than 0.5%.
(c) Includes 2,357 shares of common stock over which Mr. Osborne and his wife
share voting and investment power.
(d) Does not include 100 shares owned by Mr. Kinsolving's son, as to which
beneficial ownership is disclaimed.
82
<PAGE>
Southern Peru Copper Corporation Common Stock Equivalents
The following table sets forth the per share number of common stock
equivalents of Southern Peru Copper Corporation credited as of June 30, 1999 to
the accounts of ASARCO designees to the Southern Peru Copper Corporation's
Board of Directors under the Deferred Fee Plan for Directors. Under the plan,
payments are made in cash following retirement based on the market value of
Southern Peru Copper Corporation common stock at that time.
<TABLE>
<CAPTION>
Common Stock
Name Equivalents
---- ------------
<S> <C>
Francis R. McAllister........................................ 5,122
Kevin R. Morano.............................................. 5,973
Augustus B. Kinsolving....................................... --
William Dowd................................................. 1,172
David B. Woodbury............................................ 4,310
Michael O. Varner............................................ 2,678
Richard de J. Osborne........................................ --
Gerald D. Van Voorhis........................................ 334
All directors and officers as a group (23 individuals)....... 19,589
</TABLE>
83
<PAGE>
Beneficial Ownership of Cyprus Amax Common Stock
Beneficial Ownership of Directors and Management of Cyprus Amax
The following table sets forth the beneficial ownership of Cyprus Amax common
stock as of June 30, 1999, except as otherwise noted, by (a) each current
director, (b) the five most highly compensated executive officers of Cyprus
Amax, and (c) all directors and executive officers as a group. Unless otherwise
specified, the directors and executive officers have sole voting and investment
power with respect to these securities. Cyprus Amax currently has Series A
convertible preferred stock issued and outstanding, none of which is
beneficially owned by directors or executive officers.
<TABLE>
<CAPTION>
Shares of Cyprus Amax Common Stock
--------------------------------------------
Additional Shares
Beneficially Deemed Beneficially Percent
Name Owned (a) Owned (b) Total of Class
- ---- ------------ ------------------- --------- --------
<S> <C> <C> <C> <C>
Milton H. Ward............ 2,030,636 0 2,030,636 2.2%
Linda G. Alvarado......... 9,815 4,843 14,658 (a)
George S. Ansell.......... 8,875(c) 7,080 15,955 (a)
Allen Born (d)............ 55,205 0 55,205 (a)
William C. Bousquette..... 8,500 28,325 36,825 (a)
Thomas V. Falkie.......... 12,000 7,727 19,727 (a)
Ann Maynard Gray.......... 7,650 4,492 12,142 (a)
Rockwell A. Schnabel...... 30,000 25,831 55,831 (a)
Theodore M. Solso......... 8,000 22,427 30,427 (a)
John H. Stookey........... 8,000 3,800 11,800 (a)
James A. Todd, Jr. (d).... 44,398 0 44,398 (a)
Billie B. Turner.......... 9,500 12,222 21,722 (a)
Gerald J. Malys........... 381,224(c) 0 381,224 (a)
Jeffery G. Clevenger...... 317,880(c) 0 317,880 (a)
Garold R. Spindler (e).... 411,295 0 411,295 (a)
Philip C. Wolf............ 241,204 0 241,204 (a)
All directors and execu-
tive officers as a
group (20 persons)....... 4,095,088(c) 116,747 4,211,835 4.7%
</TABLE>
- --------
(a) All directors and executive officers as a group (20 persons) beneficially
own 4.7% of the outstanding Cyprus Amax common stock, including 2.2%
beneficially owned by Mr. Ward. No other individual director or executive
officer beneficially owns 1% or more of the outstanding Cyprus Amax common
stock.
(b) Units denominated as Cyprus Amax common stock equivalents held in the
Deferred Compensation Plan for Non-Employee Directors. All of the nine
current non-employee directors elected to participate in the plan during
1999. Units held in the plan by Messrs. Born and Todd were converted to
shares of common stock upon their retirement from the Board (see Note (d)).
The units are rounded to the nearest whole share.
(c) Dr. Ansell shares voting power with respect to 375 shares; Mr. Clevenger
shares voting power with respect to 15,986 shares; and Mr. Malys shares
voting power with respect to 10,000 shares. The total for all directors and
executive officers as a group includes 600 shares for which an executive
officer disclaims beneficial ownership.
(d) Messrs. Born and Todd retired from their positions as directors on May 6,
1999 and the share ownership described above is as of May 6, 1999.
(e) Mr. Spindler left Cyprus Amax on June 30, 1999, in conjunction with the
sale of its U.S. coal assets.
The shares shown in the above table include:
. Shares which certain persons have the rights to acquire within 60 days
through the exercise of stock options issued under the Cyprus Amax Stock
Plan for Non-Employee Directors. These shares include
84
<PAGE>
5,000 shares for each of Mses. Alvarado and Gray, Drs. Ansell and
Falkie, and Messrs. Bousquette, Schnabel, Solso, Stookey and Turner and
8,000 shares for Messrs. Born and Todd.
. Shares which certain persons have the rights to acquire within 60 days
through the exercise of stock options issued under the Cyprus Amax
Management Incentive Program. These shares include 1,497,921 for Mr.
Ward; 242,726 for Mr. Malys; 178,200 for Mr. Clevenger; 323,900 for Mr.
Spindler; and 164,706 for Mr. Wolf. The stock options exercisable under
this program and the Cyprus Amax Stock Plan for Non-Employee Directors
total 2,768,549 for all directors and executive officers as a group.
. Shares of restricted stock acquired through the Cyprus Amax Management
Incentive Program and the Cyprus Amax Key Executive Long-Term Incentive
Plan. These shares include 350,000 for Mr. Ward; 120,475 for Mr. Malys;
109,710 for Mr. Clevenger; 73,985 for Mr. Wolf; and 820,230 for all
directors and executive officers as a group. The holders of restricted
shares have the power to vote these shares and receive dividends but do
not have investment power until the shares vest.
. Shares acquired through the employee savings plan for which the trustee
has shared voting and investment power. These share include 2,995 for
Mr. Ward; 6,189 for Mr. Malys; 4,513 for Mr.Clevenger; 995 for Mr.
Spindler; 2,513 for Mr. Wolf; and 27,498 for all executive officers as a
group. The shares reported are rounded to the nearest whole share.
----------------
Beneficial Ownership of Certain Stockholders
The following table sets forth information about the only stockholder we
know is the beneficial owner of more than 5% of Cyprus Amax common stock. The
information is based on information from public filings as of August 20, 1999.
The percentage shown is based on shares outstanding on August 19, 1999.
<TABLE>
<CAPTION>
Shares of Cyprus Amax
Common Stock Percent
Name and Address of Beneficial Owner Beneficially Owned of Class
- ------------------------------------ --------------------- --------
<S> <C> <C>
Trimark Investment Management Inc., as Manager
and
Trustee of certain mutual funds............... 9,355,200(1) 10.3%
One First Canadian Place, Suite 5600
P.O. Box 487
Toronto, Ontario M5X 1E5, Canada
</TABLE>
- --------
(1) Trimark Financial Corporation, owner of 100% of the voting equity
securities of Trimark Investment Management Inc., may be deemed to be a
beneficial owner of the shares. Information is provided in reliance upon
information included in Schedule 13G, dated February 1, 1999, filed by
Trimark Investment Management, Inc.
85
<PAGE>
DESCRIPTION OF ASARCO CYPRUS CAPITAL STOCK
The description of certain terms of the capital stock of Asarco Cyprus to be
in effect after completion of the business combination is not meant to be
complete and is qualified by reference to the Asarco Cyprus amended and
restated certificate of incorporation which is incorporated by reference
herein. A copy of the Asarco Cyprus amended and restated certificate of
incorporation is included as Exhibit C to the merger agreement which is
attached as Appendix A to this joint proxy statement and prospectus.
Authorized Capital Stock
The Asarco Cyprus restated certificate of incorporation provides authority to
issue up to 280,000,000 shares of stock of all classes, of which 250,000,000
are shares of Asarco Cyprus common stock and 30,000,000 are shares of Asarco
Cyprus preferred stock.
Asarco Cyprus Common Stock
The shares of Asarco Cyprus common stock to be issued in the mergers will be
duly authorized, validly issued, fully paid and nonassessable. Holders of
Asarco Cyprus common stock will be entitled to one vote per share in the
election of directors and on all other matters submitted to a vote of
stockholders. Each share of Asarco Cyprus common stock will have an equal and
ratable right to receive dividends as may be declared by the board of directors
out of funds legally available therefor and to share equally and ratably in all
assets available for distribution to stockholders upon dissolution or
liquidation. No holder of Asarco Cyprus common stock will have any preemptive
right to subscribe for any securities of Asarco Cyprus.
Asarco Cyprus Preferred Stock
Preferred Stock
The Asarco Cyprus Board of Directors will be authorized to issue Asarco
Cyprus preferred stock from time to time in one or more series, each of which
will have such designation or title fixed by the Asarco Cyprus Board of
Directors prior to the issuance of any shares. Each class or series of Asarco
Cyprus preferred stock will have voting powers, full or limited, or no voting
powers, and preferences and relative, participating, optional or other special
rights and any qualifications, limitations or restrictions that are permitted
by Delaware law. A number of shares of Asarco Cyprus preferred stock, to be
determined at a future date, will be designated Series A Junior Participating
Preferred Stock, for issuance in connection with the exercise of the rights
described below.
Asarco Cyprus Series A Convertible Preferred Stock
The merger agreement provides that, unless holders of Cyprus Amax Series A
convertible preferred stock exercise their dissenters' rights, each share of
Cyprus Amax Series A convertible preferred stock will be converted into one
share of Asarco Cyprus Series A convertible preferred stock in the Cyprus Amax
merger. Any shares of Asarco Cyprus Series A convertible preferred stock issued
in the mergers will have terms substantially identical to the terms of the
Cyprus Amax Series A convertible preferred stock.
If all of the shares of Cyprus Amax Series A convertible preferred stock are
converted in the Cyprus Amax merger, there will be 4,666,667 shares of Asarco
Cyprus Series A convertible preferred stock outstanding immediately after the
effective time of the business combination.
Shares of Asarco Cyprus Series A convertible preferred stock issued in the
mergers will have, among others, the following terms:
. Voting Rights. Generally, the Asarco Cyprus Series A convertible
preferred stock will not be entitled to vote. However, if Asarco Cyprus
were in default in the payment of dividends on the Asarco
86
<PAGE>
Cyprus Series A convertible preferred stock (or on any other class of
preferred stock which ranks on a parity with it in respect of dividends)
for four quarterly periods, then the Asarco Cyprus Series A convertible
preferred stock, voting together with all other preferred stock ranking
on a parity with it in respect of dividends, would be entitled to elect
one director of the class being elected or at the next Asarco Cyprus
annual meeting. Such preferred stock holders would continue to have such
a right at each subsequent annual meeting until either a maximum of
three directors (one from each class) are elected by the preferred
stockholders or until all dividends in default are paid in full. When
dividends in default are paid in full, all directors elected by the
preferred stockholders will resign.
. Dividend Rights and Rights Upon Liquidation. The holders of Asarco
Cyprus Series A convertible preferred stock will be entitled to receive,
from funds legally available for the payment thereof, dividends when and
as declared by resolution of the Asarco Cyprus Board of Directors at a
per share rate of $4.00 per year. In the event of liquidation or
dissolution, after providing for the payment of liabilities and the
liquidation preference on any class of preferred stock ranking senior to
Asarco Cyprus Series A convertible preferred stock, each share of Asarco
Cyprus Series A convertible preferred stock would be entitled to receive
the same amount such holders would have been entitled to receive had the
shares been redeemed on the date of such liquidation or dissolution.
. Redemption Rights. Asarco Cyprus will be permitted, at its option, to
redeem the Asarco Cyprus Series A convertible preferred stock, subject
to applicable law, at any time at the following redemption prices per
share plus accrued and unpaid dividends if the shares are redeemed
during the twelve-month period ending December 17 of the year indicated:
<TABLE>
<CAPTION>
Year Price
---- ------
<S> <C>
1999............................................ $51.60
2000............................................ $51.20
2001............................................ $50.80
2002............................................ $50.40
2003 and thereafter............................. $50.00
</TABLE>
. Preemptive Rights. Other than pursuant to the conversion privilege
described below, holders of Asarco Cyprus Series A convertible preferred
stock would have no preemptive rights to purchase, subscribe for or
otherwise acquire any other securities.
. Conversion Rights. The Asarco Cyprus Series A convertible preferred
stock would be convertible into Asarco Cyprus common stock at the option
of the holder at any time prior to the tenth business day prior to a
fixed redemption date at a conversion price of $31.7647 per share,
subject to adjustments.
Asarco Cyprus Rights
Under Delaware law, every corporation may create and issue rights entitling
the holders of such rights to purchase from the corporation shares of its
capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of such shares must be
stated in the certificate of incorporation or in a resolution adopted by the
board of directors for the creation or issuance of such rights.
At or prior to the effective time of the business combination, Asarco Cyprus
will adopt a stockholder rights agreement. As with most stockholder rights
agreements, the terms of our rights agreement will be complex and not easily
summarized, particularly as they relate to the acquisition of our common stock
and to exercisability. This summary may not contain all of the information
that is important to you. Accordingly, you should carefully read the form of
our rights agreement which has been filed as an exhibit to the registration
statement, of which this prospectus forms a part.
87
<PAGE>
Our rights agreement will provide that each share of our common stock
outstanding will have one right to purchase one one-hundredth of a preferred
share attached to it. The purchase price per one one-hundredth of a preferred
share under the stockholder rights agreement will be determined at a future
date.
Initially, the rights under our rights agreement will be attached to
outstanding certificates representing our common stock and no separate
certificates representing the rights will be distributed. The rights will
separate from our common stock and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender offer for
15% of our outstanding common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of the common stock. Once
distributed, the rights certificates alone will represent the rights.
All shares of our common stock issued prior to the date the rights separate
from the common stock will be issued with the rights attached. The rights will
not be exercisable until the date the rights separate from the common stock.
The rights will expire on July 1, 2009 unless earlier redeemed or exchanged by
us.
If an acquiror obtains or has the rights to obtain 15% or more of our common
stock, then each right will entitle the holder to purchase a number of shares
of our common stock equal to two times the exercise price of each right.
Each right will entitle the holder to purchase a number of shares of common
stock of the acquiror having a then current market value of twice the exercise
price of the rights if an acquiror obtains 15% or more of our common stock and
any of the following occurs:
. we merge into another entity;
. an acquiring entity merges into us; or
. we sell more than 50% of our assets or earning power.
Under our rights agreement, any rights that are or were owned by an acquiror
of more than 15% of our outstanding common stock will be null and void.
Our rights agreement will contain exchange provisions which will provide that
after an acquiror obtains 15% or more, but less than 50% or our respective
outstanding common stock, our board of directors may, at its option, exchange
all or part of the then outstanding and exercisable rights for common shares.
In such an event, the exchange ratio will be one common share per right,
adjusted to reflect any stock split, stock dividend or similar transaction.
Our board of directors may, at its option, redeem all of the outstanding
rights under our rights agreement prior to the earlier of (1) the tenth
business day following the date at which an acquiror obtains 15% or more of our
outstanding common stock or (2) the final expiration date of the rights
agreement. The redemption price under our rights agreement will be $0.01 per
right, subject to adjustment. The right to exercise the rights will terminate
upon the action of our board ordering the redemption of the rights and the only
right of the holders of the rights will be to receive the redemption price.
Holders of rights will have no rights as our stockholders including the right
to vote or receive dividends, simply by virtue of holding the rights.
Our rights agreement will provide that the provisions of the rights
agreement, except for those governing the redemption price of the rights, may
be amended without the approval of the holders of the rights, by the board of
directors prior to (1) 10 business days after an acquiror acquires 15% or more
of our outstanding common stock or (2) 10 business days after someone commences
a tender offer for 15% or more of our outstanding common stock. However, after
the date that an acquiror acquires 15% or more of our outstanding common stock
or the date that someone commences a tender offer for 15% or more of our
outstanding common stock, the board of directors may not amend the rights
agreement to increase the purchase price or extend the expiration date of the
rights.
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<PAGE>
Our rights agreement will contain rights that have anti-takeover effects. The
rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. Accordingly, the existence of the rights may deter acquirors
from making takeover proposals or tender offers. However, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquiror on behalf of all the stockholders.
In addition, the rights should not interfere with a proxy contest.
Transfer Agent and Registrar
The principal transfer agent and registrar for Asarco Cyprus common stock
after the business combination will be designated by ASARCO and Cyprus Amax
prior to the completion of the business combination.
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<PAGE>
COMPARISON OF STOCKHOLDERS' RIGHTS
ASARCO is incorporated under the laws of the State of New Jersey and Cyprus
Amax is incorporated under the laws of the State of Delaware. In accordance
with the merger agreement, at the date the business combination becomes
effective, the holders of Cyprus Amax common stock and ASARCO common stock will
exchange their respective shares of common stock and will become holders of
Asarco Cyprus common stock. The rights of Asarco Cyprus stockholders will be
governed by Delaware law and the certificate of incorporation and by-laws of
Asarco Cyprus. The following is a comparison of the material rights of the
holders of Cyprus Amax common stock, ASARCO common stock and Asarco Cyprus
common stock.
The proposed form of the provisions of the Asarco Cyprus certificate of
incorporation and the Asarco Cyprus by-laws are included in this joint proxy
statement and prospectus as Exhibits C and D to Appendix A. Copies of the
ASARCO charter, the ASARCO by-laws, the Cyprus Amax charter and the Cyprus Amax
by-laws are incorporated by reference. See "Where You Can Find More
Information" on page 98. The following summary is not intended to be complete
and is qualified by reference to Delaware law, New Jersey law, the Cyprus Amax
charter, the Cyprus Amax by-laws, the ASARCO charter, the ASARCO by-laws, the
Asarco Cyprus charter and the Asarco Cyprus by-laws.
Comparison of Charter and By-law Provisions
<TABLE>
<CAPTION>
Provision ASARCO Cyprus Amax Asarco Cyprus
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Board of Directors
- ---------------------------------------------------------------------------------------------------------------------
Classified Board Divided into three Divided into three To be divided into
classes as nearly as classes as nearly as three classes as
equal as possible, equal as possible, nearly in equal as
with each class with each class possible, with each
serving a staggered serving a staggered class serving a
three year term. three year term. staggered three year
term (other than two
of the initial three
classes which will
serve one and two
years, respectively).
- ---------------------------------------------------------------------------------------------------------------------
Removal of Directors A director may be A director may be A director may be
removed only for removed only for removed only for
cause, and only by cause, and only by cause, and only by
the affirmative vote the affirmative vote the affirmative vote
of a majority of the of the holders of 75% of the holders of 75% of the outstanding voting
votes cast by holders of the outstanding stock.
of the outstanding voting stock.
voting stock.
- ---------------------------------------------------------------------------------------------------------------------
Size of Board Board must consist of Board must consist of Board must consist of
not less than nine not less than three not less than one and
and not more than 15 directors; Board not more than 20
directors; Board currently consists of directors; initial
currently consists of 10 directors. Board will consist of
12 directors. 16 directors; prior
to 2002 annual
meeting, the number
of directors may be
amended or repealed
only by unanimous
consent of the entire
Board.
- ---------------------------------------------------------------------------------------------------------------------
Stockholder Meetings
- ---------------------------------------------------------------------------------------------------------------------
Annual Meetings Held on the last Held on date fixed by Held on a date fixed
Wednesday of April the Board. by the Board, or, if
(or, if that date is not fixed, on the
a legal holiday, the last Wednesday of
next succeeding date April (or, if that
that is not a legal date is a legal
holiday). holiday, the next
succeeding date that
is not a legal
holiday).
- ---------------------------------------------------------------------------------------------------------------------
Calling a Special Only the Chairman of Only the Chairman of Only the Chairman of
Meeting the Board, the the Board, the the Board, the Chief
President or a President, the Board Executive Officer, or
majority of the Board of Directors, or the a majority of the
may call a special holders of a majority Board may call a
meeting. of the voting stock special meeting.
may call a special
meeting.
</TABLE>
90
<PAGE>
<TABLE>
<CAPTION>
Provision ASARCO Cyprus Amax Asarco Cyprus
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quorum Requirements The presence, in The presence, in The presence, in
person or by proxy, person or by proxy, person or by proxy,
of the holder of of the holders of 33 of the holders of a
record of shares 1/3% of the majority of the
entitled to cast a outstanding voting shares entitled to
majority of the votes stock constitutes a vote at the meeting
at any meeting quorum at such constitutes a quorum
constitutes a quorum meeting. for that meeting.
at such meeting.
- ----------------------------------------------------------------------------------------------
Vote Required for Stockholder action Stockholder action Stockholder action
Stockholder Action generally requires approving a merger or approving a merger or
the affirmative vote consolidation or a consolidation or a
of a majority of sale of all or sale of all or
votes cast, except substantially all of substantially all of
for election of a corporation's a corporation's
directors and certain assets, requires the assets, requires the
voting requirements affirmative vote by affirmative vote by
applicable to certain the holders of the the holders of the
amendments of majority of majority of
organizational outstanding voting outstanding voting
documents and certain stock; stockholder stock; stockholder
transactions with the action on other action on other
beneficial owner of matters, except for matters, except
more than 10% of any elections of elections of
class of capital directors, certain directors and certain
stock of ASARCO. amendments of amendments to
Abstentions have the organizational organizational
effect of a vote documents and certain documents, requires
against a proposed transactions with the affirmative vote of
matter only if the beneficial owner of the majority of votes
affirmative vote more than 10% of any cast at a meeting.
required is that of class of capital Abstentions have the
the majority of the stock of Cyprus Amax, effect of a vote
total votes requires affirmative against a proposed
represented by the vote of the majority matter only if the
outstanding voting of votes cast at a affirmative vote
stock. meeting. required is that of
Abstentions have the the majority of the
effect of a vote total votes
against a proposed represented by the
matter only if the outstanding voting
affirmative vote stock.
required is that of
the majority of the
total votes
represented by the
outstanding voting
stock.
- ----------------------------------------------------------------------------------------------
Action by Written Stockholder action Stockholder action Stockholder action
Consent must be taken at an must be taken at an must be taken at an
annual or special annual or special annual or special
meeting and not by meeting and not by meeting and not by
written consent. written consent. written consent.
- ----------------------------------------------------------------------------------------------
Advanced Notice Stockholders may To bring a matter To bring a matter
Requirements for nominate one or more (including the (including the
Stockholder Nominations persons for elections nomination of nomination of
and Other Business as directors at an directors) before an directors) before an
annual meeting if annual meeting, a annual meeting, a
they deliver written stockholder generally stockholder must give
notice 90 days prior must give notice of a notice of a proposed
to the first proposed matter not matter not less than
anniversary of the less than 90 days 90 days nor more than
immediately preceding prior to the first 120 days prior to the
annual meeting, or at anniversary of the first anniversary of
a special meeting if immediately preceding the immediately
they deliver written annual meeting, but preceding annual
notice by the tenth if less than 70 days meeting, but if the
day following the day notice of the annual annual meeting is
that notice of the meeting is given to called for a date not
special meeting is stockholders, a 30 days before or
given to the stockholder must give after the anniversary
stockholders. notice of a proposed date of the
matter by the tenth immediately preceding
day following the annual meeting, a
date at which notice stockholder must give
of the annual meeting notice of a proposed
was mailed. matter by the
fifteenth day
following the date at
which notice for the
meeting was announced
or mailed to
stockholders.
</TABLE>
91
<PAGE>
<TABLE>
<CAPTION>
Provision ASARCO Cyprus Amax Asarco Cyprus
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amendments to
Organizational Documents
- -----------------------------------------------------------------------------------------------
Certificate of Generally may be Generally may be Generally may be
Incorporation amended by the amended by Board amended by Board
affirmative vote of resolutions and the resolutions and the
the majority of votes affirmative vote by affirmative vote by
cast by the holders the holders of a the holders of a
of outstanding voting majority of the majority of the
stock except that: outstanding voting outstanding voting
stock except that: stock except that:
. affirmative vote of . amendments for . amendments of
80% of the provisions relating provisions of
outstanding voting to the directors, certificate of
stock is required stockholder incorporation
for amendment or nominations and relating to the
deletion of certain action, bylaw classification of
provisions relating amendments, and the Board and the
to certain certain removal of
transactions transactions with directors require
involving the beneficial owners the affirmative
beneficial owner of of 10% or more of vote of the holders
more than 10% of the outstanding of 75% of the
any class of common stock outstanding voting
capital stock; and require the stock.
affirmative vote of
the holders of 75%
of the outstanding
voting stock.
. affirmative vote of
the holders of 80%
of the outstanding
voting stock
(including the
affirmative vote of
the majority of
outstanding voting
stock not owned by
the 10% holder)
required for the
amendment or repeal
of certain
provisions
regarding
affiliated
transactions with
10% holders
(generally unless
the amendment is
declared advisable
by the affirmative
vote of 66 2/3% of
the Board and
submitted to
stockholders for
their
consideration).
- -----------------------------------------------------------------------------------------------
Bylaws Generally may be Generally may be Generally may be
amended by the amended by the amended by a majority
affirmative vote of a affirmative vote of of the Board;
majority of the Board the holders of a stockholders also may
except that: majority of the amend bylaws by the
voting stock at the affirmative vote of
relevant meeting, or the holders of 66
by the affirmative 2/3% of the
vote of a majority of outstanding voting
the Board; amendments stock.
of certain provisions
of the certificate of
incorporation
governing the bylaws,
including those
relating to
stockholder meetings
and action, and the
number, election, and
removal of directors,
require the
affirmative vote of
the holders of 75% of
the outstanding
voting stock.
. generally may also
be amended by the
affirmative vote of
the holders of a
majority of the
outstanding voting
stock entitled to
vote and present or
represented at a
stockholder
meeting;
. amendments of
certain bylaws,
including
provisions relating
to special
stockholder
meetings, charter
document
amendments,
directorship
vacancies, removal
of directors, and
the number,
election and
qualification of
directors, require
the affirmative
vote of the holders
of 80% of the
outstanding voting
stock. Generally,
provisions relating
to indemnification
of corporate agents
may be amended only
by action of the
Board approved by
the affirmative
vote of the votes
cast by
stockholders
entitled to vote at
a meeting of
stockholders for
which proxies are
solicited in
accordance with
then applicable
requirements of the
SEC.
</TABLE>
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<PAGE>
Comparison of Charter and By-law Provisions
<TABLE>
<CAPTION>
Provision ASARCO Cyprus Amax Asarco Cyprus
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capitalization
- -----------------------------------------------------------------------------------------------------
Authorized Stock Common Stock: 80 million Common Stock: 150 Common Stock: 250
shares Preferred Stock: million shares Preferred million shares Preferred
10 million shares Stock: 20 million shares Stock: 30 million shares
- -----------------------------------------------------------------------------------------------------
Preferred Stock The Board is authorized The Board is authorized The Board will be
to issue preferred stock to issue preferred stock authorized to issue
from time to time in one from time to time in one preferred stock from
or more series, with or more series, with time to time in one or
terms to be fixed by the terms to be fixed by the more series, with terms
Board. Board. to be fixed by the
Board.
- -----------------------------------------------------------------------------------------------------
Rights Agreements
- -----------------------------------------------------------------------------------------------------
Terms of Share ASARCO has a Rights Cyprus Amax has a Rights Asarco Cyprus will enter
Repurchases Agreement, dated as of Agreement, dated as of into a Rights Agreement
January 28, 1998; the February 28, 1999; the prior to the effective
Rights Agreement Rights Agreement time of the business
triggers upon the triggers upon the combination; the Rights
acquisition by a third acquisition by a third Agreement will trigger
party of 15% of ASARCO's party of 15% of Cyprus upon the acquisition by
outstanding common Amax's outstanding a third party of 15% of
stock; Board may redeem common stock; Board may Asarco Cyprus's
rights at any time prior redeem rights at any outstanding common
to the end of the tenth time prior to the time stock; Board may redeem
business day following such an acquisition rights at any time prior
the date at which time takes place. to the end of the tenth
such an acquisition business day following
takes place. the date at which time
such an acquisition
takes place.
- -----------------------------------------------------------------------------------------------------
Share Repurchases
- -----------------------------------------------------------------------------------------------------
Terms of Share ASARCO may generally Cyprus Amax generally Asarco Cyprus generally
Repurchases repurchase its own may purchase its owns will be able to
shares. shares, although there repurchase its own
are specific shares.
restrictions on such
repurchases when the
seller is a beneficial
owner of 10% or more of
the voting power of the
outstanding voting
stock.
- -----------------------------------------------------------------------------------------------------
Exculpation and The certificate of The certificate of The certificate of
Indemnification of incorporation of ASARCO incorporation of Cyprus incorporation of Asarco
Directors, Officers and provides that no Amax provides that no Cyprus provides that no
Employees director will be director will be director will be
personally liable for personally liable for personally liable for
damages for breach of damages for breach of damages for breach of
fiduciary duty, except fiduciary duty, except fiduciary duty, except
in cases where the in cases where the in cases where the
director's acts or director's acts or director's acts or
omissions: omissions: omissions:
. breached his or her . breached his or her . breached his or her
duty of loyalty to the duty of loyalty to the duty of loyalty to the
corporation or its corporation or its corporation or its
stockholders, stockholders, stockholders,
. were not in good faith . were not in good faith . were not in good faith
or involved or involved or involved
intentional misconduct intentional misconduct intentional misconduct
or a knowing violation or a knowing violation or a knowing violation
of law, or of law, or of law, or
. provided an improper . provided an improper . provided an improper
personal benefit to personal benefit to personal benefit to
the director. the director. the director.
The ASARCO certificate The bylaws of Cyprus The bylaws of Asarco
of incorporation Amax provide that the Cyprus provide that the
provides such protection corporation will corporation will
against personal indemnify any director indemnify any director
liability to officers, or officer to the or officer to the
employees, as well as to fullest extent permitted fullest extent permitted
directors. by law if such director by law if such director
or officer is involved or officer is involved
in litigation by reason in litigation by reason
of the fact that he or of the fact that he or
she is (or was) a she is (or was) a
director or officer, and director or officer, and
provide in addition that provide in addition that
the corporation may the corporation may
indemnify any person, purchase and maintain
other than a director or insurance on behalf of
officer, if such person any person who is (or
is involved in was) a director,
litigation by reason of officer, employee or
the fact that he or she agent of the corporation
is (or was) an employee. against any liability
asserted against him or
her and incurred by him
or her in any such
capacity, or arising out
of his or her status as
such.
The bylaws of ASARCO
provide that the
corporation will
indemnify any director,
officer, or employee to
the fullest extent
permitted by law if such
director, officer, or
employee is involved in
litigation by reason of
the fact that he or she
is (or was) a director,
officer, or employee.
</TABLE>
93
<PAGE>
Comparison of Certain Statutory Provisions
Appraisal Rights
ASARCO Stockholder Rights
Under New Jersey law, appraisal rights are available in connection with a
merger or consolidation or any sale, lease or exchange or other disposition of
all or substantially all of a corporation's assets other than in the usual and
regular course of business, unless an exception applies or the corporation's
certificate of incorporation provides otherwise. ASARCO's certificate of
incorporation does not provide otherwise.
Appraisal rights are not available under New Jersey law to stockholders of a
surviving corporation with respect to a merger if the merger did not require
stockholder approval.
In addition, unless provided for in the corporation's certificate of
incorporation, no appraisal rights are available in a merger or consolidation
with respect to shares
. which are listed on a national securities exchange or are held of record
by at least 1,000 holders, or
. for which, pursuant to the merger or consolidation, the stockholder will
receive cash, shares, obligations or other securities of the kind
described by the previous bulleted item or cash and such securities.
Furthermore, unless provided in the corporation's certificate of
incorporation, no appraisal rights are available in a sale, lease, exchange or
other disposition of all or substantially all of a corporation's assets
. with respect to shares which are listed on a national securities
exchange or are held of record by at least 1,000 holders, or
. from a dissolution transaction in which substantially all of a
corporation's net assets are to be distributed to its stockholders
within one year after the date of the transaction, so long as the
transaction is wholly for cash, shares, obligations or other securities
which will be listed on a national securities exchange or held of record
by not less than 1,000 holders or cash and such securities.
Cyprus Amax Stockholder Rights
Under Delaware law, the rights of dissenting stockholders to obtain the fair
value for their shares (so-called "appraisal rights") may be available in
connection with a statutory merger or consolidation in certain specific
situations. Appraisal rights are not available to a corporation's stockholders
under Delaware law when the corporation is to be the surviving corporation and
no vote of its stockholders is required to approve the merger.
In addition, unless otherwise provided in the certificate of incorporation,
no appraisal rights are available under Delaware law to holders of shares of
any class of stock which is either (1) listed on a national securities
exchange or designated as a national market system security on an inter dealer
quotation system by NASD or (2) held of record by more than 2,000
stockholders, unless such stockholders are required by the terms of the merger
to accept anything other than:
. shares of stock of the surviving corporation;
. shares of stock of another corporation which, as of the effective date
of the merger or consolidation, are the kind described in clauses (1)
and (2) above;
. cash instead of fractional shares of such stock; or
. any combination of the consideration described above in the three
bulleted items.
Appraisal rights are not available under Delaware law in the event of the
sale of all or substantially all of a corporation's assets or the adoption of
an amendment to its certificate of incorporation, unless such rights are
granted in the corporation's certificate of incorporation. The Cyprus Amax
certificate of incorporation does not grant such rights.
94
<PAGE>
Asarco Cyprus Stockholder Rights
The holders of Asarco Cyprus common stock and Asarco Cyprus preferred stock
will have appraisal rights to the extent appraisal rights are available under
Delaware law.
Certain Business Combinations
ASARCO Stockholder Rights
New Jersey law restricts the ability of certain persons to acquire control
of a New Jersey corporation.
In general, a New Jersey corporation with its principal executive offices or
significant operations in New Jersey may not engage in a business combination
with an interested stockholder for a period of five years following the
interested stockholder's becoming such. Such a business combination would be
permitted where it is approved by the board of directors prior to the stock
acquisition.
Covered business combinations include certain mergers, dispositions of
assets or shares and recapitalizations. An interested stockholder is generally
a stockholder owning at least 10% of the voting power of a corporation's
outstanding shares.
In addition, New Jersey corporations may not engage at any time with any
interested shareholder in a business combination other than:
. a business combination approved by the board of directors of such
corporation prior to the stock acquisition,
. a business combination approved by the affirmative vote of the holders
of 66 2/3% of the voting stock not beneficially owned by such interested
shareholder at a meeting for such purpose, or
. a business combination in which the interested shareholder pays a
formula price designed to ensure that all other shareholders receive at
least the highest price per share paid by such interested shareholder.
A New Jersey corporation may not opt out of the foregoing provisions and the
ASARCO board of directors has taken the necessary action to make the foregoing
provisions of New Jersey law inapplicable to the business combination and the
related transactions.
The ASARCO certificate of incorporation provides that certain transactions,
including a merger, significant asset sales and certain issuances or transfers
of securities, with the beneficial owner of more than 10% of any class of
capital stock of ASARCO generally require the affirmative vote of the holders
of 80% of the outstanding shares of all classes of stock, voting together as a
single class.
The ASARCO certificate of incorporation also provides that certain
affiliated transactions with an interested stockholder or any affiliate of an
interested shareholder of ASARCO require, in addition to any vote required by
law or in the ASARCO certificate of incorporation or by-laws, approval by a
majority of the continuing directors.
Affiliated Transaction is defined in ASARCO's certificate of incorporation,
and generally includes significant transactions involving aggregate fair
market value or commitments of more than $10 million or more than 1% of
ASARCO's consolidated assets, and certain other material arrangements.
Interested Stockholder is also defined in the ASARCO certificate of
incorporation and generally means a beneficial owner of voting stock
representing 10% or more of the votes entitled to be cast by the holders of
all then outstanding shares of voting stock of ASARCO. Continuing Director is
also defined in the ASARCO certificate of incorporation and generally means a
director that is not affiliated with the interested stockholder and that was a
director before the stockholder became an interested stockholder.
95
<PAGE>
The ASARCO Board of Directors has taken the necessary action to make the
foregoing provisions of the ASARCO certificate of incorporation inapplicable
to the business combination and the related transactions.
Cyprus Amax Stockholder Rights
Section 203 of the Delaware General Corporation Law provides that, if a
person acquires 15% or more of the stock of a Delaware corporation without the
approval of the board of directors of that corporation, thereby becoming an
interested stockholder, that person generally may not engage in certain
transactions with the corporation for a period of three years unless one of
the following three exceptions applies:
. the board of directors approved the acquisition of stock or the
transaction prior to the time that the person became an interested
stockholder,
. upon consummation of the transaction in which the person became an
interested stockholder, the interested stockholder became an 85% owner
of the voting stock of the corporation in the transaction, excluding
voting stock owned by directors who are also officers and certain
employee stock plans, or
. the transaction is approved by the board of directors and by the
affirmative vote of 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
The Cyprus Amax certificate of incorporation provides that certain
transactions with the beneficial owner of 10% of the voting power of the
outstanding voting stock, including a merger, significant dispositions of
assets, certain issuances or transfers of securities, certain plans of
liquidation and dissolution, and certain reclassifications of securities,
generally require the affirmative vote of 75% of the voting power of the
outstanding shares of stock entitled to vote in the election of directors.
Asarco Cyprus Stockholder Rights
Asarco Cyprus will be governed by Section 203 of the Delaware General
Corporation Law. The Asarco Cyprus certificate of incorporation does not
contain a provision with respect to transactions with "interested
stockholders."
96
<PAGE>
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION
OF ASARCO COMMON STOCK AND CYPRUS AMAX COMMON STOCK
It is a condition to the business combination that the shares of Asarco
Cyprus common stock to be issued in the business combination be approved for
listing on the New York Stock Exchange. If the business combination is
completed, the ASARCO common stock and the Cyprus Amax common stock will no
longer be listed on the New York Stock Exchange or any other exchanges.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Cyprus Amax Minerals Company
incorporated in this joint proxy statement and prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1998, have been so
incorporated in reliance on the audit report of PricewaterhouseCoopers LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
With respect to the unaudited consolidated financial information of Cyprus
Amax Minerals Company for the three-month and six-month periods ended March 31,
1999 and 1998 and June 30, 1999 and 1998, respectively, incorporated by
reference in this joint proxy statement and prospectus, PricewaterhouseCoopers
LLP reported that they have applied limited procedures in accordance with
professional standards for the review of such information. However, their
separate reports dated May 14, 1999 and August 4, 1999 incorporated by
reference in this joint proxy statement and prospectus, state that they did not
audit and they do not express an opinion on that unaudited consolidated
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the
review procedures applied. PricewaterhouseCoopers LLP is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited consolidated financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11
of the Securities Act.
The consolidated financial statements of ASARCO incorporated in this joint
proxy statement and prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 1998, have been so incorporated in reliance on
the audit report of PricewaterhouseCoopers LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of ASARCO
for the three-month and six-month periods ended March 31, 1999 and 1998 and
June 30, 1999 and 1998, respectively, incorporated by reference in this joint
proxy statement and prospectus, PricewaterhouseCoopers LLP reported that they
have applied limited procedures in accordance with professional standards for
the review of such information. However, their separate reports dated April 20,
1999 and July 21, 1999 incorporated by reference in this joint proxy statement
and prospectus, state that they did not audit and they do not express an
opinion on that unaudited consolidated financial information. Accordingly, the
degree of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of
Section 11 of the Securities Act for their report on the unaudited consolidated
financial information because that report is not a "report" or a "part" of the
registration statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Securities Act.
LEGAL MATTERS
The validity of the Asarco Cyprus common stock and Asarco Cyprus Series A
convertible preferred stock to be issued in connection with the business
combination will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP.
97
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
ASARCO and Cyprus Amax file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information we file at
the Securities and Exchange Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference rooms. The SEC filings of ASARCO and Cyprus Amax are also available
to the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
Asarco Cyprus has filed a Registration Statement on Form S-4 to register with
the SEC for the Asarco Cyprus common stock to be issued to ASARCO stockholders
and Cyprus Amax stockholders in the business combination. This joint proxy
statement and prospectus is a part of that Registration Statement and
constitutes a prospectus of Asarco Cyprus in addition to being a proxy
statement of ASARCO and Cyprus Amax for the special meetings. As allowed by SEC
rules, this document does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement and prospectus. This means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement and prospectus, except for any information superseded by
information in this joint proxy statement and prospectus. This joint proxy
statement and prospectus incorporate by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their finances.
<TABLE>
<CAPTION>
ASARCO SEC Filing Period
(File No. 1-164)
<S> <C>
Annual Report on Form 10-K/A Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Quarterly Report on Form 10-Q Quarter ended June 30, 1999
Current Report on Form 8-K Filed on July 20, 1999
Cyprus Amax SEC Filing (File Period
No. 1-10040)
Annual Report on Form 10-K/A Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Quarterly Report on Form 10-Q Quarter ended June 30, 1999
Current Reports on Form 8-K Filed on February 24, 1999, July 14, 1999
and July 21, 1999
</TABLE>
We are also incorporating by reference additional documents that we file with
the SEC between the date of this joint proxy statement and prospectus and the
dates of the special meetings of our stockholders.
ASARCO has supplied all information contained or incorporated by reference in
this document relating to ASARCO and Cyprus Amax has supplied all information
contained or incorporated by reference in this document relating to Cyprus
Amax.
If you are a stockholder, we may have previously sent you some of the
documents incorporated by reference. You can obtain any of the incorporated
documents by contacting us or the SEC. We will send you the documents
incorporated by reference without charge, excluding exhibits to the information
that is incorporated by reference, unless we have specifically incorporated by
reference the exhibit in this document.
98
<PAGE>
Stockholders may obtain documents incorporated by reference in this document
by requesting them in writing or by telephone from the appropriate party at the
following addresses:
ASARCO Incorporated Cyprus Amax Minerals Company
180 Maiden Lane 9100 East Mineral Circle
New York, New York 10038 Englewood, Colorado 80112
(212) 510-2000 (303) 643-5000
If you would like to request documents from us, including any documents we
may subsequently file with the Securities and Exchange Commission prior to the
special meetings, please do so by September 23, 1999 so that you will receive
them before the special meetings.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement and prospectus to vote on the mergers.
We have not authorized anyone to provide you with information that is different
from what is contained in this joint proxy statement and prospectus. This joint
proxy statement and prospectus is dated August 20, 1999. You should not assume
that the information contained in this joint proxy statement and prospectus is
accurate as of any date other than such date, and neither the mailing of the
joint proxy statement and prospectus to stockholders nor the issuance of Asarco
Cyprus common stock in the mergers shall create any implication to the
contrary.
By order of the Board of Directors, By order of the Board of
ASARCO Incorporated Directors,
Robert Ferri Cyprus Amax Minerals Company
Secretary Philip C. Wolf
Senior Vice President,
General Counsel and Secretary
99
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
among
ASARCO CYPRUS INCORPORATED
ACO ACQUISITION CORP.
CAM ACQUISITION CORP.
ASARCO INCORPORATED
and
CYPRUS AMAX MINERALS COMPANY
Dated as of July 15, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGERS; CLOSING
<TABLE>
<C> <S> <C>
Section 1.1 The ASARCO Merger........................................ A-1
Section 1.2 The Cyprus Merger........................................ A-2
Section 1.3 Closing.................................................. A-2
Section 1.4 Effective Time........................................... A-2
Section 1.5 Effects of the Mergers................................... A-2
Section 1.6 Directors................................................ A-3
Section 1.7 Parent Charter Documents................................. A-3
ARTICLE II
EFFECT OF THE MERGERS ON THE STOCK OF ASARCO
AND CYPRUS; EXCHANGE OF CERTIFICATES
Section 2.1 Effect on ASARCO Stock and SubA Stock.................... A-3
Section 2.2 Effect on Cyprus Stock and SubC Stock.................... A-3
Section 2.3 Exchange of Certificates................................. A-4
Section 2.4 Dissenting Shares........................................ A-7
ARTICLE III
GOVERNANCE
Section 3.1 Board of Directors and Committees of Parent.............. A-7
Section 3.2 Key Executive Officers of Parent......................... A-8
Section 3.3 Name..................................................... A-8
Section 3.4 Parent Corporate Headquarters............................ A-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Organization, Qualification, Etc......................... A-8
Section 4.2 Capital Stock............................................ A-9
Section 4.3 Corporate Authority Relative to this Agreement........... A-10
Section 4.4 Non-Conventional Consents and Approvals.................. A-11
Section 4.5 Reports and Financial Statements......................... A-11
Section 4.6 Environmental Matters.................................... A-12
Section 4.7 Employee Benefit Plans; ERISA............................ A-13
Section 4.8 Joint Proxy Statement; Registration Statement; Other
Information.............................................. A-15
Section 4.9 ASARCO Rights Plan....................................... A-15
Section 4.10 Cyprus Rights Plan....................................... A-15
Section 4.11 Tax Matters.............................................. A-15
Section 4.12 Opinion of Financial Advisors............................ A-16
Section 4.13 Required Vote............................................ A-17
Section 4.14 Absence of Certain Changes............................... A-17
Section 4.15 No Undisclosed Material Liabilities...................... A-18
Section 4.16 Labor Relations.......................................... A-18
Section 4.17 No Prior Activities...................................... A-18
</TABLE>
i
<PAGE>
<TABLE>
ARTICLE V
COVENANTS AND AGREEMENTS
<C> <S> <C>
Section 5.1 Conduct of Business Pending the Effective Time........... A-18
Section 5.2 Investigation ........................................... A-20
Section 5.3 Stockholder Approvals and Other Cooperation.............. A-20
Section 5.4 Affiliate Agreements..................................... A-21
Section 5.5 Cyprus Employee Stock Options, Incentive and Benefit
Plans.................................................... A-22
Section 5.6 ASARCO Employee Stock Options, Incentive and Benefit
Plans.................................................... A-23
Section 5.7 Filings; Other Action.................................... A-24
Section 5.8 Further Assurances....................................... A-24
Section 5.9 Takeover Statute......................................... A-25
Section 5.10 No Solicitation by Cyprus................................ A-25
Section 5.11 No Solicitation by ASARCO................................ A-26
Section 5.12 Public Announcements..................................... A-26
Section 5.13 Indemnification and Insurance............................ A-27
Section 5.14 Accountants' "Comfort" Letters........................... A-27
Section 5.15 Additional Reports....................................... A-27
Section 5.16 Disclosure Schedule Supplements.......................... A-28
Section 5.17 Parent Shareholder Rights Plans.......................... A-28
Section 5.18 Shareholder Litigation................................... A-28
Section 5.19 Section 16(b)............................................ A-28
Section 5.20 Change of Control Agreements............................. A-28
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Mergers.................................................. A-29
Section 6.2 Conditions to Obligations of Cyprus to Effect the Cyprus
Merger................................................... A-30
Section 6.3 Conditions to Obligations of ASARCO to Effect the ASARCO
Merger................................................... A-30
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.1 Termination or Abandonment............................... A-30
Section 7.2 Effect of Termination.................................... A-31
Section 7.3 Termination Fee.......................................... A-31
Section 7.4 Amendment or Supplement.................................. A-32
Section 7.5 Extension of Time, Waiver, Etc........................... A-32
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties............ A-32
Section 8.2 Expenses................................................. A-32
Section 8.3 Counterparts; Effectiveness.............................. A-33
Section 8.4 Governing Law............................................ A-33
Section 8.5 Notices.................................................. A-33
Section 8.6 Assignment; Binding Effect............................... A-33
Section 8.7 Severability............................................. A-33
Section 8.8 Enforcement of Agreement................................. A-34
Section 8.9 Entire Agreement; No Third-Party Beneficiaries........... A-34
Section 8.10 Headings................................................. A-34
Section 8.11 Definitions.............................................. A-34
Section 8.12 Finders or Brokers....................................... A-34
</TABLE>
ii
<PAGE>
LIST OF EXHIBITS
Exhibit A--Form of Certificate of Incorporation of SubA
Exhibit B--Form of Certificate of Incorporation of SubC
Exhibit C--Form of Certificate of Incorporation of Parent
Exhibit D--Form of Bylaws of Parent
Exhibit E--Form of Rights Plan of Parent
Exhibit F--Form of Cyprus Affiliate Letter
Exhibit G--Form of ASARCO Affiliate Letter
iii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Section
- ------------ ------------
<S> <C>
affiliates........................................................ 8.11
Agreement......................................................... Introduction
ASARCO............................................................ Introduction
ASARCO Acquisition Agreement...................................... 5.11(b)
ASARCO Award...................................................... 5.6(b)
ASARCO Certificates............................................... 2.1(b)
ASARCO Common Stock............................................... 1.1(a)
ASARCO Disclosure Schedule........................................ Article IV
ASARCO Indemnified Parties........................................ 5.13(c)
ASARCO Merger..................................................... 1.1(a)
ASARCO Merger Consideration....................................... 2.1(b)
ASARCO Option Plans............................................... 5.6(a)
ASARCO Policy..................................................... 5.13(d)
ASARCO SAR........................................................ 5.6(a)
ASARCO Shareholder Approval....................................... 4.13(a)
ASARCO Shareholders Meeting....................................... 5.3(c)(iii)
ASARCO Stock Options.............................................. 5.6(a)
ASARCO Surviving Corporation...................................... 1.1(a)
ASARCO Takeover Proposal.......................................... 5.11(a)
CERCLA............................................................ 4.6(d)
Certificates...................................................... 2.2(c)
Cyprus............................................................ Introduction
Cyprus Acquisition Agreement...................................... 5.10(b)
Cyprus Award...................................................... 5.5(b)
Cyprus Certificates............................................... 2.2(b)
Cyprus Common Stock............................................... 1.2(a)
Cyprus Disclosure Schedule........................................ Article IV
Cyprus Indemnified Parties........................................ 5.13(a)
Cyprus Merger..................................................... 1.2(a)
Cyprus Merger Consideration....................................... 2.2(b)
Cyprus Option Plans............................................... 5.5(a)
Cyprus Policy..................................................... 5.13(b)
Cyprus Preferred Certificates..................................... 2.2(c)
Cyprus Preferred Stock............................................ 2.2(c)(i)
Cyprus SAR........................................................ 5.5(a)
Cyprus Shareholder Approval....................................... 4.13(b)
Cyprus Shareholders Meeting....................................... 5.3(c)(ii)
Cyprus Stock Options.............................................. 5.5(a)
Cyprus Surviving Corporation...................................... 1.2(a)
Cyprus Takeover Proposal.......................................... 5.10(a)
Closing........................................................... 1.3
Closing Date...................................................... 1.3
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Defined Term Section
- ------------ ------------
<S> <C>
Code.............................................................. Introduction
Combination....................................................... Introduction
Common Shares Trust............................................... 2.3(e)(iii)
Confidentiality Agreement......................................... 5.2
control........................................................... 8.11
Current Representing Party Group.................................. 4.11(a)
DGCL.............................................................. 1.2(a)
Dissenting Preferred Shares....................................... 2.4(a)
Effective Time.................................................... 1.4
Employee Benefit Plan............................................. 4.7(g)(i)
Encumbrance....................................................... 4.1(c)
Environmental Claim............................................... 4.6(d)(i)
Environmental Law................................................. 4.6(d)(ii)
Environmental Permits............................................. 4.6(a)
ERISA............................................................. 4.7(g)(i)
ERISA Affiliate................................................... 4.7(g)(iii)
Excess Shares..................................................... 2.3(e)(ii)
Exchange Act...................................................... 4.5
Exchange Agent.................................................... 2.3(a)
Exchange Fund..................................................... 2.3(a)
First Annual Meeting.............................................. 3.1(a)
GAAP.............................................................. Introduction
Governmental Entity............................................... 4.4(a)
Hazardous Materials............................................... 4.6(d)(iii)
HSR Act........................................................... 6.1(e)
IRS............................................................... 4.7(b)
Joint Proxy Statement............................................. 4.8
Law............................................................... 4.4(a)
Material Adverse Effect........................................... 4.1
Merger Consideration.............................................. 2.3(b)
Mergers........................................................... 1.2(a)
Multiemployer Plan................................................ 4.7(a)
NJBCA............................................................. 1.1(a)
NYSE.............................................................. 2.3(e)(ii)
Option Agreements................................................. Introduction
Parent............................................................ Introduction
Parent Certificates............................................... 2.1(b)
Parent Common Stock............................................... 1.1(a)
Parent Preferred Stock............................................ 1.2(b)
Parent Rights Plan................................................ 1.7
Past Representing Party Group..................................... 4.11(a)
person............................................................ 8.11
Plan.............................................................. 4.7(g)(ii)
Preferred Merger Consideration.................................... 2.2(c)
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Defined Term Section
- ------------ ------------
<S> <C>
Registration Statement............................................ 5.3(a)(i)
Representing Party................................................ Article IV
Representing Party Affiliated Group............................... 4.13(a)
Representing Party Agreements..................................... 4.4(a)
Representing Party's Disclosure Schedule.......................... Article IV
Required Statutory Approvals...................................... 4.4(b)
Required Third Party Consents..................................... 4.4(b)
SEC............................................................... 4.5(a)
Second Annual Meeting............................................. 3.1(a)
SEC Reports....................................................... 4.5
Securities Act.................................................... 4.5
Significant Subsidiaries.......................................... 8.11
SubA.............................................................. Introduction
SubC.............................................................. Introduction
Subsidiaries...................................................... 8.11
Surviving Corporations............................................ 1.2(a)
Tax Certificates.................................................. 5.3(a)(v)
Tax Return........................................................ 4.11
Taxes............................................................. 4.11
Termination Date.................................................. 5.1
Termination Fee................................................... 7.3(a)
</TABLE>
vi
<PAGE>
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 15, 1999 (the
"Agreement"), among ASARCO CYPRUS INCORPORATED, a Delaware corporation
("Parent"), ACO ACQUISITION CORP., a New Jersey corporation ("SubA"), CAM
ACQUISITION CORP., a Delaware corporation ("SubC"), ASARCO INCORPORATED, a New
Jersey corporation ("ASARCO"), and CYPRUS AMAX MINERALS COMPANY, a Delaware
corporation ("Cyprus").
WHEREAS, ASARCO and Cyprus desire to combine their respective businesses,
shareholders, managements, employees and other constituencies in a merger-of-
equals transaction upon the terms and subject to the conditions in this
Agreement (the "Combination");
WHEREAS, (i) Parent is a newly formed corporation organized and existing
under the laws of the State of Delaware; (ii) ASARCO is a corporation organized
and existing under the laws of the State of New Jersey; and (iii) Cyprus is a
corporation organized and existing under the laws of the State of Delaware;
WHEREAS, ASARCO and Cyprus have caused Parent to form SubA and SubC, each a
wholly owned subsidiary of Parent, and all the outstanding capital stock of
each of SubA and SubC is owned by Parent;
WHEREAS, the Board of Directors of each of ASARCO and Cyprus deem it
advisable and in the best interests of their shareholders to effect the
Combination by causing each of ASARCO and Cyprus to become subsidiaries of
Parent pursuant to the Mergers as provided for in this Agreement;
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Combination and also to
prescribe various conditions to the Combination;
WHEREAS, for U.S. federal income tax purposes, it is intended that (i) the
ASARCO Merger, taken together with the Cyprus Merger, will qualify as a
transaction described in Section 351 and/or the ASARCO Merger will qualify as a
transaction described in Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and (ii) the Cyprus Merger, taken together with the
ASARCO Merger, will qualify as a transaction described in Section 351 of the
Code; and
WHEREAS, for financial accounting purposes, it is intended that the
transactions contemplated by this Agreement will be accounted for as a purchase
transaction in accordance with United States generally accepted accounting
principles ("GAAP");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and fully intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGERS; CLOSING
Section 1.1 The ASARCO Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the New Jersey Business Corporation Act (the
"NJBCA"), SubA shall merge with and into ASARCO (the "ASARCO Merger") at the
Effective Time. ASARCO shall be the surviving corporation in the ASARCO Merger
(the "ASARCO Surviving Corporation") and shall thereupon become a wholly owned
subsidiary of Parent. From and after the Effective Time, the identity and
separate existence of SubA shall cease.
(b) In connection with the ASARCO Merger, ASARCO and Cyprus shall take such
actions as may be necessary to cause Parent to reserve a sufficient number of
shares of common stock, par value $.01 per share, of Parent (the "Parent Common
Stock"), prior to the ASARCO Merger, to permit the issuance of shares of Parent
Common Stock (i) to the holders of common stock, no par value per share, of
ASARCO (the "ASARCO Common Stock") as of the Effective Time in accordance with
the terms of this Agreement, and (ii) upon the exercise of ASARCO Stock Options
being assumed by Parent in accordance with Section 5.6 hereof.
A-1
<PAGE>
Section 1.2 The Cyprus Merger.
(a) Upon the terms and subject to the conditions set forth in this Agreement
and in accordance with the Delaware General Corporation Law (the "DGCL"), SubC
shall merge with and into Cyprus (the "Cyprus Merger," and together with the
ASARCO Merger, the "Mergers") at the Effective Time. Cyprus shall be the
surviving corporation in the Cyprus Merger (the "Cyprus Surviving Corporation"
and together with the ASARCO Surviving Corporation, the "Surviving
Corporations") and shall thereupon become a wholly owned subsidiary of Parent.
From and after the Effective Time, the identity and separate existence of SubC
shall cease.
(b) In connection with the Cyprus Merger, Cyprus and ASARCO shall take such
actions as may be necessary to cause Parent to reserve a sufficient number of
shares of Parent Common Stock, prior to the Cyprus Merger, to permit the
issuance of shares of Parent Common Stock (i) to the holders of common stock,
no par value per share, of Cyprus (the "Cyprus Common Stock") as of the
Effective Time in accordance with the terms of this Agreement, (ii) to holders
of a new series of convertible preferred stock to be issued by Parent at the
Effective Time and to be designated as $4.00 Series A Convertible Preferred
Stock (the "Parent Preferred Stock"), who convert such shares subsequent to the
Effective Time in accordance with the terms of the Parent Preferred Stock, and
(iii) upon the exercise of Cyprus Stock Options being assumed by Parent in
accordance with Section 5.5 hereof.
Section 1.3 Closing. The closing of the Mergers (the "Closing") will take
place at 10:00 a.m. local time on the day following the later of the Cyprus
Shareholder Meeting and the ASARCO Shareholder Meeting (the "Closing Date"),
but shall in no event be later than the second business day after satisfaction
or waiver of the conditions set forth in Article VI unless another time or date
is agreed to by the parties hereto. The Closing will be held at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY,
unless another place is agreed to by the parties hereto.
Section 1.4 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on or after the Closing Date: (a) with respect to the
ASARCO Merger, the parties shall file with the Secretary of State of the State
of New Jersey a certificate of merger duly completed and executed in accordance
with the relevant provisions of the NJBCA and shall make all other filings or
recordings required under the NJBCA in order to effect the ASARCO Merger; and
(b) with respect to the Cyprus Merger, the parties shall file with the
Secretary of State of the State of Delaware a certificate of merger duly
completed and executed in accordance with the relevant provisions of the DGCL
and shall make all other filings required under the DGCL to effect the Cyprus
Merger. Each Merger shall become effective at the actual time of the filing of
both such certificates of merger, or of the later to be filed of such
certificates of merger, or at such other later time as is reasonably specified
in the certificates of merger (the time at which both Mergers have become fully
effective being hereinafter referred to as the "Effective Time").
Section 1.5 Effects of the Mergers.
(a) NJBCA. The ASARCO Merger shall have the effects set forth in Section
14A:10-6 of the NJBCA.
(b) DGCL. The Cyprus Merger shall have the effects set forth in Section 259
of the DGCL.
(c) Names of Surviving Corporations. The names of the ASARCO Surviving
Corporation and the Cyprus Surviving Corporation from and after the Effective
Time shall be "ASARCO Incorporated" and "Cyprus Amax Minerals Company,"
respectively, until changed or amended in accordance with applicable Law.
(d) Charter Documents. At the Effective Time (i) the Certificate of
Incorporation substantially in the form of Exhibit A hereto and the Bylaws of
SubA, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and Bylaws, respectively, of the ASARCO Surviving
Corporation, and (ii) the Certificate of Incorporation substantially in the
form of Exhibit B hereto and the Bylaws of SubC, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation and Bylaws,
respectively, of the Cyprus Surviving Corporation.
A-2
<PAGE>
Section 1.6 Directors.
(a) SubA. The directors of SubA at the Effective Time shall be the directors
of the ASARCO Surviving Corporation until the next annual meeting of
shareholders of ASARCO (or their earlier resignation or removal) and until
their respective successors are duly elected and qualified, as the case may be.
(b) SubC. The directors of SubC at the Effective Time shall be the directors
of the Cyprus Surviving Corporation until the next annual meeting of
shareholders of Cyprus (or their earlier resignation or removal) and until
their respective successors are duly elected and qualified, as the case may be.
Section 1.7 Parent Charter Documents. At the Effective Time (i) the
Certificate of Incorporation and Bylaws of Parent shall be in full force and
legal effect in the appropriate form of Exhibit C and Exhibit D, respectively,
and (ii) Parent shall have in full force and legal effect a stockholder rights
plan substantially in the form of Exhibit E hereto (the "Parent Rights Plan").
ARTICLE II
EFFECT OF THE MERGERS ON THE STOCK OF
ASARCO AND CYPRUS; EXCHANGE OF CERTIFICATES
Section 2.1 Effect on ASARCO Stock and SubA Stock. As of the Effective Time,
by virtue of the ASARCO Merger and without any action on the part of SubA,
ASARCO or the holders of any securities of SubA or ASARCO:
(a) Cancellation of Treasury Stock and Cyprus Owned Stock. Each share of
ASARCO Common Stock that is owned directly by ASARCO or any of its Subsidiaries
or by Cyprus or any of its Subsidiaries (but not including any such shares
owned by employees or employee benefit or pension plans) shall automatically be
cancelled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(b) Conversion of ASARCO Common Stock. Each issued and outstanding share of
ASARCO Common Stock (other than shares to be cancelled in accordance with
Section 2.1(a)) shall be converted into one (the "ASARCO Merger Exchange
Ratio") fully paid and nonassessable share of Parent Common Stock (such
consideration being referred to herein as the "ASARCO Merger Consideration").
As of the Effective Time, all such shares of ASARCO Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
ASARCO Common Stock (the "ASARCO Certificates") shall cease to have any rights
with respect thereto, except the right to receive (i) certificates ("Parent
Certificates") representing the number of whole shares of Parent Common Stock
into which such shares have been converted, and (ii) certain dividends and
other distributions in accordance with Section 2.3(c).
(c) Conversion of Common Stock of SubA. Each issued and outstanding share of
common stock, par value $.01 per share, of SubA shall be converted into one
fully paid and nonassessable share of common stock of ASARCO Surviving
Corporation.
Section 2.2 Effect on Cyprus Stock and SubC Stock. As of the Effective Time,
by virtue of the Cyprus Merger and without any action on the part of SubC,
Cyprus or the holders of any securities of SubC or Cyprus:
(a) Cancellation of Treasury Stock and ASARCO Owned Stock. Each share of
Cyprus Common Stock that is owned directly by Cyprus or any of its Subsidiaries
or by ASARCO or any of its Subsidiaries (but not including any such shares
owned by employees or employee benefit or pension plans) shall automatically be
cancelled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(b) Conversion of Cyprus Common Stock. Subject to Section 2.3(e), each
issued and outstanding share of Cyprus Common Stock (other than shares to be
cancelled in accordance with Section 2.2(a)) shall be converted into 0.765 (the
"Cyprus Merger Exchange Ratio") of a fully paid and nonassessable share of
Parent Common Stock (such consideration being referred to herein as the "Cyprus
Merger Consideration"). As of the
A-3
<PAGE>
Effective Time, all such shares of Cyprus Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Cyprus Common Stock
(the "Cyprus Certificates") shall cease to have any rights with respect
thereto, except the right to receive (i) Parent Certificates, (ii) certain
dividends and other distributions in accordance with Section 2.3(c), and (iii)
cash in lieu of fractional shares of Parent Common Stock in accordance with
Section 2.3(e), without interest.
(c) Conversion of Cyprus Preferred Stock. At the Effective Time, each issued
and outstanding share of $4.00 Series A Convertible Preferred Stock of Cyprus
(the "Cyprus Preferred Stock"), other than Dissenting Preferred Shares, shall
be converted into one fully paid and nonassessable share of Parent Preferred
Stock (the "Preferred Merger Consideration"). Each holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Cyprus Preferred Stock (the "Cyprus Preferred
Certificates" and together with the Cyprus Certificates and the ASARCO
Certificates, the "Certificates") shall cease to have any rights with respect
thereto, except the right to receive (1) certificates representing shares of
Parent Preferred Stock (the "Parent Preferred Certificates") and (2) certain
dividends and other distributions in accordance with Section 2.3(c). As of the
Effective Time the Certificate of Incorporation of Parent shall include the
section in Exhibit C constituting the designation and terms of the Parent
Preferred Stock.
(d) Conversion of Common Stock of SubC. Each issued and outstanding share of
common stock, par value $.01 per share, of SubC shall be converted into one
fully paid and nonassessable share of common stock of the Cyprus Surviving
Corporation.
(e) Cancellation of Parent Common Stock Owned by ASARCO and Cyprus. Each
share of Parent Common Stock that is owned by ASARCO or by Cyprus immediately
prior to the Effective Time shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
Section 2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall enter into an
agreement with such bank or trust company as may be designated by ASARCO and
Cyprus (the "Exchange Agent"), which shall provide that Parent shall deposit
with the Exchange Agent as of the Effective Time, for the benefit of the
holders of shares of ASARCO Common Stock and shares of Cyprus Common Stock and
Cyprus Preferred Stock, for exchange in accordance with this Article II,
through the Exchange Agent, (i) Parent Certificates representing the number of
whole shares of Parent Common Stock issuable pursuant to Section 2.1 in
exchange for outstanding shares of ASARCO Common Stock and pursuant to Section
2.2 in exchange for outstanding shares of Cyprus Common Stock, and (ii) Parent
Preferred Certificates representing the number of shares of Parent Preferred
Stock issuable pursuant to Section 2.2(c) in exchange for outstanding shares of
Cyprus Preferred Stock (such shares of Parent Common Stock and Parent Preferred
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time, any Excess Shares and any cash (including
cash proceeds from the sale of the Excess Shares) payable in lieu of any
fractional shares of Parent Common Stock being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted into the ASARCO Merger Consideration,
pursuant to Section 2.1, or the Cyprus Merger Consideration or the Preferred
Merger Consideration pursuant to Section 2.2 (collectively, the "Merger
Consideration") (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as ASARCO and Cyprus may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor, in the case of holders of ASARCO
Certificates and Cyprus Certificates, a Parent Certificate representing that
number of whole shares of Parent Common Stock which such holder has
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the right to receive pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.3(c) and cash in
lieu of any fractional share in accordance with Section 2.3(e), and, in the
case of holders of Cyprus Preferred Certificates, a Parent Preferred
Certificate representing the number of shares of Parent Preferred Stock which
such holder has the right to receive pursuant to this Article II and certain
dividends or other distributions in accordance with Section 2.3(c), and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of ASARCO Common Stock not registered in the transfer
records of ASARCO or of Cyprus Common Stock or Cyprus Preferred Stock not
registered in the transfer records of Cyprus, a Parent Certificate representing
the proper number of shares of Parent Common Stock, or in the case of Cyprus
Preferred Stock, a Parent Preferred Certificate representing the proper number
of shares of Parent Preferred Stock, may be issued to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer, and the person requesting such issuance shall pay all transfer or
other non-income Taxes required by reason of the issuance of shares of Parent
Common Stock or Parent Preferred Stock, as the case may be, to a person other
than the registered holder of such Certificate or establish to the satisfaction
of Parent that such Tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.3, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender, in the case of holders of ASARCO Certificates and Cyprus
Certificates, Parent Certificates representing the number of whole shares of
Parent Common Stock into which the shares of ASARCO Common Stock or Cyprus
Common Stock formerly represented by such Certificate have been converted,
certain dividends or other distributions in accordance with Section 2.3(c) and
cash in lieu of any fractional share in accordance with Section 2.3(e), and in
the case of holders of Cyprus Preferred Certificates, a Parent Preferred
Certificate representing the number of shares of Parent Preferred Stock which
such holder has the right to receive pursuant to this Article II and certain
dividends or other distributions in accordance with Section 2.3(c). No interest
will be paid or will accrue on any cash payable to holders of Certificates
pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock or Parent Preferred Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock or
Parent Preferred Stock, as the case may be, represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.3(e), and all such dividends, other distributions and cash in lieu
of fractional shares of Parent Common Stock or Parent Preferred Stock, as the
case may be, shall be paid by Parent to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar Laws, following surrender of any such Certificate
there shall be paid to the holder of the Parent Certificate representing whole
shares of Parent Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.3(e), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock. Subject to the effect of applicable escheat or similar
Laws, following surrender of any Cyprus Preferred Certificate there shall be
paid to the holder of the Parent Preferred Certificate representing shares of
Parent Preferred Stock issued in exchange therefor, without interest, (i) at
the time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
shares of Parent Preferred Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent
to such surrender payable with respect to such shares of Parent Preferred
Stock. Parent shall make available to the Exchange Agent cash for these
purposes.
(d) No Further Ownership Rights in ASARCO Common Stock, Cyprus Common Stock
and Cyprus Preferred Stock. All shares of Parent Common Stock and Parent
Preferred Stock issued upon the surrender for
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exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of ASARCO Common Stock, Cyprus Common Stock and Cyprus Preferred Stock
theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been authorized or made by ASARCO on such shares of ASARCO Common Stock or by
Cyprus on such shares of Cyprus Common Stock and Cyprus Preferred Stock, as the
case may be, which remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of the applicable
Surviving Corporation of the shares of ASARCO Common Stock, Cyprus Common Stock
and Cyprus Preferred Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to a
Surviving Corporation or the Exchange Agent for any reason, they shall be
cancelled and exchanged as provided in this Article II, except as otherwise
provided by Law.
(e) No Fractional Shares. (i) No Parent Certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Parent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent will determine the excess of (A) the number of whole shares
of Parent Common Stock delivered to the Exchange Agent by Parent pursuant
to Section 2.3(a)(i) for exchange pursuant to Section 2.2 for outstanding
shares of Cyprus Common Stock over (B) the aggregate number of whole shares
of Parent Common Stock to be distributed to holders of Cyprus Common Stock
pursuant to Section 2.3(b) (such excess being herein called the "Excess
Shares"). Following the Effective Time, the Exchange Agent will, on behalf
of former shareholders of Cyprus, sell the Excess Shares at then-prevailing
prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner
provided in Section 2.3(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and will
be executed in round lots to the extent practicable. The Exchange Agent
will use reasonable efforts to complete the sale of the Excess Shares as
promptly following the Effective Time as, in the Exchange Agent's sole
judgment, is practicable consistent with obtaining the best execution of
such sales in light of prevailing market conditions. Until the net proceeds
of such sale or sales have been distributed to the holders of Cyprus Common
Stock, the Exchange Agent will hold such proceeds in trust for the holders
of Cyprus Common Stock (the "Common Shares Trust"). The Parent will pay all
commissions, transfer Taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent incurred in
connection with such sale of the Excess Shares. The Exchange Agent will
determine the portion of the Common Shares Trust to which each holder of
Cyprus Common Stock is entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction,
the numerator of which is the amount of the fractional share interest to
which such holder of Cyprus Common Stock is entitled (after taking into
account all shares of Cyprus Common Stock held at the Effective Time by
such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Cyprus Common Stock are
entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Cyprus Common Stock with respect to
any fractional share interests, the Exchange Agent will make available such
amounts to such holders of Cyprus Common Stock subject to and in accordance
with the terms of Section 2.3(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates six months after the
Effective Time shall be delivered to Parent upon demand, and any holders of the
Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock or Parent
Preferred Stock.
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(g) No Liability. None of Parent, ASARCO, Cyprus or the Exchange Agent shall
be liable to any person in respect of any shares of Parent Common Stock or
Parent Preferred Stock (or dividends or distributions with respect thereto) or
cash from the Exchange Fund in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law. If any
Certificate shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration, any cash payable to the holder of such Certificate pursuant to
this Article II or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
governmental body or authority) any such Merger Consideration or cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable Law, become the property of the related Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
related Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration and, if applicable, any cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Parent
Common Stock or Parent Preferred Stock as may be deliverable in respect thereof
pursuant to this Agreement.
Section 2.4 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, shares
of Cyprus Preferred Stock that are outstanding immediately prior to the
Effective Time and which are held by persons who shall have properly demanded
in writing appraisal for such shares of Cyprus Preferred Stock in accordance
with Section 262 of the DGCL (collectively, the "Dissenting Preferred Shares")
shall not be converted into or represent the right to receive Parent Preferred
Stock as provided in Section 2.2(c). Such persons shall be entitled to receive
payment of the appraised value of such shares of Cyprus Preferred Stock held by
them in accordance with the provisions of Section 262 of the DGCL, except that
all Dissenting Preferred Shares held by persons who shall have failed to
perfect or who effectively shall have withdrawn or lost their right to
appraisal of such shares under Section 262 shall thereupon be deemed to have
been converted into, as of the Effective Time, the Preferred Merger
Consideration upon surrender of the Certificate therefor in the manner provided
in Section 2.3.
(b) Cyprus shall give ASARCO (i) prompt notice of any demands for appraisal
received by Cyprus, withdrawals of such demands and any other instruments
served pursuant to the DGCL and received by Cyprus, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under the DGCL. Cyprus shall not, except with the prior written
consent of ASARCO, make any payment with respect to any demands for appraisal
or offer to settle or settle any such demands.
ARTICLE III
GOVERNANCE
Section 3.1 Board of Directors and Committees of Parent.
(a) The Board of Directors of Parent shall have 16 members, 8 of which shall
come from the existing ASARCO directors and 8 of which shall come from the
existing Cyprus directors, as designated respectively by ASARCO and Cyprus. The
Board of Directors of Parent shall be divided into three classes, Class I
consisting of 6 directors, Class II consisting of 5 directors, and Class III
consisting of 5 directors, with the term of Class I expiring at Parent's first
annual meeting following the Effective Time (the "First Annual Meeting"), the
term of Class II expiring at the next succeeding annual meeting (the "Second
Annual Meeting") and the term of Class III expiring at the annual meeting next
succeeding the Second Annual Meeting. Class I shall consist of three ASARCO
designees and three Cyprus designees; Class II shall consist of three ASARCO
designees and two Cyprus designees; and Class III shall consist of two ASARCO
designees and three Cyprus designees.
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(b) At the Effective Time, the committees of the Board of Directors of
Parent shall consist of an equal number of ASARCO designees to the Board of
Directors and Cyprus designees to the Board of Directors.
Section 3.2 Key Executive Officers of Parent. Immediately following the
Effective Time, Mr. Milton H. Ward shall be the Chairman of the Board and Co-
Chief Executive Officer of Parent, and Mr. Francis R. McAllister shall be the
President and Co-Chief Executive Officer of Parent. Both Mr. Ward and Mr.
McAllister shall be Class III directors. Immediately after the Effective Time
Mr. Jeffrey G. Clevenger shall be Executive Vice President and Chief Operating
Officer of Parent, and Mr. Kevin R. Morano shall be the Executive Vice
President and Chief Financial Officer of Parent. Both Mr. Clevenger and Mr.
Morano shall be Class I directors. The remaining key executive officers of
Parent shall be jointly designated by Mr. Ward and Mr. McAllister, with the
advice and consent of the Parent Board of Directors. At and effective as of the
First Annual Meeting of Parent, Mr. McAllister shall become the sole Chief
Executive Officer and shall continue as the President of Parent. At and
effective as of December 31, 2000, Mr. McAllister shall become the sole
Chairman of the Board and shall continue as the President and Chief Executive
Officer of Parent, and Mr. Ward will continue as a non-employee director.
Between the First Annual Meeting and December 31, 2000, Mr. Ward will continue
to participate actively in managing the consolidation of the operations of
ASARCO and Cyprus, realizing the synergies expected to be derived from the
Mergers and exploring growth opportunities for Parent. The respective
employment contracts of Mr. McAllister, Mr. Ward, Mr. Clevenger and Mr. Morano
shall include provisions substantially to the foregoing effect. Any changes to
the foregoing arrangements following the Effective Time and prior to the Annual
Meeting of Stockholders in 2002 shall require the affirmative vote of at least
three-quarters of the Directors constituting the entire Board of Directors of
Parent.
Section 3.3 Name. Effective as of the Effective Time the name of Parent
shall be Asarco Cyprus Incorporated.
Section 3.4 Parent Corporate Headquarters. Following the Effective Time,
Parent shall maintain its corporate headquarters at the current corporate
headquarters of ASARCO.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Except as set forth in the disclosure schedule delivered by Cyprus to ASARCO
prior to the execution of this Agreement (the "Cyprus Disclosure Schedule"),
Cyprus hereby represents and warrants to ASARCO, and, except as set forth in
the disclosure schedule delivered by ASARCO to Cyprus prior to the execution of
this Agreement (the "ASARCO Disclosure Schedule"), ASARCO represents and
warrants to Cyprus, in each case as set forth in this Article IV, with the
party making such representations and warranties being referred to as the
"Representing Party" and such Representing Party's Disclosure Schedule as the
"Representing Party's Disclosure Schedule." Notwithstanding the foregoing, any
representation or warranty which expressly refers to ASARCO or Cyprus is being
made solely by ASARCO or Cyprus, as the case may be.
Section 4.1 Organization, Qualification, Etc.
(a) The Representing Party is a corporation duly organized, validly existing
and in good standing (or other equivalent status) under the laws of the
jurisdiction of its incorporation and has the corporate power and authority to
own, operate and lease all of its properties and assets and to carry on its
business as it is now being conducted or presently proposed to be conducted and
is duly qualified to do business and is in good standing (or other equivalent
status) in each jurisdiction in which the ownership, operation or leasing of
its properties or assets or the conduct of its business requires such
qualification, except for jurisdictions in which the failure to be so qualified
or in good standing (or other equivalent status) would not, individually or in
the aggregate, have a Material Adverse Effect on the Representing Party and its
Subsidiaries, taken as a whole. As used in this Agreement, any reference to any
state of facts, event, change or effect having a "Material Adverse Effect" on
or with respect to a Representing Party, means such state of facts, event,
change or effect that has had or would
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reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of the Representing Party and its
Subsidiaries, taken as a whole; provided, however, that any adverse effect that
copper prices have had or may have on the business, results of operations or
financial condition of the Representing Party and its Subsidiaries, taken as a
whole, shall not be deemed a Material Adverse Effect for purposes of this
Agreement. The copies of each Representing Party's Certificate of Incorporation
and Bylaws which have been delivered to the other Representing Party are
complete and correct and in full force and effect.
(b) Each of the Representing Party's Significant Subsidiaries is a
corporation duly organized, validly existing and in good standing (or other
equivalent status) under the laws of its jurisdiction of incorporation or
organization, has the power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted or
presently proposed to be conducted, and is duly qualified to do business and is
in good standing (or equivalent status) in each jurisdiction in which the
ownership, operation or leasing of its properties or assets or the conduct of
its business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing (or other equivalent status)
would not, individually or in the aggregate, have a Material Adverse Effect on
the Representing Party. Each Representing Party has made available to the other
Representing Party complete and correct copies of the certificate of
incorporation, bylaws or other similar governing documents which are in full
force and effect for each of such Representing Party's Significant Subsidiaries
that are not directly or indirectly wholly owned.
(c) All the outstanding shares of capital stock of, or other ownership
interests in, the Representing Party's Subsidiaries are validly issued, fully
paid and non-assessable and are owned of record and beneficially by such
Representing Party, directly or indirectly, free and clear of all Encumbrances.
As used in this Agreement, the term "Encumbrance" means any mortgage, pledge,
lien, charge, encumbrance, defect, security interest, claim, option or
restriction of any kind. There are no (i) securities of the Representing Party
or any of its Subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests in
any of the Representing Party's Subsidiaries, (ii) warrants, calls, options or
other rights to acquire from the Representing Party or any of its Subsidiaries,
or any obligations of the Representing Party or any of its Subsidiaries to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for, any capital
stock, voting securities or ownership interests in any of the Representing
Party's Subsidiaries, or (iii) obligations of the Representing Party or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding
securities of the Representing Party's Subsidiaries or to issue, deliver or
sell, or cause to be issued, delivered or sold, any such securities.
(d) Except for the Representing Party's Subsidiaries, as set forth in
Section 4.1(d) of the Representing Party's Disclosure Schedule or the
Representing Party's (or any of its Subsidiaries') SEC Reports, and in respect
of minerals exploration or development agreements in the ordinary course of
business, the Representing Party (excluding employee pension or benefit plans)
does not own any securities of, or have any debt or equity investment in, or
loans outstanding to, any corporation, partnership, joint venture, limited
liability company or other entity. The Representing Party is not subject to any
contractual obligation under which it may be required to advance or contribute
capital to any entity, except in respect of minerals exploration or development
agreements in the ordinary course of business.
Section 4.2 Capital Stock.
(a) Section 4.2(a) of the Representing Party's Disclosure Schedule sets
forth as of June 30, 1999:
(i) the number of authorized shares of each class or series of capital
stock of the Representing Party;
(ii) the number of shares of each class or series of capital stock of the
Representing Party which are issued and outstanding;
(iii) the number of shares of each class or series of capital stock which
are held in the treasury of such Representing Party;
(iv) the number of shares of each class or series of capital stock of the
Representing Party which are reserved for issuance, indicating each
specific reservation; and
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(v) the number of shares of each class or series of capital stock of such
Representing Party which are subject to employee stock options or other
rights to purchase or receive capital stock granted under such Representing
Party's stock option or other stock based employee or non-employee director
benefit plans, indicating the name of the plan, the date of grant, the
number of shares and the exercise price thereof.
(b) All of the issued and outstanding shares of capital stock of the
Representing Party have been validly issued and are fully paid and
nonassessable. Except as set forth in Section 4.2(a) of the Representing
Party's Disclosure Schedule, there are no authorized, issued, reserved for
issuance or outstanding (i) shares of capital stock or voting securities of the
Representing Party, (ii) securities convertible into or exchangeable for shares
of capital stock or voting securities of the Representing Party, (iii)
warrants, calls, options or other rights to acquire from the Representing Party
or any of its Subsidiaries, or any obligation of the Representing Party or any
of its Subsidiaries to issue, any shares of capital stock or voting securities
or securities convertible into or exchangeable or exercisable for capital stock
or voting securities of the Representing Party, and (iv) there are no
outstanding obligations of the Representing Party to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities.
Section 4.3 Corporate Authority Relative to this Agreement.
(a) ASARCO has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of ASARCO, and, except for the approval of this Agreement by its
shareholders, no other corporate proceedings on the part of ASARCO are
necessary to authorize the consummation of the transactions contemplated
hereby. The Board of Directors of ASARCO has taken all appropriate action so
that none of Parent, Cyprus or SubC will be (i) an "interested stockholder"
within the meaning of Section 14A:10A-3 of the NJBCA or (ii) an "interested
shareholder" within the meaning of the Certificate of Incorporation of ASARCO
by virtue of Parent, Cyprus and SubC entering into this Agreement and
consummating the transactions contemplated hereby. The Board of Directors of
ASARCO has determined that the transactions contemplated by this Agreement are
in the best interest of ASARCO and its shareholders and to recommend to such
shareholders that they approve this Agreement. This Agreement has been duly and
validly executed and delivered by ASARCO and, assuming this Agreement
constitutes a valid and binding agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of ASARCO, enforceable
against ASARCO in accordance with its terms (except insofar as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) Cyprus has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Cyprus and, except for the approval of this Agreement by its
shareholders, no other corporate proceedings on the part of Cyprus are
necessary to authorize the consummation of the transactions contemplated
hereby. The Board of Directors of Cyprus has taken all appropriate action so
that none of Parent, ASARCO or SubA will be an "interested stockholder" within
the meaning of (i) Section 203 of the DGCL or (ii) the Certificate of
Incorporation of Cyprus by virtue of Parent, ASARCO and SubA entering into this
Agreement and consummating the transactions contemplated hereby. The Board of
Directors of Cyprus has determined that the transactions contemplated by this
Agreement are in the best interest of Cyprus and its shareholders and to
recommend to such shareholders that they approve this Agreement. This Agreement
has been duly and validly executed and delivered by Cyprus and, assuming this
Agreement constitutes a valid and binding agreement of the other parties
hereto, this Agreement constitutes a valid and binding agreement of Cyprus,
enforceable against Cyprus in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by principles governing the availability of equitable remedies).
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Section 4.4 Non-Contravention; Consents and Approvals.
(a) None of the execution, delivery or performance of this Agreement by the
Representing Party or the consummation by such Representing Party of the
transactions contemplated hereby will (i) violate the certificate of
incorporation or the bylaws or other similar governing documents of the
Representing Party or any of its Subsidiaries, (ii) except for the Required
Third Party Consents, result in the violation or breach of or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, vesting, payment, exercise, acceleration,
suspension or revocation) under any of the provisions of any note, bond,
mortgage, deed of trust, security interest, indenture, license, contract,
agreement, plan or other instrument or obligation to which the Representing
Party or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound (the "Representing Party Agreements"),
(iii) except for the Required Statutory Approvals, violate any order, writ,
injunction, decree, judgment, permit, license, statute, law, ordinance,
policy, rule or regulation ("Law") of any court, tribunal or administrative,
governmental or regulatory body, agency, commission, division, department,
public body or other authority, whether federal, state, local or foreign
(individually, a "Governmental Entity") applicable to the Representing Party
or any of its Subsidiaries or any of their respective property or assets, or
(iv) result in the creation or imposition of any Encumbrance on any asset of
the Representing Party or any of its Subsidiaries, except in the case of
clauses (ii), (iii) and (iv) for violations, breaches, defaults, terminations,
cancellations, accelerations or creations which would not in the aggregate
have a Material Adverse Effect on the Representing Party and its Subsidiaries,
taken as a whole, or prevent or delay the consummation of the transactions
contemplated hereby.
(b) Section 4.4(b)(i) of the Representing Party's Disclosure Schedule sets
forth a list of all third party consents and approvals required to be obtained
under the Representing Party Agreements prior to the consummation of the
transactions contemplated by this Agreement the failure of which to obtain
would have, individually or in the aggregate, a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole (the "Required Third
Party Consents"). Section 4.4(b)(ii) of the Representing Party's Disclosure
Schedule sets forth a list of all notices to, filings and registrations with,
and permits, authorizations, consents and approvals of, Governmental Entities
required to be made or obtained from Governmental Entities prior to the
consummation of the transactions contemplated by this Agreement the failure of
which to obtain would have, individually or in the aggregate, a Material
Adverse Effect on the Representing Party and its Subsidiaries, taken as a
whole (the "Required Statutory Approvals").
Section 4.5 Reports and Financial Statements. The Representing Party has
previously furnished or made available to the other Representing Party
complete and correct copies of:
(a) such Representing Party's (and any of its Subsidiaries') Annual Reports
on Form 10-K filed with the Securities and Exchange Commission (the "SEC") for
each of the years ended December 31, 1996 through 1998;
(b) such Representing Party's (and any of its Subsidiaries') Quarterly
Reports on Form 10-Q filed with the SEC for the each of the fiscal quarters
ended following such Representing Party's last fiscal year end;
(c) each definitive proxy statement filed by such Representing Party or any
of its Subsidiaries with the SEC since March 1, 1996;
(d) each final prospectus filed by such Representing Party with the SEC
since December 31, 1995; and
(e) all Current Reports on Form 8-K filed by such Representing Party with
the SEC since January 1, 1998.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, with any amendments, supplements and exhibits
thereto, the "SEC Reports") (i) complied as to form in all material respects
with the applicable requirements of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, and
(ii) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in
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any SEC Report of the Representing Party has been revised or superseded by an
SEC Report subsequently filed by the Representing Party, none of the
Representing Party's SEC Reports contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements included in the Representing Party's SEC Reports (including any
related notes and schedules) fairly present the financial position of the
Representing Party and its consolidated Subsidiaries as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end adjustments),
in each case in accordance with past practice and GAAP consistently applied
during the periods involved (except as otherwise disclosed in the notes
thereto). Since January 1, 1998, the Representing Party has timely filed all
reports, registration statements and other filings required to be filed by it
with the SEC under the rules and regulations of the SEC.
Section 4.6 Environmental Matters.
(a) Except for Environmental Claims disclosed in or referred to in Section
4.6(b) of the Disclosure Schedule, as of the date of this Agreement, each of
the Representing Party and its Subsidiaries has obtained all licenses, permits,
authorizations, approvals and consents from Governmental Entities which are
required under any applicable Environmental Law in respect of its business,
properties, assets and operations ("Environmental Permits"), except (i) for
such permits as to which due and proper application is pending, and (ii) for
such failures to have Environmental Permits which, individually or in the
aggregate, are not reasonably expected to have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole. Each of such
Environmental Permits is in full force and effect, and each of the Representing
Party and its Subsidiaries is in compliance with the terms and conditions of
all such Environmental Permits and with all applicable Environmental Laws,
except for such exceptions as would not, individually or in the aggregate, have
a Material Adverse Effect on the Representing Party and its Subsidiaries, taken
as a whole.
(b) Except for Environmental Claims disclosed in or referred to in Section
4.6(b) of the Disclosure Schedule, as of the date of this Agreement, there is
no Environmental Claim filed, pending, or to the best knowledge of the
Representing Party threatened or in process, against the Representing Party or
any of its Subsidiaries or any person whose liability for such Environmental
Claim the Representing Party or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of Law, that would,
individually or in the aggregate, have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole.
(c) Except as disclosed or referred to in Section 4.6(c) of the Disclosure
Schedule, no Encumbrances have arisen under or pursuant to any Environmental
Law on any property, site or facility owned, operated or leased by the
Representing Party or any of its Subsidiaries, except for such Encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Representing Party and its Subsidiaries, taken as a whole, and no
action of any Governmental Entity has been taken or, to the best knowledge of
the Company, is threatened or in process which could subject any of such
properties to such Encumbrances, except for such action which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole.
(d) As used in this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
order, investigation or notice (written or oral) by any person alleging
potential or actual liability (including, without limitation, potential or
actual liability for investigation, evaluation, cleanup, removal actions,
remedial actions, response actions, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from any Environmental Law, including any claim under CERCLA, and
shall include any request for information under CERCLA or any comparable
state or local Law.
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(ii) "Environmental Law" means any Law relating to (a) the environment or
pollution, environmental matters, the protection of the environment, or the
protection of human health and safety from environmental concerns, (b)
actual or threatened emissions, discharges, or releases of pollutants,
contaminants, chemicals or solid, industrial, toxic or hazardous
substances, wastes or constituents into the environment, and (c) the
presence, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" mean (a) any petroleum or petroleum products
and radioactive materials, (b) any chemicals, constituents, materials, or
substances defined or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous
substances," "toxic substances " and related materials, as such materials
are defined in any Environmental Law, and (c) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
Governmental Entity.
Section 4.7 Employee Benefit Plans; ERISA.
(a) Except as set forth in the Representing Party's SEC Reports or as would
not have a Material Adverse Effect on the Representing Party and its
Subsidiaries, taken as a whole, (i) all Employee Benefit Plans (other than any
Employee Benefit Plan that is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA (a "Multiemployer Plan")) of the Representing Party are
in material compliance with all applicable requirements of Law, including ERISA
and the Code, and (ii) neither the Representing Party nor any of its
Subsidiaries nor any ERISA Affiliate has any liabilities or obligations with
respect to any such Employee Benefit Plans, whether accrued, contingent or
otherwise, that are not otherwise reflected on the Representing Party's
financial statements, nor to the best knowledge of the Representing Party, are
any such liabilities or obligations expected to be incurred. Except as
described in the Representing Party's (or any of its Subsidiaries') SEC Reports
or as set forth in Section 4.7(a) of the Representing Party's Disclosure
Schedule, the execution and delivery of, and performance of the transactions
contemplated by this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any Employee
Benefit Plan of the Representing Party that will or may result in acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee. The only severance
agreements or severance policies applicable to the Representing Party or any of
its Subsidiaries are the agreements and policies specifically described in
Section 4.7(a) of the Representing Party's Disclosure Schedule.
(b) With respect to each of its Plans, the Representing Party has heretofore
made available to the other Representing Party complete and correct copies of
each of the following documents, as applicable: (i) a copy of the Plan and any
amendments thereto; (ii) a copy of the most recent annual report; (iii) a copy
of the most recent actuarial report; (iv) a copy of the most recent Summary
Plan Description and all material modifications; (v) a copy of the trust or
other funding agreement and any amendments thereto; and (vi) the most recent
determination letter received from the Internal Revenue Service (the "IRS")
with respect to each Plan that is intended to be qualified under Section 401 of
the Code and all notices of reportable events received following receipt of
such letter. Each Representing Party will deliver to the other Representing
Party a copy of each Foreign Plan within thirty days following the date hereof.
(c) Section 4.7(c) of the Representing Party's Disclosure Schedule sets
forth a list of each employee of the Representing Party (or any Subsidiary) who
is a party to any agreement (whether written or oral) with respect to such
person's employment by the Representing Party or a Subsidiary, other than offer
letters which do not have guaranteed periods of employment and statutory
employment agreements under foreign Laws, and which provide for annual
compensation in excess of $100,000. The Representing Party has made available
to the other Representing Party a complete and correct copy of each such
written employment agreement, a complete and correct summary of each such oral
agreement.
(d) No liability under Title IV of ERISA has been incurred by the
Representing Party or any ERISA Affiliate within the past six years that has
not been satisfied in full. To the best knowledge of the Representing
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Party, no condition exists that presents a material risk to the Representing
Party, any of its Subsidiaries or any ERISA Affiliate of incurring a liability
under such Title that is reasonably likely to have a Material Adverse Effect on
the Representing Party. The Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any of the Employee Benefit Plans, and, to
the knowledge of the Representing Party, no condition exists that presents a
material risk that such proceedings will be instituted. Except as would not
have a Material Adverse Effect on the Representing Party, with respect to each
of the Employee Benefit Plans that is subject to Title IV of ERISA, the present
value of accrued benefits under such Employee Benefit Plan, based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Employee Benefit Plan's actuary with respect to such
Employee Benefit Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Employee Benefit Plan allocable to
such accrued benefits, and there have been no changes since such latest
valuation date which would cause the present value of such accrued benefits to
exceed the current value of such assets. None of the Employee Benefit Plans or
any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of
each of the Employee Benefit Plans ended prior to the date of this Agreement.
None of the Employee Benefit Plans is a Multiemployer Plan. To the knowledge of
the Representing Party each of the Employee Benefit Plans that is intended to
be "qualified" within the meaning of Section 401(a) of the Code is so qualified
and the trusts maintained thereunder are exempt from taxation under Section
501(a) of the Code. No Employee Benefit Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees after retirement or other termination of
service (other than coverage mandated by applicable Law or benefits, the full
cost of which is borne by the current or former employee). There are no
material pending or threatened claims by or on behalf of any Employee Benefit
Plan, by any employee or beneficiary covered under any such Employee Benefit
Plan, or otherwise involving any such Employee Benefit Plan (other than routine
claims for benefits). No prohibited transaction has occurred with respect to
any Employee Benefit Plan that would result, directly or indirectly, in the
imposition of an excise Tax or other liability under the Code or ERISA, except
for such a Tax or other liability that would not have a Material Adverse
Effect. Except as would not have a Material Adverse Effect on the Representing
Party, with respect to each Foreign Plan: (i) all amounts required to be
reserved on account of each Foreign Plan have been so reserved in accordance
with reasonable accounting practices prevailing in the country where such
Foreign Plan is established, and (ii) each Foreign Plan required to be
registered with a Governmental Entity has been registered, has been maintained
in good standing with the appropriate Governmental Entities, and has been
maintained and operated in accordance with its terms and applicable Law.
(e) No director or officer or other employee of such Representing Party will
become entitled to any termination, retirement, severance or similar payment,
benefit or enhanced or accelerated benefit (including any acceleration of
vesting or lapse of restrictions, repurchase rights or obligations with respect
to any employee stock option or other benefit under any stock option plan or
incentive or compensation plan or arrangement) as a result of the transactions
contemplated by this Agreement (either standing alone or in conjunction with
any additional or subsequent events).
(f) Any amount or other entitlement that could be received (whether in cash
or property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of the
Representing Party or any of its affiliates who is a "disqualified individual"
(as such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employee benefit plan or other compensation arrangement currently in
effect would not be characterized as an "excess parachute payment" or a
"parachute payment" (as such terms are defined in Section 280G(b)(1) of the
Code).
(g) As used in this Agreement
(i) "Employee Benefit Plan" means any material Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by the Representing Party, any of its Subsidiaries or ERISA
Affiliates for the benefit of the current or former employees or directors
of the Representing Party or any of its Subsidiaries and existing on the
date of this Agreement or at any time subsequent thereto and on or prior to
the Effective Time;
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(ii) "Foreign Plan" shall refer to each material plan, program or
contract that is subject to or governed by the Laws of any jurisdiction
other than the United States, and which would have been treated as an
Employee Benefit Plan had it been a United States plan, program or
contract;
(iii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock,
leave of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability, worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice policy, program or
arrangement of any kind, whether written or oral, other than a Foreign
Plan, including, but not limited to any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder ("ERISA"); and
(iv) "ERISA Affiliate" means, with respect to any Representing Party, any
entity, trade or business that is a member of the same controlled group as
such Representing Party (within the meaning of Sections 414(b), (c), (m) or
(o) of the Code).
Section 4.8 Joint Proxy Statement; Registration Statement; Other
Information. None of the information with respect to the Representing Party or
its Subsidiaries to be included in the Joint Proxy Statement or the
Registration Statement will, in the case of the Joint Proxy Statement or any
amendments thereof or supplements thereto, at the time of the mailing of the
Joint Proxy Statement or any amendments or supplements thereto, and at the time
of the Cyprus Shareholders Meeting and the ASARCO Shareholders Meeting, or, in
the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Representing Party
with respect to information supplied in writing by the other Representing Party
or any of its affiliates specifically for inclusion in the Joint Proxy
Statement. The Joint Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. The letters to shareholders, notices of meeting, joint
proxy statement and forms of proxies to be distributed to stockholders in
connection with the Mergers and any schedules required to be filed with the SEC
in connection therewith are collectively referred to herein as the "Joint Proxy
Statement."
Section 4.9 ASARCO Rights Plan. ASARCO represents and warrants that the
Board of Directors of ASARCO has taken all necessary action to render the
Rights Agreement dated as of July 26, 1989, as amended, between ASARCO and
First Chicago Trust Company of New York and the Rights Agreement between ASARCO
and The Bank of New York, dated as of January 28, 1998, inapplicable to the
transactions contemplated by this Agreement.
Section 4.10 Cyprus Rights Plan. Cyprus represents and warrants that the
Board of Directors of Cyprus has taken all necessary action to render the
Rights Agreement between Cyprus and The Bank of New York, dated as of February
28, 1999, inapplicable to the transactions contemplated by this Agreement.
Section 4.11 Tax Matters.
(a) All federal, state, local and foreign Tax Returns required to be filed
by or on behalf of the Representing Party, each of its Subsidiaries, and each
affiliated, combined, consolidated or unitary group of which the Representing
Party or any of its Subsidiaries (i) is a member (a "Current Representing Party
Group") or (ii) was a member during six years prior to the date hereof but is
not currently a member, but only insofar as any such Tax Return relates to a
taxable period ending on a date within the last six years (a "Past Representing
Party Group," together with Current Representing Party Groups, a "Representing
Party Affiliated Group") have been timely filed, and all such Tax Returns filed
are complete and accurate except to the extent any failure to file or any
inaccuracies in filed Tax Returns would not, individually or in the aggregate,
have a Material Adverse Effect on such Representing Party (it being understood
that the representations made in this Section, to
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the extent that they relate to Past Representing Party Groups, are made to the
knowledge of the Representing Party). All Taxes due and owing by the
Representing Party, any Subsidiary of the Representing Party or any
Representing Party Affiliated Group have been paid, or adequately reserved for,
except to the extent any failure to pay or reserve would not, individually or
in the aggregate, have a Material Adverse Effect on the Representing Party.
There is no audit examination, deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any Taxes due and owing by
the Representing Party, any Subsidiary of the Representing Party or any
Representing Party Affiliated Group which would, individually or in the
aggregate, have a Material Adverse Effect on the Representing Party; provided
that in no event shall the existence of a proposed adjustment or matter in
controversy with respect to Taxes be deemed to have or contribute to a Material
Adverse Effect for any purpose under this Agreement to the extent that such
proposed adjustment or matter in controversy has been specifically reserved for
or paid as of the date of this Agreement. All assessments for Taxes due and
owing by the Representing Party, any Subsidiary of the Representing Party or
any Representing Party Affiliated Group with respect to completed and settled
examinations or concluded litigation have been paid. As soon as practicable
after the public announcement of the execution of the Merger Agreement, the
Representing Party will provide the other party with written schedules of (i)
the taxable years of the Representing Party for which the statutes of
limitations with respect to federal income Taxes have not expired, and (ii)
with respect to federal income Taxes, those years for which examinations have
been completed, those years for which examinations are presently being
conducted, and those years for which examinations have not yet been initiated.
The Representing Party and each of its Subsidiaries have complied in all
material respects with all rules and regulations relating to the withholding of
Taxes, except to the extent any such failure to comply would not, individually
or in the aggregate, have a Material Adverse Effect on the Representing Party.
(b) Neither the Representing Party nor any of its Subsidiaries has (i)
entered into a closing agreement or similar agreement with a taxing authority
relating to Taxes of the Representing Party or any of its Subsidiaries with
respect to a taxable period for which the statute of limitations is still open,
or (ii) with respect to U.S. federal income Taxes, granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any such income Tax, in either case, that is still outstanding.
There are no Liens relating to Taxes upon the assets of the Representing Party
other than Liens relating to Taxes not yet due, except as would not have a
Material Adverse Effect on the Representing Party. Neither the Representing
Party nor any of its Subsidiaries is a party to any agreement relating to the
allocating or sharing of Taxes, other than an agreement with each other.
(c) Neither the Representing Party nor any of its Subsidiaries knows of any
fact or has taken any action that could reasonably be expected to prevent the
satisfaction of the condition set forth in Section 6.1(f) hereof or prevent the
Mergers from constituting transactions described in Sections 351 and/or, in the
case of the ASARCO Merger, 368(a) of the Code.
For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without
limitation, taxes or other charges on or with respect to income, franchise,
windfall or other profits, gross receipts, property, sales, use, severance,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth, and taxes or other charges in the
nature of excise, withholding, ad valorem or value added, and (ii) "Tax Return"
means any return, report or similar statement (including the attached
schedules) required to be filed with respect to any Tax, including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 4.12 Opinion of Financial Advisors.
(a) The Board of Directors of ASARCO has received the opinion of Credit
Suisse First Boston Corporation, dated the date of this Agreement,
substantially to the effect that, as of such date, the Exchange Ratio (defined
in such opinion to be collectively the ASARCO Merger Exchange Ratio and the
Cyprus Merger Exchange Ratio), is fair to the holders of ASARCO Common Stock
from a financial point of view.
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(b) The Board of Directors of Cyprus has received the opinion of Merrill
Lynch & Co., dated the date of this Agreement, substantially to the effect
that, as of such date, the Cyprus Merger Consideration is fair to the holders
of Cyprus Common Stock from a financial point of view.
Section 4.13 Required Vote.
(a) The affirmative vote of a majority of the votes cast by the holders of
shares of ASARCO Common Stock entitled to vote at the ASARCO Meeting (the
"ASARCO Shareholder Approval") is required to approve this Merger Agreement. No
other vote of the shareholders of ASARCO is required by Law, the Certificate of
Incorporation or the Bylaws of ASARCO or otherwise in order for ASARCO to
consummate the ASARCO Merger and the transactions contemplated hereby.
(b) The affirmative vote of the holders of shares of Cyprus Common Stock
representing a majority of all shares entitled to vote at the Cyprus Meeting
(the "Cyprus Shareholder Approval") is required to approve this Merger
Agreement. No other vote of the shareholders of Cyprus is required by Law, the
Certificate of Incorporation or the Bylaws of Cyprus or otherwise in order for
Cyprus to consummate the Cyprus Merger and the transactions contemplated
hereby.
Section 4.14 Absence of Certain Changes. Since December 31, 1998, and, other
than with respect to clause (a) below, prior to the date hereof, except as set
forth in the Representing Party's (or any of its Subsidiaries') SEC Reports
filed prior to the date hereof, the Representing Party and its Subsidiaries
have conducted their respective businesses in the ordinary course, consistent
with past practice and there has not been:
(a) any event, occurrence or development (including the discovery of new or
additional information concerning an existing environmental condition) which,
individually or in the aggregate, would have a Material Adverse Effect on the
Representing party;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Representing
Party (other than regular quarterly cash dividends payable by the Representing
Party in respect of shares of its capital stock consistent with past practice)
or any repurchase, redemption or other acquisition by the Representing Party or
any of its Subsidiaries of any outstanding shares of its capital stock (except
(x) as required by the terms of any employee or stock option plan or
compensation plan or arrangement, (y) in accordance with any dividend
reinvestment plan as in effect as of the date of this Agreement in the ordinary
course of operation of such plan consistent with past practice, and/or (z) as
otherwise permitted by Section 5.1);
(c) any amendment of any material term of any outstanding security of the
Representing Party or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the
Representing Party or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any material amount of
assets) or any relinquishment by the Representing Party or any of its
Subsidiaries of any contract or other right, in either case, material to the
Representing Party and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements (including
without limitation settlements of litigation and tax proceedings) in the
ordinary course of business consistent with past practice and those
contemplated by this Agreement;
(e) any change prior to the date hereof in any method of accounting or
accounting practice by the Representing Party or any of its Subsidiaries,
except for any such change which is not material or which is required by reason
of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or amendment to
any such existing arrangement with) any director, officer or employee of the
Representing Party or any of its Subsidiaries, (ii) entering into of any
employment, deferred compensation, supplemental retirement or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Representing Party or
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any of its Subsidiaries, (iii) increase in, or accelerated vesting and/or
payment of, benefits under any existing severance or termination pay policies
or employment agreements or (iv) increase in or enhancement of any rights or
features related to compensation, bonus or other benefits payable to directors,
officers or employees of the Representing Party or any of its Subsidiaries, in
each case, other than in the ordinary course of business consistent with past
practice or as permitted by this Agreement; or
(g) any material Tax election made or changed, any material audit settled or
any material amended Tax Returns filed.
Section 4.15 No Undisclosed Material Liabilities. There are no liabilities
of the Representing Party or any Subsidiary of the Representing Party of any
kind whatsoever, whether accrued, contingent, absolute, determined or
determinable, other than:
(a) liabilities which, individually or in the aggregate, would not have a
Material Adverse Effect on the Representing Party;
(b) liabilities disclosed in the SEC Reports of the Representing Party; and
(c) liabilities under or arising as a result of this Agreement.
Section 4.16 Labor Relations. As of the date of this Agreement: (i) Section
4.16 of the Representing Party's Disclosure Schedule sets forth a complete list
of each collective bargaining agreement to which the Representing Party or any
of its Subsidiaries is a party, (ii) no labor organization or group of
employees of the Representing Party (or any of its Subsidiaries) has made a
pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the
Representing Party, threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or authority, and (iii)
there are no organizing activities, strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances, or other material labor
disputes pending or, to the knowledge of the Representing Party, threatened
against or involving the Representing Party or any of its Subsidiaries.
Section 4.17 No Prior Activities. Parent, SubA and SubC were each formed for
the purpose of engaging in the transactions contemplated by this Agreement, and
none of them has any Subsidiaries or has undertaken any business or other
activities other than in connection with entering into this Agreement and
engaging in the transactions contemplated hereby.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of Business Pending the Effective Time. From and after
the date hereof and prior to the Effective Time or the date, if any, on which
this Agreement is earlier terminated pursuant to Section 7.1 (the "Termination
Date"), and except as may be agreed in writing by the other parties hereto or
as may be provided for or permitted pursuant to this Agreement:
(a) each of the parties shall, and shall cause each of its Subsidiaries to,
conduct its operations according to their ordinary and usual course of business
in substantially the same manner as heretofore conducted;
(b) each of the parties shall use its reasonable best efforts, and cause
each of its Subsidiaries to use its reasonable best efforts, to preserve intact
its business organizations and goodwill, keep available the services of its
current officers and other key employees and preserve its relationships with
those persons having business dealings with it (including its relationships
with customers, suppliers, employees and business partners);
(c) each of the parties shall confer at such times as any of the other
parties may reasonably request with one or more representatives of such
requesting party to report material operational matters and the general status
of ongoing operations (to the extent such requesting party reasonably requires
such information);
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(d) each of the parties shall notify the other parties of any emergency or
other change in the normal course of its or its Subsidiaries' respective
businesses or in the operation of its or its Subsidiaries, respective
properties and of any complaints or hearings (or communications indicating that
the same may be contemplated) of any Governmental Entity if such emergency,
change, complaint, investigation or hearing would have a Material Adverse
Effect on such party;
(e) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, (i) declare, set aside, authorize or pay any dividends on
or make any distribution with respect to its outstanding shares of stock,
except in the case of Cyprus for regular quarterly cash dividends on the
outstanding shares of Cyprus Common Stock and Cyprus Preferred Stock and in the
case of ASARCO and its majority owned subsidiary Southern Peru Copper
Corporation for regular quarterly cash dividends on the outstanding shares of
their common stock and except for cash dividends by a wholly owned Subsidiary
to a parent, or (ii) split, combine or reclassify any of its shares of capital
stock;
(f) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, except (i) in the ordinary course of business consistent
with past practice, (ii) as otherwise provided in this Agreement or (iii) as
required by applicable Law, adopt or amend any Employee Benefit Plan;
(g) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, authorize, propose or announce an intention to authorize
or propose, or enter into an agreement with respect to, any merger,
consolidation or business combination (other than the Cyprus Merger and the
ASARCO Merger), any acquisition of a material amount of assets or securities,
any disposition of a material amount of assets or securities (except as set
forth in Section 5.1(g) of the Cyprus Disclosure Schedule) or any release or
relinquishment of any material contract rights, in each case not in the
ordinary course of business;
(h) none of the parties shall, and none of the parties shall permit its
Subsidiaries to, propose or adopt any amendments to its certificate of
incorporation or by-laws or other similar governing documents;
(i) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, issue or authorize the issuance of, or agree to issue or
sell any shares of their capital stock of any class (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise), except for the issuance of shares of Cyprus Common
Stock by Cyprus and ASARCO Common Stock by ASARCO upon the exercise of stock
options or other rights to acquire such party's capital stock, in each case
which securities, options and rights are outstanding as of the date of this
Agreement (or as set forth on Section 4.7(a) of the Cyprus Disclosure Schedule)
and such issuance is made in accordance with the terms of such securities,
options and rights in effect on the date of this Agreement;
(j) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, except in the ordinary course of business in connection
with employee incentive and benefit plans, programs or arrangements in
existence on the date hereof, purchase or redeem any shares of its stock or any
rights, warrants or options to acquire any such shares;
(k) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, incur, assume or prepay any indebtedness or any other
material liabilities, other than indebtedness between such party and a wholly
owned Subsidiary or between wholly owned Subsidiaries, provided, in either such
case, such wholly owned Subsidiaries remain wholly owned Subsidiaries, and
other than in the ordinary course of business consistent with past practice;
(l) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
(including securitizations), other than in the ordinary course of business
consistent with past practice and other than the consummation of contracts of
sale executed and delivered prior to the date hereof;
(m) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, take any action that would reasonably be expected to cause
the Mergers not to constitute transactions described in Section 351 or, in the
case of the ASARCO Merger, Section 368(a) of the Code;
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(n) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to make any material Tax election or settle or compromise any
material Tax liability, other than in the ordinary course of business
consistent with past practice and except that Cyprus may make one or more
Section 338(h)(10) elections (and corresponding state and local elections)
relating to the sale of the Cypress Amax Coal Company and its Subsidiaries; and
(o) none of the parties shall, and none of the parties shall permit any of
its Subsidiaries to, agree, in writing or otherwise, to take any of the
foregoing actions or take any action which would (i) make any representation or
warranty made by such party in Article IV hereof untrue or incorrect or (ii)
result in any of the conditions to the Mergers set forth in Article VI not
being satisfied.
Section 5.2 Investigation. Each of Cyprus and ASARCO shall (and shall cause
its respective Subsidiaries to) afford to one another and to one another's
officers, employees, accountants, counsel and other authorized representatives
full and complete access on reasonable prior notice during normal business
hours, throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' properties, contracts,
commitments, books, and records (including but not limited to Tax Returns) and
any report, schedule or other document filed or received by it or any of its
Subsidiaries pursuant to the requirements of federal or state securities laws
or filed with or sent to the SEC, the Department of Justice, the Federal Trade
Commission or any other Governmental Entity and shall use their reasonable best
efforts to cause their respective representatives and Subsidiaries to furnish
promptly to one another such additional financial and operating data and other
information as to its and its Subsidiaries' respective businesses and
properties as the other or its duly authorized representatives may from time to
time reasonably request; provided, that nothing herein shall require either
Cyprus or ASARCO or any of their respective Subsidiaries to disclose any
information to the other that would cause significant competitive harm to such
disclosing party or its affiliates if the transactions contemplated by this
Agreement are not consummated. The parties hereby agree that each of them will
treat any such information in accordance with the Confidentiality Agreement,
dated as of May 18, 1999, between Cyprus and ASARCO (the "Confidentiality
Agreement"). Notwithstanding any provision of this Agreement to the contrary,
no party shall be obligated to make any disclosure in violation of applicable
laws or regulations.
Section 5.3 Stockholder Approvals and Other Cooperation.
(a) Cyprus and ASARCO shall together, or pursuant to any reasonable
allocation of responsibility between them:
(i) prepare and file confidentially with the SEC as soon as is reasonably
practicable the Joint Proxy Statement in preliminary form and promptly
prepare and cause Parent to file with the SEC a registration statement on
Form S-4 under the Securities Act with respect to the Parent Common Stock
and Parent Preferred Stock issuable in the Mergers (the "Registration
Statement"), and shall use their reasonable best efforts to have the Joint
Proxy Statement cleared by the SEC under the Exchange Act and the
Registration Statement declared effective by the SEC under the Securities
Act;
(ii) as soon as is reasonably practicable cause Parent to take all such
action as may be required under state blue sky or securities laws in
connection with the issuance of shares of Parent Common Stock and Parent
Preferred Stock in the Mergers and as contemplated by this Agreement;
(iii) promptly prepare and file with the NYSE and such other stock
exchanges as shall be agreed upon listing applications covering the shares
of Parent Common Stock issuable in the Mergers, upon exercise of Cyprus and
ASARCO stock options, warrants, conversion rights or other rights or
vesting or payment of other Cyprus and ASARCO equity-based awards or upon
conversion of the Parent Preferred Stock and use its reasonable best
efforts to obtain, prior to the Effective Time, approval for the listing of
such Parent Common Stock, subject only to official notice of issuance;
(iv) cooperate with one another in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated herein; and
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(v) cooperate with one another in obtaining (i) an opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel to ASARCO, dated as of the
date of the Effective Time, to the effect that the ASARCO Merger, taken
together with the Cyprus Merger, will qualify as a transaction described in
Section 351 and/or the ASARCO Merger will qualify as a transaction
described in Section 368(a) of the Code, and (ii) an opinion of Wachtell,
Lipton, Rosen & Katz, special counsel to Cyprus, dated as of the date of
the Effective Time, to the effect that the Cyprus Merger, taken together
with the ASARCO Merger, will qualify as a transaction described in Section
351 of the Code. In connection therewith, each of Cyprus, ASARCO and Parent
shall deliver to Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate,
Meagher & Flom LLP customary representation letters in form and substance
reasonably satisfactory to such special counsel and Cyprus and ASARCO shall
use their reasonable best efforts to obtain any representation letters
drafted by their special counsel from their respective appropriate
shareholders and shall deliver any such letters obtained to Wachtell,
Lipton, Rosen & Katz and Skadden, Arps, Slate, Meagher & Flom LLP (the
representation letters referred to in this sentence are collectively, the
"Tax Certificates").
(b) Subject to the limitations contained in Section 5.2, Cyprus and ASARCO
shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions and
each represents and warrants to the other that no information furnished by it
in connection with such actions or otherwise in connection with the
consummation of the transactions contemplated by this Agreement will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in order to make any information so furnished, in light
of the circumstances under which it is so furnished, not misleading.
(c) (i) Cyprus shall cause the Joint Proxy Statement to be mailed to
Cyprus's shareholders, and ASARCO shall cause the Joint Proxy Statement to be
mailed to ASARCO's shareholders, in each case as promptly as practicable after
the Registration Statement is declared effective under the Securities Act.
(ii) Cyprus shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Cyprus Shareholders Meeting") for the purpose of
obtaining the Cyprus Shareholder Approval. Cyprus shall, subject to the
proviso of Section 5.10(b), through its Board of Directors, recommend to
its shareholders the adoption of this Agreement, the Cyprus Merger and the
other transactions contemplated hereby.
(iii) ASARCO shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "ASARCO Shareholders Meeting") for the purpose of
obtaining the ASARCO Shareholder Approval. ASARCO shall, through its Board
of Directors, subject to the proviso of Section 5.11(b) recommend to its
shareholders the adoption of this Agreement, the ASARCO Merger and the
other transactions contemplated hereby.
(iv) Each of ASARCO and Cyprus will use their best efforts to hold the
Cyprus Shareholders Meeting and the ASARCO Shareholders Meeting on the same
date and as soon as practicable after the date hereof.
(v) Each of ASARCO and Cyprus shall cause Parent to adopt this Agreement
and take all additional actions as may be necessary to cause Parent to
effect the transactions contemplated hereby.
Section 5.4 Affiliate Agreements.
(a) Cyprus shall, as soon as practicable, deliver to ASARCO a list
(reasonably satisfactory to counsel for ASARCO), setting forth the names and
addresses of all persons who will be, at the time of the Cyprus Shareholders
Meeting, in Cyprus's reasonable judgment, "affiliates" of Cyprus for purposes
of Rule 145 under the Securities Act. Cyprus shall furnish such information and
documents as ASARCO may reasonably request for the purpose of reviewing such
list. Cyprus shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished pursuant to this Section 5.4
to execute a written agreement on or prior to the mailing of the Joint Proxy
Statement, in substantially the form of Exhibit F hereto.
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(b) ASARCO shall, as soon as practicable, deliver to Cyprus a list
(reasonably satisfactory to counsel for Cyprus) setting forth the names and
addresses of all persons who will be, at the time of the ASARCO Shareholders
Meeting, in ASARCO's reasonable judgment, "affiliates" of ASARCO for purposes
of Rule 145 under the Securities Act. ASARCO shall furnish such information and
documents as Cyprus may reasonably request for the purpose of reviewing such
list. ASARCO shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished pursuant to this Section 5.4
to execute a written agreement on or prior to the mailing of the Joint Proxy
Statement, in substantially the form of Exhibit G hereto.
Section 5.5 Cyprus Employee Stock Options, Incentive and Benefit Plans.
(a) Simultaneously with the Cyprus Merger, (i) each outstanding option
("Cyprus Stock Options") and related stock appreciation right ("Cyprus SAR"),
if any, to purchase or acquire a share of Cyprus Common Stock under employee
incentive or benefit plans, programs or arrangements and non-employee director
plans presently maintained by Cyprus ("Cyprus Option Plans") shall be converted
into an option (together with a related stock appreciation right of Parent, if
applicable) to purchase the number of shares of Parent Common Stock equal to
the Cyprus Merger Consideration times the number of shares of Cyprus Common
Stock which could have been obtained prior to the Effective Time upon the
exercise of each such option, at an exercise price per share equal to the
exercise price for each such share of Cyprus Common Stock subject to an option
(and related Cyprus SAR, if any) under the Cyprus Option Plans divided by the
Cyprus Merger Consideration, and all references to Cyprus in each such option
(and related Cyprus SAR, if any) shall be deemed to refer to Parent, where
appropriate, and (ii) Parent shall assume the obligations of Cyprus under the
Cyprus Option Plans. The other terms of each such Cyprus Stock Option and
Cyprus SAR, and the plans under which they were issued, shall continue to apply
in accordance with their terms, including any provisions providing for
acceleration of vesting or payment.
(b) Simultaneously with the Cyprus Merger, each outstanding award including
restricted stock, performance units, share units and performance shares
("Cyprus Award") under any employee incentive or benefit plans, programs or
arrangements and non-employee director plans presently maintained by Cyprus
which provide for grants of equity-based awards shall be amended or converted
into a similar instrument of Parent, in each case with such adjustments to the
terms of such Cyprus Awards as are appropriate to preserve the value inherent
in such Cyprus Awards with no detrimental effects on the holders thereof. The
other terms of each Cyprus Award, and the plans or agreements under which they
were issued, shall continue to apply in accordance with their terms, including
any provisions providing for acceleration. With respect to any restricted stock
awards as to which the restrictions shall have lapsed on or prior to the
Effective Time in accordance with the terms of the applicable plans or award
agreements, shares of such previously restricted stock shall be converted in
accordance with the provisions of Section 2.2(b).
(c) Cyprus agrees that each of its employee incentive or benefit plans,
programs and arrangements and non-employee director plans shall be amended, to
the extent necessary and appropriate, to reflect the transactions contemplated
by this Agreement, including, but not limited to the conversion of shares of
Cyprus Common Stock held or to be awarded or paid pursuant to such benefit
plans, programs or arrangements into shares of Parent Common Stock on a basis
consistent with the transactions contemplated by this Agreement. At or prior to
the Effective Time, Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the Cyprus Stock Options. As soon as practicable after the
Effective Time, Parent shall file a registration statement on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms), with
respect to the Parent Common Stock subject to such Cyprus Stock Options, and
shall maintain the effectiveness of such registration statement and the current
status of the prospectus or prospectuses contained therein, for so long as such
Cyprus Stock Options remain outstanding.
(d) Parent and its Subsidiaries and affiliates agree to honor in accordance
with their terms the Cyprus Employee Benefit Plans, including, without
limitation, any rights or benefits arising thereunder as a result of the
transactions contemplated by this Agreement (either alone or in combination
with any other event). It is the intention of the parties hereto that, for a
period of one year from the Effective Time, Parent and its Subsidiaries
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continue to maintain the Cyprus Employee Benefit Plans, in each case in
accordance with their terms as in effect at the Effective Time, with only such
amendments as are required by applicable law or permitted by the terms thereof
as in effect at the Effective Time, and which do not adversely affect the
rights of participants (or their beneficiaries) thereunder.
(e) Parent shall take, and shall cause the Cyprus Surviving Corporation and
its Subsidiaries and all other affiliates of Parent to take, the following
actions: (i) waive any limitations regarding pre-existing conditions and
eligibility waiting periods under any welfare or other employee benefit plan
maintained by any of them for the benefit of employees of Cyprus or any of its
Subsidiaries immediately prior to the Effective Time (the "Cyprus Employees")
or in which Cyprus Employees participate after the Effective Time, (ii) provide
each Cyprus Employee with credit for any co-payments and deductibles paid prior
to the Effective Time for the calendar year in which the Effective Time occurs,
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time, and (iii) for all purposes (other than for purposes of benefit
accruals under any defined benefit pension plan) under all compensation and
benefit plans and policies applicable to Cyprus Employees, treat all service by
Cyprus Employees with Cyprus or any of its Subsidiaries or affiliates before
the Effective Time as service with Parent and its Subsidiaries and affiliates.
(f) As of the Effective Time, Parent shall guarantee the performance of the
employment contracts and Cyprus Employee Benefit Plans in accordance with their
respective terms and the terms of this Agreement.
Section 5.6 ASARCO Employee Stock Options, Incentive and Benefit Plans.
(a) Simultaneously with the ASARCO Merger, (i) each outstanding option
("ASARCO Stock Options") and related stock appreciation right ("ASARCO SAR"),
if any, to purchase or acquire a share of ASARCO Common Stock under employee
incentive or benefit plans, programs or arrangements and non-employee director
plans presently maintained by ASARCO ("ASARCO Option Plans") shall be converted
into an option (together with a related stock appreciation right of ASARCO, if
applicable) to purchase the number of shares of Parent Common Stock equal to
the number of shares of ASARCO Common Stock which could have been obtained
prior to the Effective Time upon the exercise of each such option, at an
exercise price per share equal to the exercise price for each such share of
ASARCO Common Stock subject to an option (and related ASARCO SAR, if any) under
the ASARCO Option Plans, and all references in each such option (and related
ASARCO SAR, if any) to ASARCO shall be deemed to refer to Parent, where
appropriate, and (ii) Parent shall assume the obligations of ASARCO under the
ASARCO Option Plans. The other terms of each such ASARCO Stock Option and
ASARCO SAR, and the plans under which they were issued, shall continue to apply
in accordance with their terms, including any provisions providing for
acceleration of vesting or payment.
(b) Simultaneously with the ASARCO Merger, each outstanding award including
restricted stock and phantom stock or common stock equivalents ("ASARCO Award")
under any employee incentive or benefit plans, programs or arrangements and
non-employee director plans presently maintained by ASARCO which provide for
grants of equity-based awards shall be amended or converted into a similar
instrument of Parent, in each case with such adjustments to the terms of such
ASARCO Awards as are appropriate to preserve the value inherent in such ASARCO
Awards with no detrimental effects on the holders thereof. The other terms of
each ASARCO Award, and the plans or agreements under which they were issued,
shall continue to apply in accordance with their terms, including any
provisions providing for acceleration of vesting or payment. With respect to
any restricted stock awards as to which the restrictions shall have lapsed on
or prior to the Effective Time in accordance with the terms of the applicable
plans or award agreements, shares of such previously restricted stock shall be
converted in accordance with the provisions of Section 2.1(b).
(c) ASARCO agrees that each of its employee incentive or benefit plans,
programs and arrangements and non-employee director plans shall be amended, to
the extent necessary and appropriate, to reflect the transactions contemplated
by this Agreement, including, but not limited to the conversion of shares of
ASARCO Common Stock held or to be awarded or paid pursuant to such benefit
plans, programs or
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arrangements into shares of Parent Common Stock on a basis consistent with the
transactions contemplated by this Agreement. At or prior to the Effective Time,
Parent shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise
of the ASARCO Stock Options. As soon as practicable after the Effective Time,
Parent shall file a registration statement on Form S-3 or Form S-8, as the case
may be (or any successor or other appropriate forms), with respect to the
Parent Common Stock subject to such ASARCO Stock Options, and shall maintain
the effectiveness of such registration statement and the current status of the
prospectus or prospectuses contained therein, for so long as such ASARCO Stock
Options remain outstanding.
(d) Parent and its Subsidiaries and affiliates agree to honor in accordance
with their terms the ASARCO Employee Benefit Plans, including, without
limitation, any rights or benefits arising thereunder as a result of the
transactions contemplated by this Agreement (either alone or in combination
with any other event). It is the intention of the parties hereto that, for a
period of one year from the Effective Time, Parent and its Subsidiaries
continue to maintain the ASARCO Employee Benefit Plans, in each case in
accordance with their terms as in effect at the Effective Time, with only such
amendments as are required by applicable law or permitted by the terms thereof
as in effect at the Effective Time, and which do not adversely affect the
rights of participants (or their beneficiaries) thereunder.
(e) Parent shall take, and shall cause the ASARCO Surviving Corporation and
its Subsidiaries and all other affiliates of Parent to take, the following
actions: (i) waive any limitations regarding pre-existing conditions and
eligibility waiting periods under any welfare or other employee benefit plan
maintained by any of them for the benefit of employees of ASARCO or any of its
Subsidiaries immediately prior to the Effective Time (the "ASARCO Employees")
or in which ASARCO Employees participate after the Effective Time, (ii) provide
each ASARCO Employee with credit for any co-payments and deductibles paid prior
to the Effective Time for the calendar year in which the Effective Time occurs,
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time, and (iii) for all purposes (other than for purposes of benefit
accruals under any defined benefit pension plan) under all compensation and
benefit plans and policies applicable to ASARCO Employees, treat all service by
ASARCO Employees with ASARCO or any of its Subsidiaries or affiliates before
the Effective Time as service with Parent and its Subsidiaries and affiliates.
(f) As of the Effective Time, Parent shall guarantee the performance of the
employment contracts and ASARCO Employee Benefit Plans in accordance with their
respective terms and the terms of this Agreement.
Section 5.7 Filings; Other Action. Subject to the terms and conditions
herein provided, Cyprus and ASARCO shall (a) promptly make all filings
necessary in connection with their respective Required Statutory Approvals, (b)
use reasonable efforts to cooperate with one another in (i) determining whether
any filings are required to be made with, or consents, permits, authorizations
or approvals are required to be obtained from, any third party or other
governmental or regulatory bodies or authorities of federal, state, local and
foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby and (ii) timely making all such filings and timely seeking all such
consents, permits, authorizations or approvals, including such party's Required
Third Party Consents, and (c) use reasonable efforts to take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby; provided however, that nothing in this
Agreement shall require ASARCO or Cyprus to agree to hold separate or to divest
any of the businesses, product lines or assets of ASARCO or Cyprus or any of
their respective Subsidiaries or affiliates or take any other action, if such
holding separate, divestiture or other action would have a Material Adverse
Effect on ASARCO or Cyprus.
Section 5.8 Further Assurances. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each of the parties to this
Agreement shall take all such necessary action.
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Section 5.9 Takeover Statute. If any "fair price," "moratorium," "control
share acquisition" or other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated hereby, each of Cyprus and
ASARCO and the members of their respective Boards of Directors shall grant such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated hereby.
Section 5.10 No Solicitation by Cyprus.
(a) Cyprus shall not, nor shall it permit any of its Subsidiaries to,
authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action designed
to facilitate, any inquiries or the making of any proposal which constitutes
any Cyprus Takeover Proposal (or reasonably could be expected to lead to a
Cyprus Takeover Proposal) or (ii) participate in any discussions or
negotiations regarding any Cyprus Takeover Proposal. For purposes of this
Agreement, "Cyprus Takeover Proposal" means any inquiry, proposal or offer (or
any improvement, restatement, amendment, renewal or reiteration thereof) from
any person relating to any direct or indirect acquisition or purchase of a
business or shares of any class of equity securities of Cyprus or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning any class of equity securities of
Cyprus or any of its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Cyprus or any of its Subsidiaries, other than the transactions
contemplated by this Agreement (including the items listed on Section 5.1(g) of
the Cyprus Disclosure Schedule).
(b) Neither the Board of Directors of Cyprus nor any committee thereof shall
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to ASARCO, the approval or recommendation by such Board of Directors or
such committee of the Cyprus Merger or this Agreement; provided that the Board
of Directors of Cyprus may withdraw its favorable recommendation of this
Agreement and recommend that the stockholders of Cyprus vote against approval
of the Cyprus Merger and this Agreement if it determines in good faith, based
on advice of outside counsel, that its failure to do so would constitute a
breach of its fiduciary duties to Cyprus' s stockholders under applicable Law,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Cyprus Takeover Proposal, or (iii) cause Cyprus to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement (each, a "Cyprus Acquisition Agreement") related to any Cyprus
Takeover Proposal.
(c) In addition to the obligations of Cyprus set forth in paragraphs (a) and
(b) of this Section 5.10, Cyprus shall immediately advise ASARCO orally and in
writing of any request for information or of any Cyprus Takeover Proposal, the
material terms and conditions of such request or Cyprus Takeover Proposal and
the identity of the person making such request or Cyprus Takeover Proposal.
Cyprus will keep Parent and ASARCO reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
Cyprus Takeover Proposal.
(d) Nothing contained in this Section 5.10 shall prohibit Cyprus from taking
and disclosing to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to Cyprus's
shareholders if, in the good faith judgment of the Board of Directors of
Cyprus, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable Law. At the meeting of
Cyprus's Board of Directors at which this Agreement was considered, authorized
and approved, held July 15, 1999, the Board of Directors of Cyprus unanimously
declared it advisable that Cyprus's shareholders adopt and approve this
Agreement. Notwithstanding any subsequent determination by the Board of
Directors of Cyprus to change such recommendation, this Agreement shall be
submitted to the shareholders of Cyprus at the Cyprus Shareholders Meeting for
the purpose of obtaining the Cyprus Shareholder Approval and nothing contained
herein shall be deemed to relieve Cyprus of such obligation.
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Section 5.11 No Solicitation by ASARCO.
(a) ASARCO shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action designed
to facilitate, any inquiries or the making of any proposal which constitutes
any ASARCO Takeover Proposal (or reasonably could be expected to lead to a
ASARCO Takeover Proposal) or (ii) participate in any discussions or
negotiations regarding any ASARCO Takeover Proposal. For purposes of this
Agreement, "ASARCO Takeover Proposal" means any inquiry, proposal or offer (or
any improvement, restatement, amendment, renewal or reiteration thereof) from
any person relating to any direct or indirect acquisition or purchase of a
business or shares of any class of equity securities of ASARCO or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning any class of equity securities of
ASARCO or any of its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving ASARCO or any of its subsidiaries, other than the transactions
contemplated by this Agreement.
(b) Neither the Board of Directors of ASARCO nor any committee thereof shall
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Cyprus, the approval or recommendation by such Board of Directors or
such committee of the ASARCO Merger or this Agreement; provided that the Board
of Directors of ASARCO may withdraw its favorable recommendation of this
Agreement and recommend that the stockholders of ASARCO vote against approval
of the ASARCO Merger and this Agreement if it determines in good faith, based
on advice of outside counsel, that its failure to do so would constitute a
breach of its fiduciary duties to ASARCO's stockholders under applicable Law,
(ii) approve or recommend, or propose publicly to approve or recommend, any
ASARCO Takeover Proposal, or (iii) cause ASARCO to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement (each, a "ASARCO Acquisition Agreement") related to any ASARCO
Takeover Proposal.
(c) In addition to the obligations of ASARCO set forth in paragraphs (a) and
(b) of this Section 5.11, ASARCO shall immediately advise Cyprus orally and in
writing of any request for information or of any ASARCO Takeover Proposal, the
material terms and conditions of such request or ASARCO Takeover Proposal and
the identity of the person making such request or ASARCO Takeover Proposal.
ASARCO will keep Parent and Cyprus reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
ASARCO Takeover Proposal.
(d) Nothing contained in this Section 5.11 shall prohibit ASARCO from taking
and disclosing to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to ASARCO's
shareholders if, in the good faith judgement of the Board of Directors of
ASARCO, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable Law. At the meeting of
ASARCO's Board of Directors at which this Agreement was considered, authorized
and approved, held July 14 and 15, 1999, the Board of Directors of ASARCO
unanimously declared it advisable that ASARCO's shareholders adopt and approve
this Agreement. Notwithstanding any subsequent determination by the Board of
Directors or ASARCO to change such recommendation, this Agreement shall be
submitted to the shareholders of ASARCO at the ASARCO Shareholders Meeting for
the purpose of obtaining the ASARCO shareholder Approval and nothing contained
herein shall be deemed to relieve ASARCO of such obligation.
Section 5.12 Public Announcements. Cyprus and ASARCO will consult with and
provide each other the reasonable opportunity to review and comment upon any
press release prior to the issuance of any press release relating to this
Agreement or the transactions contemplated herein and shall not issue any such
press release prior to such consultation except as may be required by Law or by
obligations pursuant to any listing agreement with any national securities
exchange.
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Section 5.13 Indemnification and Insurance.
(a) Parent agrees that all rights to exculpation and indemnification for
acts or omissions occurring prior to the Effective Time now existing in favor
of the current or former directors or officers (the "Cyprus Indemnified
Parties") of Cyprus as provided in its charter or by-laws or in any agreement
shall survive the Cyprus Merger and shall continue in full force and effect in
accordance with their terms. For six years from the Effective Time, Parent
shall indemnify the Cyprus Indemnified Parties to the same extent as such
Cyprus Indemnified Parties are entitled to indemnification pursuant to the
preceding sentence.
(b) For three years from the Effective Time, Parent shall maintain in effect
Cyprus's current directors' and officers' liability insurance policy (the
"Cyprus Policy") covering those persons who are currently covered by the Cyprus
Policy (a copy of which has been heretofore delivered to Parent and ASARCO);
provided, however, that in no event shall Parent be required to expend in any
one year an amount in excess of 150% of the annual premiums currently paid by
Cyprus for such insurance, and, provided, further, that if the annual premiums
of such insurance coverage exceed such amount, Parent shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount; and provided, further, that Parent may meet its obligations under
this paragraph by covering the above people under Parent's insurance policy or
policies on the terms described above.
(c) Parent agrees that all rights to exculpation and indemnification for
acts or omissions occurring prior to the Effective Time now existing in favor
of the current or former directors or officers (the "ASARCO Indemnified
Parties") of ASARCO as provided in its charter or by-laws or in any agreement
shall survive the ASARCO Merger and shall continue in full force and effect in
accordance with their terms. For six years from the Effective Time, Parent
shall indemnify the ASARCO Indemnified Parties to the same extent as such
ASARCO Indemnified Parties are entitled to indemnification pursuant to the
preceding sentence.
(d) For three years from the Effective Time, Parent shall maintain in effect
ASARCO's current directors' and officers' liability insurance policy (the
"ASARCO Policy"), covering those persons who are covered by the ASARCO Policy
(a copy of which has been heretofore delivered to Parent and Cyprus); provided,
however, that in no event shall Parent be required to expend in any one year an
amount in excess of 150% of the annual premiums to be paid by ASARCO for such
insurance, and, provided, further, that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount; and provided, further, that Parent may meet its obligations under this
paragraph by covering the above people under Parent's insurance policy or
policies on the terms described above.
Section 5.14 Accountants' "Comfort" Letters. Cyprus and ASARCO will each use
reasonable best efforts to cause to be delivered to each other two letters from
their respective independent accountants, one dated a date within two business
days before the date of the Registration Statement and one dated a date within
two business days before the Effective Time, in form and substance reasonably
satisfactory to the recipient and customary in scope for comfort letters
delivered by independent accountants in connection with registration statements
similar to the Registration Statement.
Section 5.15 Additional Reports. Cyprus and ASARCO shall each furnish to the
other copies of any reports of the type referred to in Section 4.5 which it
files with the SEC on or after the date hereof, and each of Cyprus and ASARCO,
as the case may be, represents and warrants that as of the respective dates
thereof, such reports will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statement therein, in light of the circumstances under which they were
made, not misleading. Any unaudited consolidated interim financial statements
included in such reports (including any related notes and schedules) will
fairly present the financial position of Cyprus and its consolidated
Subsidiaries or ASARCO and its consolidated Subsidiaries, as the case may be,
as of the dates thereof and the results of operations and changes in financial
position or other information included therein for the periods or as of the
date then ended (subject, where appropriate, to normal year-end adjustments),
in each case in accordance with past practice and GAAP consistently applied
during the periods involved (except as otherwise disclosed in the notes
thereto).
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Section 5.16 Disclosure Schedule Supplements. From time to time after the
date of this Agreement and prior to the Effective Time, Cyprus will promptly
supplement or amend the Cyprus Disclosure Schedule with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in the
Cyprus Disclosure Schedule or which is necessary to correct any information in
a schedule or in any representation and warranty of Cyprus which has been
rendered inaccurate thereby, other than Section 5.1(g) thereof which Cyprus
shall have no authority to amend. From time to time after the date of this
Agreement and prior to the Effective Time, ASARCO will promptly supplement or
amend the ASARCO Disclosure Schedule with respect to any matter hereafter
arising which, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the ASARCO
Disclosure Schedule or which is necessary to correct any information in a
schedule or in any representation and warranty of ASARCO which has been
rendered inaccurate thereby. For purposes of determining the accuracy of the
representations and warranties of ASARCO contained in this Agreement and the
accuracy of the representations and warranties of Cyprus contained in this
Agreement in order to determine the fulfillment of the conditions set forth in
Sections 6.2 and 6.3, respectively, the ASARCO Disclosure Schedule and the
Cyprus Disclosure Schedule shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
any information contained in any subsequent supplement or amendment thereto.
Section 5.17 Parent Shareholder Rights Plans. Cyprus and ASARCO will take
all actions necessary to cause Parent to adopt the Parent Rights Plan prior to
the mailing of the Joint Proxy Statement and to make such Plan fully operative
and effective at the Effective Time.
Section 5.18 Shareholder Litigation. Each of Cyprus and ASARCO shall give
the other the reasonable opportunity to participate in the defense of any
shareholder litigation against Cyprus or ASARCO, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
Section 5.19 Section 16(b). Cyprus and ASARCO shall take all steps
reasonably necessary to cause the transactions contemplated hereby and any
other dispositions of equity securities of Cyprus or ASARCO (including
derivative securities) or acquisitions of Parent equity securities (including
derivative securities) in connection with this Agreement by each individual who
(a) is a director or officer of Cyprus or ASARCO or (b) at the Effective Time,
will become a director or officer of Parent, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
Section 5.20 Change of Control Agreements.
(a) Cyprus may enter into amendments to the current change of control
employment agreements with the 16 people listed in Section 5.20(a) of the
Cyprus Disclosure Schedule to provide that the benefits provided under such
agreements upon a termination of employment other than for "cause" or for "good
reason" will be payable on the basis set forth therein in the event the
executive loses his or her job with Cyprus or does not accept the job offered
by Parent, if any. Parent shall take all appropriate steps necessary to, and
will, give reasonable advance notice of its intention to offer employment
(including the proposed terms thereof), or not to offer employment, to each of
the aforementioned 16 people and will make such offers in the former case, all
sufficiently in advance of the Effective Time to afford such offerees
reasonable time prior to the Effective Time to decide whether or not to accept
the employment offered prior to the Effective Time. Cyprus has previously made
written disclosure to ASARCO for each of such 16 people and for all such people
in the aggregate of the total estimated amount payable to such people for all
obligations owed to them by Cyprus under all contractual and plan arrangements
with such people assuming that the employment of each such person was
terminated effective as of December 31, 1999 (except that retirement and
supplemental retirement benefits are calculated as of January 1, 1999).
(b) ASARCO has change of control employment agreements with the 9 people
listed in Section 5.20(b) of the ASARCO Disclosure Schedule which provide
certain benefits upon a termination of employment other than for "cause" or for
"good reason" following the Effective Time. Parent shall take all appropriate
steps
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necessary to, and will, give reasonable advance notice of its intention to
offer employment (including the proposed terms thereof), or not to offer
employment, to each of the aforementioned 9 people and will make such offers in
the former case, all sufficiently in advance of the Effective Time to afford
such offerees reasonable time prior to the Effective Time to decide whether or
not to accept the employment offered prior to the Effective Time. ASARCO has
previously made written disclosure to Cyprus for each of such 9 people and for
all such people in the aggregate of the total estimated amount payable to such
people for all obligations owed to them by ASARCO under all contractual and
plan arrangements with such people, assuming that the employment of each such
person was terminated effective as of December 31, 1999 S(except that specific
benefits are calculated as of specified dates set forth in the written
disclosure).
ARTICLE VI
CONDITIONS TO THE MERGERS
Section 6.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligations of each party to effect the Mergers shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The Cyprus Shareholder Approval and the ASARCO Shareholder Approval
shall have been obtained, all in accordance with applicable Law.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits the
consummation of the Mergers substantially on the terms contemplated hereby. In
the event any order, decree or injunction shall have been issued, each party
shall use its reasonable efforts to remove any such order, decree or
injunction.
(c) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act and no stop order suspending such
effectiveness shall have been issued and remain in effect.
(d) The shares of Parent Common Stock issuable in the Mergers shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
(e) (i) Any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or
been terminated, (ii) any other Required Statutory Approval shall have been
granted or deemed to have been granted, and (iii) any other Required Third
Party Consents shall have been obtained.
(f) (i) ASARCO shall have received from Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel to ASARCO, an opinion, based on reasonably requested
representation letters and customary assumptions, dated as of the date of the
Effective Time, substantially to the effect that for U.S. federal income tax
purposes the ASARCO Merger, taken together with the Cyprus Merger, will qualify
as a transaction described in Section 351 and/or the ASARCO Merger will qualify
as a transaction described in Section 368(a) of the Code and (ii) Cyprus shall
have received from Wachtell, Lipton, Rosen & Katz, special counsel to Cyprus,
an opinion, based on reasonably requested representation letters and customary
assumptions, dated as of the date of the Effective Time, substantially to the
effect that for U.S. federal income tax purposes the Cyprus Merger, taken
together with the ASARCO Merger, will qualify as a transaction described in
Section 351 of the Code. The opinion conditions referred to in the preceding
sentence shall not be waivable after receipt of the Cyprus Shareholder Approval
or the ASARCO Shareholder Approval referred to in Section 6.1(a), unless
further shareholder approval is obtained with appropriate disclosure.
(g) Each of Cyprus and ASARCO shall have received the accountants' letters
contemplated by Sections 5.14.
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Section 6.2 Conditions to Obligations of Cyprus to Effect the Cyprus
Merger. The obligation of Cyprus to effect the Cyprus Merger is further subject
to the conditions that (a) the representations and warranties of ASARCO set
forth herein shall be true and correct (without giving effect to any
qualification as to "materiality" or "Material Adverse Effect" set forth
therein) both when made and at and as of the Effective Time, as if made at and
as of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
qualification as to "materiality" or "Material Adverse Effect" set forth
therein) would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on ASARCO, (b) ASARCO shall have performed
in all material respects all obligations and complied with all covenants
required by this Agreement to be performed or complied with by it prior to the
Effective Time, and (c) ASARCO shall have delivered to Cyprus a certificate,
dated the Effective Time and signed by its Chairman of the Board and Chief
Executive Officer, certifying to both such effects.
Section 6.3 Conditions to Obligations of ASARCO to Effect the ASARCO
Merger. The obligation of ASARCO to effect the ASARCO Merger is further subject
to the conditions that (a) the representations and warranties of Cyprus set
forth herein shall be true and correct (without giving effect to any
qualification as to "materiality" or "Material Adverse Effect" set forth
therein) both when made and at and as of the Effective Time, as if made at and
as of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
qualification as to "materiality" or "Material Adverse Effect" set forth
therein) would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Cyprus, (b) Cyprus shall have performed
in all material respects all obligations and complied with all covenants
required by this Agreement to be performed or complied with by it prior to the
Effective Time, and (c) Cyprus shall have delivered to ASARCO a certificate,
dated the Effective Time and signed by its Chairman of the Board, Chief
Executive Officer and President, certifying to both such effects.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.1 Termination or Abandonment. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after any approval of
the matters presented in connection with the Mergers by the respective
shareholders of Cyprus and ASARCO:
(a) by the mutual written consent of Cyprus and ASARCO;
(b) by either ASARCO or Cyprus if the Effective Time shall not have occurred
on or before June 30, 2000; provided, that the party seeking to terminate this
Agreement pursuant to this clause 7.1(b) shall not have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the failure to consummate the Mergers on or
before such date;
(c) by either ASARCO or Cyprus if (i) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated prohibiting the
consummation of the Mergers substantially on the terms contemplated hereby or
(ii) an order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the consummation of the Mergers
substantially on the terms contemplated hereby and such order, decree, ruling
or injunction shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause 7.1(c)(ii)
shall have used its reasonable best efforts, subject to the proviso to Section
5.7, to remove such order, decree, ruling or injunction;
(d) by either ASARCO or Cyprus, if the approvals of the shareholders of
either ASARCO or Cyprus contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of shareholders or of any adjournment thereof;
(e) by ASARCO, if Cyprus shall breach Section 5.10;
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(f) by Cyprus, if ASARCO shall breach Section 5.11; or
(g) by Cyprus or ASARCO if there shall have been a material breach by the
other of any of its representations, warranties, covenants or agreements
contained in this Agreement and such breach shall not have been cured within 30
days after notice thereof shall have been received by the party alleged to be
in breach.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 7.1, this Agreement shall terminate (except for
the provisions of Sections 5.2, 7.3 and 8.2), and there shall be no other
liability on the part of ASARCO or Cyprus to the other except liability arising
out of a willful and material breach of this Agreement or as provided for in
the Confidentiality Agreement.
Section 7.3 Termination Fee.
(a) In the event that (i) after the date hereof and prior to the Cyprus
Shareholders Meeting a Cyprus Takeover Proposal shall have been made known to
Cyprus or any of its Subsidiaries or shall have been made directly to its
shareholders generally or any person shall have publicly announced an intention
(whether or not conditional) to make a Cyprus Takeover Proposal and thereafter
this Agreement is terminated by either ASARCO or Cyprus pursuant to Section
7.1(b) or 7.1(d) (provided that the basis for such termination is that the
Cyprus Shareholder Approval shall not have been obtained and provided, further,
that the ASARCO shareholders shall not have voted to disapprove this Agreement)
or (ii) this Agreement is terminated by ASARCO pursuant to Section 7.1(e), then
Cyprus shall promptly pay ASARCO a fee equal to $45 million (the "Termination
Fee"), payable by wire transfer of same day funds; provided, however, that no
Termination Fee shall be payable to ASARCO in any circumstance in which ASARCO
shareholders vote to disapprove this Agreement; and provided, further, that no
Termination Fee shall be payable to ASARCO pursuant to this paragraph (a)
unless and until within 18 months of such termination Cyprus or any of its
Subsidiaries enters into any Cyprus Acquisition Agreement or consummates any
Cyprus Takeover Proposal (for the purposes of the foregoing proviso the terms
"Cyprus Acquisition Agreement" and "Cyprus Takeover Proposal" shall have the
meanings assigned to such terms in Section 5.10 (except that the reference to
the "acquisition or purchase of a business or shares of any class of equity
securities of Cyprus or any of its Subsidiaries" in the definition of "Cyprus
Takeover Proposal" in Section 5.10 shall be deemed to be a reference to the
"acquisition or purchase of a business that constitutes 20% or more of the net
revenues, net income or the assets of Cyprus and its Subsidiaries, taken as a
whole, or 20% of any class of equity securities of Cyprus or any of its
Subsidiaries," but such reference shall not include either of the items set
forth in Section 5.1(g) of the Cyprus Disclosure Schedule)) in which event the
Termination Fee shall be payable upon the first to occur of such events. Cyprus
acknowledges that the agreements contained in this Section 7.3(a) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, ASARCO would not enter into this Agreement;
accordingly, if Cyprus fails promptly to pay the Termination Fee, and, in order
to obtain such payment, ASARCO commences a suit which results in a judgment
against Cyprus for the Termination Fee, Cyprus shall pay to ASARCO its costs
and expenses (including attorneys' fees and expenses) in connection with such
suit, together with interest on the amount of the Termination Fee at the prime
rate of Citibank N.A. in effect on the date such payment was required to be
made.
(b) In the event that (i) after the date hereof and prior to the ASARCO
Shareholders Meeting an ASARCO Takeover Proposal shall have been made known to
ASARCO or any of its Subsidiaries or shall have been made directly to its
shareholders generally or any person shall have publicly announced an intention
(whether or not conditional) to make an ASARCO Takeover Proposal and thereafter
this Agreement is terminated by either ASARCO or Cyprus pursuant to Section
7.1(b) or 7.1(d) (provided that the basis for such termination is that the
ASARCO Shareholder Approval shall not have been obtained and provided, further,
that the Cyprus shareholders shall not have voted to disapprove this Agreement)
or (ii) this Agreement is terminated by Cyprus pursuant to Section 7.1(f), then
ASARCO shall promptly pay Cyprus the Termination Fee, payable by wire transfer
of same day funds; provided, however, that no Termination Fee shall be payable
to Cyprus in any circumstance in which Cyprus shareholders vote to disapprove
this Agreement and provided, further, that no
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Termination Fee shall be payable to Cyprus pursuant to this paragraph (b)
unless and until within 18 months of such termination ASARCO or any of its
Subsidiaries enters into any ASARCO Acquisition Agreement or consummates any
ASARCO Takeover Proposal (for the purposes of the foregoing proviso the terms
"ASARCO Acquisition Agreement" and "ASARCO Takeover Proposal" shall have the
meanings assigned to such terms in Section 5.11 (except that the reference to
the "acquisition or purchase of a business or shares of any class of equity
securities of ASARCO or any of its subsidiaries" in the definition of "ASARCO
Takeover Proposal" in Section 5.11 shall be deemed to be a reference to the
"acquisition or purchase of a business that constitutes 20% or more of the net
revenues, net income or the assets of ASARCO and its Subsidiaries, taken as a
whole, or 20% of any class of equity securities of ASARCO or any of its
Subsidiaries"), in which event the Termination Fee shall be payable upon the
first to occur of such events. ASARCO acknowledges that the agreements
contained in this Section 7.3(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Cyprus
would not enter into this Agreement; accordingly, if ASARCO fails promptly to
pay the Termination Fee, and, in order to obtain such payment, Cyprus
commences a suit which results in a judgment against ASARCO for the
Termination Fee, ASARCO shall pay to Cyprus its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the Termination Fee at the prime rate of Citibank
N.A. in effect on the date such payment was required to be made.
Section 7.4 Amendment or Supplement. At any time before or after approval
of the matters presented in connection with the Combination by the respective
shareholders of Cyprus and ASARCO and prior to the Effective Time, this
Agreement may be amended or supplemented in writing by Cyprus and ASARCO with
respect to any of the terms contained in this Agreement; provided, however,
that following approval by the shareholders of ASARCO and Cyprus there shall
be no amendment or change to the provisions hereof with respect to the Cyprus
Merger Consideration or the ASARCO Merger Consideration as provided herein nor
any amendment or change not permitted under applicable Law, without further
approval by the shareholders of Cyprus and ASARCO.
Section 7.5 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, any party may:
(a) extend the time for the performance of any of the obligations or acts
of the other party;
(b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto; or
(c) subject to the proviso of Section 7.4 waive compliance with any of the
agreements or conditions of the other party contained herein.
Notwithstanding the foregoing no failure or delay by any party in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Mergers.
Section 8.2 Expenses. Whether or not the Mergers are consummated, all costs
and expenses incurred in connection with the Mergers, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except that (a)(i) the filing fee in connection with any HSR Act
filing or any other Required Statutory Approval, (ii) the commissions and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with the sale of Excess Shares,
(iii) the expenses incurred in connection with the printing and mailing of the
Joint Proxy Statement (including SEC filing fees), and (iv) all transfer
Taxes, shall be shared equally by Cyprus and ASARCO.
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Section 8.3 Counterparts; Effectiveness. This Agreement may be executed in
two or more consecutive counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered (by telecopy or otherwise) to the
other parties.
Section 8.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof, except to the extent the provisions of
this Agreement are expressly governed by or derive their authority from the
NJBCA.
Section 8.5 Notices. All notices and other communications hereunder shall be
in writing (including telecopy or similar writing) and shall be effective (a)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 8.5 and the appropriate telecopy confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section 8.5:
To ASARCO, Parent, or SubA:
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Attention: Augustus B. Kinsolving, Esq.
Telecopy: (212) 510-1908
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Margaret L. Wolff
Telecopy: (212) 735-2000
To Cyprus, Parent or SubC:
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Attention: Philip C. Wolf, Esq.
Telecopy: (303) 643-5049
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Elliott V. Stein
Telecopy: (212) 403-2000
Section 8.6 Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 8.7 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
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Section 8.8 Enforcement of Agreement. The parties hereto agree that money
damages or other remedy at law would not be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by them and that
in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by Law to an injunction restraining
such breach, violation or default or threatened breach, violation or default
and to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 8.9 Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof
and thereof and, except for the provisions of Section 5.13 hereof, is not
intended to and shall not confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 8.10 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11 Definitions. References in this Agreement to "Subsidiaries" of
any person shall mean any corporation or other form of legal entity of which
more than 50% of the outstanding voting securities are on the date hereof
directly or indirectly owned by such person. References in this Agreement to
"Significant Subsidiaries" shall mean Subsidiaries which constitute
"significant subsidiaries" under Rule 405 promulgated by the SEC under the
Securities Act. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by
contract or otherwise. References in the Agreement to "person" shall mean an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including, without limitation, a governmental body or
authority. Notwithstanding the foregoing, Parent shall not be deemed to be an
"affiliate" or a "Subsidiary" of either ASARCO or Cyprus.
Section 8.12 Finders or Brokers. Except for Merrill Lynch & Co. with respect
to Cyprus, a copy of whose engagement agreement has been or will be provided to
ASARCO, and Credit Suisse First Boston Corporation with respect to ASARCO, a
copy of whose engagement agreement has been or will be provided to Cyprus,
neither Cyprus nor ASARCO nor any of their respective Subsidiaries has employed
any investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to any fee or any
commission in connection with or upon consummation of the Mergers.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
ASARCO CYPRUS INCORPORATED
By: /s/ Milton H. Ward
____________________________________
Name: Milton H. Ward
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Francis R. McAllister
____________________________________
Name: Francis R. McAllister
Title: President and and Co-Chief
Executive Officer
ACO ACQUISITION CORP.
By: /s/ William Dowd
____________________________________
Name: William Dowd
Title: President and Treasurer
CAM ACQUISITION CORP.
By: /s/ Gerald J. Malys
____________________________________
Name: Gerald J. Malys
Title: President and Treasurer
ASARCO INCORPORATED
By: /s/ Francis R. McAllister
____________________________________
Name: Francis R. McAllister
Title: Chairman and Chief Executive
Officer
CYPRUS AMAX MINERALS COMPANY
By: /s/ Milton H. Ward
____________________________________
Name: Milton H. Ward
Title: Chairman and Chief Executive
Officer
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<PAGE>
EXHIBIT A to APPENDIX A
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
ACO ACQUISITION CORP.
PURSUANT TO SECTION 14A: 9-5 OF THE
NEW JERSEY BUSINESS CORPORATION ACT
ACO Acquisition Corp., a corporation organized and existing under the laws of
the State of New Jersey, restates, integrates and amends its Certificate of
Incorporation to read in full as herein set forth.
1. Name of Corporation: ASARCO Incorporated.
2. The purpose for which this corporation is organized is (are) to engage in
any activity within the purposes for which corporations may be organized under
NJSA 14A 1-1 et seq:
3. Registered Agent: THE CORPORATION TRUST COMPANY.
4. Registered Office: 820 Bear Tavern Road, West Trenton, New Jersey 08628
5. The aggregate number of shares which the corporation shall have the
authority to issue is: 1,000 shares of Common Stock.
6. If applicable, set forth the designation of each class and series of
shares, the number in each, and a statement of the relative rights, preferences
and limitations: Common Stock, par value $.01, per share.
7. If applicable, set forth a statement of any authority vested in the board
to divide the shares into classes or series or both and to determine or change
their designation number, relative rights, preference and limitations. N/A
8. The first Board of Directors shall consist of 1 Director: [ ].
9. Name and Address of Incorporator(s): [ ].
10. The duration of the corporation is perpetual.
11. Other provisions:
(a) The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and
of its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
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<PAGE>
(4) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the New Jersey Business Corporation Act, this
Certificate of Incorporation, and any By-Laws adopted by the
stockholders; provided, however, that no By-Laws hereafter adopted by
the stockholders shall invalidate any prior act of the directors which
would have been valid if such By-Laws had not been adopted.
(b) Meetings of stockholders may be held within or without the State of
New Jersey, as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the New Jersey Business
Corporation Act) outside the State of New Jersey at such place or places as
may be designated from time to time by the Board of Directors or in the By-
Laws of the Corporation.
(c) The 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.
(d) The proposed form of the By-Laws is hereby adopted as and for the By-
Laws of the Corporation.
(e) This corporation shall indemnify to the full extent permitted by law
any person made, or threatened to be made, a party to any pending,
threatened or completed civil, criminal, administrative or arbitrative
action, suit or proceeding and any appeal therein (and any inquiry or
investigation which could lead to such action, suit or proceeding) by reason
of the fact that he is or was a director, officer or employee of this
corporation or serves or served any other enterprise as a director, officer
or employee at the request of this corporation. Such right of indemnification
shall inure to the benefit of the legal representative of any such person.
(f) To the full extent from time to time permitted bylaw, no director or
officer of the corporation shall be personally liable to the corporation or
its shareholders for damages for breach of any duty owed to the corporation
or its shareholders. Neither the amendment or repeal of this Section 11(f),
nor the adoption of any provision of this Certificate of Incorporation
inconsistent with this Section 11(f), shall eliminate or reduce the
protection afforded by this Section 11(f) to a director or officer of the
corporation in respect to any matter which occurred, or any cause of
action, suit or claim which but for this Section 11(f) would have accrued
or arisen, prior to such amendment, repeal or adoption.
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<PAGE>
EXHIBIT B to APPENDIX A
FORM OF
CERTIFICATE OF INCORPORATION
OF
CAM ACQUISITION CORP.
FIRST: The name of the Corporation is Cyprus Amax Minerals Company
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is One Thousand (1,000) shares of Common Stock, each having
a par value of one cent ($.01).
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
(4) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
SEVENTH: The 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.
EIGHTH: No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 174 of Title 8 of the Delaware Code (relating to the GCL) or any
amendment thereto or successor provision thereto or shall be liable by reason
that he (i) has breached his duty of loyalty to the Corporation or its
stockholders, (ii) has not acted in good faith or, in failing to act, has not
acted in good faith,
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<PAGE>
(iii) has acted in a manner involving intentional misconduct or a knowing
violation of law, or (iv) has derived an improper personal benefit. Neither the
amendment nor repeal of this Article EIGHTH, nor the adoption of any provision
of the Certificate of Incorporation inconsistent with this Article EIGHTH shall
eliminate or reduce the effect of this Article EIGHTH in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article
EIGHTH would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
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<PAGE>
EXHIBIT C to APPENDIX A
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ASARCO CYPRUS INCORPORATED
----------------
PURSUANT TO SECTIONS 242 AND 245 OF THE
DELAWARE GENERAL CORPORATION LAW
----------------
The undersigned, Francis R. McAllister and Milton H. Ward, certify that they
are the Co-Chief Executive Officers, of Asarco Cyprus Incorporated, a
corporation organized under the laws of the State of Delaware (the
"Corporation"), and do hereby further certify as follows:
1. The name of the Corporation is Asarco Cyprus Incorporated. The name
of the Corporation under which it was originally incorporated was "ACA
Holding Incorporated." The original Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of the State
of Delaware on July 12, 1999.
2. This Amended and Restated Certificate of Incorporation was duly
adopted by the Board of Directors of the Corporation (the "Board of
Directors") and by the stockholders in accordance with Sections 228, 242
and 245 of the General Corporation Law of the State of Delaware.
3. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the certificate of incorporation of the
Corporation, as heretofore amended or supplemented.
4. The text of the Certificate of Incorporation of the Corporation as
amended hereby is restated to read in its entirety as follows:
FIRST: The name of the corporation is Asarco Cyprus Incorporated
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street,
in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code ("GCL").
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 280,000,000
shares, consisting of (a) 250,000,000 shares of common stock, par value
$.01 per share (the "Common Stock"), and (b) 30,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock").
A description of the different classes of capital stock of the Corporation,
a statement of the relative rights of the holders of stock of such classes, and
a statement of the voting powers and the designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the various classes of capital stock
are as follows:
A. A holder of shares of Common Stock of the Corporation shall be
entitled to one vote for each and every share of Common Stock standing in
such holder's name on the record of stockholders on all matters requiring
stockholder action.
B. Subject to limitations prescribed by applicable law and the
provisions of this Article FOURTH, shares of the Preferred Stock may be
issued by the Board of Directors of the Corporation with such voting
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<PAGE>
powers, full or limited and without voting powers, and in such classes and
series and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereon, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by the Board of
Directors of the Corporation, which resolutions shall be set forth in a
Certificate of Designation which shall be filed with the Secretary of State
of the State of Delaware pursuant to the GCL.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following: (i) the number
of shares constituting that series and the distinctive designation of that
series; (ii) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(iii) whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights; (iv)
whether that series shall have conversion privileges, and, if so, the terms and
conditions of such conversion, including provisions for adjustment of the
conversion rate in such events as the Board of Directors shall determine; (v)
whether the shares of that series shall be redeemable, and, if so, the terms
and conditions of such redemption, including the date or dates upon or after
which they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund; (vii) the rights of the shares of that series in
the event of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of payment on
shares of that series; and (viii) any other relative rights, powers,
preferences, qualifications, limitations or restrictions of that series.
C. Series A Junior Participating Preferred Stock
The designation, voting powers, preferences and relative, participating,
optional and other special rights of the shares of a series of Preferred Stock,
and the qualifications, limitations or restrictions thereof shall be, in
addition to those set forth in paragraphs A. and B. above, as follows:
1. Designation and Amount. The shares of such series shall be designated as
"Series A Junior Participating Preferred Stock," par value $.01 per share (the
"Series A Junior Preferred Stock"), and the number of shares constituting such
series shall be XXX,XXX.
2. Dividends and Distributions. (a) Subject to the prior and superior rights
of the holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Preferred Stock in
preference to the holders of Common Stock and of any other junior stock, shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available therefor, dividends payable quarterly on the first
day of January, April, July and October (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 Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 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 Preferred
Stock. In the event the Corporation shall at any time after the record date for
the initial distribution of the Corporation's Preferred Stock Purchase Rights
pursuant to the Rights Agreement between the Corporation and The Bank of New
York, as Rights Agent (the "Rights Declaration Date"), (i) declare any dividend
on Common Stock 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 Preferred Stock were entitled immediately prior to
such event under
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<PAGE>
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 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, in the event 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 $1.00 per share on the Series A Junior
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 Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Junior Preferred
Stock, unless the date of issue of such shares 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 unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Junior
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 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 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.
3. Voting Rights. The holders of shares of Series A Junior Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior 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 on Common Stock 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 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 under applicable law, the
holders of shares of Series A Junior 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 at any time dividends on any Series A Junior Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (a "default period") that shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares of Series A
Junior Preferred Stock then outstanding shall have been declared and paid
or set apart for payment. During each default period, all holders of shares
of Series A Junior Preferred Stock together with any other series of
Preferred Stock then entitled to such a vote under the terms of the Amended
and Restated Certificate of Incorporation, voting as a separate class,
shall be entitled to elect two members of the Board of Directors of the
Corporation.
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(ii) During any default period, such voting right of the holders of
Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Subsection 3(c) or at any annual
meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting rights nor the rights
of holders of Preferred Stock as hereinafter provided to increase in
certain cases the authorized number of Directors shall be exercised
unless the holders of 25% in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a separate class, to elect Directors to fill such vacancies,
if any, in the Board of Directors as may then exist up to two (2)
Directors, or, if such right is exercised at an annual meeting, to
elect two (2) Directors. If the number that may be so elected at any
special meeting does not amount to the required number, the holders of
the Preferred Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock
shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights
of any equity securities ranking senior to or pari passu with the
Series A Junior Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the total
number of shares of Preferred Stock outstanding, irrespective of
series, may request the Chairman or the Chief Executive Officer call a
special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by such person. Notice of such meeting and of any
annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this Section 3(c)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation.
Such meeting shall be called for a time not earlier than 10 days and
not later than 60 days after such order or request. In the event such
meeting is not called within 60 days after such order or request, such
meeting may be called on a similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the total
number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Section 3(c)(iii), no such special meeting shall be
called during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2)
Directors voting as a separate class, after the exercise of which right
(x) the Directors so elected by the holders of Preferred Stock shall
continue in office until their successors shall have been elected by
such holders or until the expiration of the default period, and (y) any
vacancy in the Board of Directors may (except as provided in Section
3(c)(ii)) be filled by vote of a majority of the remaining Directors
theretofore elected by the class which elected the Director whose
office shall have become vacant. References in this Section 3(c)(iv) to
Directors elected by a particular class shall include Directors elected
by such Directors to fill vacancies as provided in clause (y) of the
foregoing sentence.
(d) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock, as a separate class, to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
Preferred Stock, as a separate class, shall terminate, and (z) the number
of Directors shall be such number as may be provided for in, or pursuant
to, the Amended and Restated Certificate of Incorporation or Bylaws
irrespective of any increase made pursuant to the provisions of Section
3(c)(ii) (such number being subject, however, to change thereafter in any
manner provided by law or in the Amended and Restated Certificate of
Incorporation or
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Bylaws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a
majority of the remaining Directors, even though less than a quorum.
(e) Except as set forth herein or as otherwise provided in the
Certificate of Incorporation, holders of Series A Junior 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.
4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends
or distributions payable on the Series A Junior 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
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay or set apart for payment any dividends or make any
other distributions on, or redeem or purchase or otherwise acquire,
directly or indirectly, for consideration any shares of any class of stock
of the Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Preferred
Stock;
(ii) 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 Preferred
Stock, except dividends paid ratably on the Series A Junior 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;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Junior Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior 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 paragraph (a) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior 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.
6. Liquidation, Dissolution or Winding Up. (a) Upon any voluntary or
involuntary liquidation, 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 Preferred Stock unless, prior thereto, the holders of shares of
Series A Junior Preferred Stock shall have received an amount equal to 100
times the par value 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
Preferred Stock unless, prior
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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) being hereinafter referred to as 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 Preferred Stock and Common Stock, respectively, holders of
Series A Junior 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
Series A Junior Preferred Stock and Common Stock, on a per share basis,
respectively.
(b) In the event, however, that 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 Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of all such shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(c) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock 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.
7. Consolidation, Merger, Share Exchange, etc. In case the Corporation shall
enter into any consolidation, merger, share exchange, 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 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. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
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 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 immedi ately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Junior Preferred Stock shall not be
redeemable.
9. Ranking. The Series A Junior 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 terms of any such series
shall provide otherwise.
10. Amendment. The Amended and Restated Certificate of Incorporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
or more of the outstanding shares of Series A Junior Preferred Stock, voting
together as a single voting group.
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<PAGE>
11. Fractional Shares. Series A Junior 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 Preferred Stock.
D. $4.00 Series A Convertible Preferred Stock
The designation, voting powers, preferences and relative, participating,
optional and other special rights of the shares of a series of Preferred Stock,
and the qualifications, limitations or restrictions thereof shall be, in
addition to those set forth in paragraphs A. and B. above as follows:
1. Designation and Amount. The distinctive serial designation of this series
of Preferred Stock is $4.00 Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock"), and the number of shares constituting such
series shall be up to 4,666,667, which number may be increased or decreased
from time to time by the Board of Directors.
2. Dividends. The holders of Series A Convertible Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, but
only out of funds legally available for the payment of dividends, cumulative
cash dividends at the annual rate of $4.00 per share, and no more, payable
quarter-yearly in arrears, on the first days of March, June, September and
December in each year, to stockholders of record on the respective dates, not
exceeding fifty days preceding such dividend payment dates, fixed for the
purpose by the Board of Directors in advance of payment of each particular
dividend. The amount of dividends payable per share of Series A Convertible
Preferred Stock for each quarterly dividend period shall be computed by
dividing the annual dividend amount by four. The amount of dividends payable
for any period shorter than a full quarterly dividend period shall be computed
on the basis of a 360-day year of twelve 30-day months. No interest shall be
payable in respect of any dividend payment on the Series A Convertible
Preferred Stock which may be in arrears. So long as any shares of the Series A
Convertible Preferred Stock remain outstanding, but not thereafter, dividends
on the Series A Convertible Preferred Stock shall accrue and be cumulative from
and after dates determined, as follows:
(i) if issued prior to the record date for the first dividend on shares
of such series, then from September 1, 1993;
(ii) if issued during the period commencing immediately after a record
date for a dividend on such series and ending on the payment date for such
dividend, then from and after such dividend payment date; and
(iii) otherwise from and after the first day of March, June, September
or December next preceding the date of issue of such shares. So long as any
shares of the Series A Convertible Preferred Stock remain outstanding, but
not thereafter, no dividend whatever shall be paid, and no distribution
made, on any junior stock (which shall mean the Common Stock and any other
class or series of stock of the Corporation over which the Series A
Convertible Preferred Stock has preference or priority in the payment of
dividends or in the distribution of assets on any dissolution, liquidation
or winding up of the Corporation), other than a dividend payable in junior
stock, nor shall any shares of junior stock be acquired for consideration
by the Corporation or by any subsidiary, unless all dividends on the Series
A Convertible Preferred Stock accrued for all past dividend periods have
been paid or declared and set aside for payment, and the full dividends
thereon for the then current quarter-yearly dividend period have been paid
or declared. Subject to the foregoing, and not otherwise, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on any junior stock from time to time
out of funds legally available therefor and the Series A Convertible
Preferred Stock shall not be entitled to participate in any such dividends,
whether payable in cash, stock or otherwise.
3. Liquidation Preference. In the event of any voluntary liquidation,
dissolution or winding up of the Corporation, the holders of the Series A
Convertible Preferred Stock then outstanding shall be entitled to receive the
amount per share which such holders would have been entitled to receive had
such shares been
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<PAGE>
redeemed on the date fixed for payment, or if redemption on such date is not
provided for, an amount equal to the maximum price at which such shares are
thereafter redeemable, plus in respect of each such share a sum computed at the
rate of $4.00 per annum from and after the date on which dividends on such
share became cumulative to and including the date fixed for such payment, less
the aggregate of dividends theretofore paid thereon, but computed without
interest. In the event of any involuntary liquidation, dissolution or winding
up of the Corporation, the holders of the Series A Convertible Preferred Stock
then outstanding shall be entitled to receive out of the assets of the
Corporation, before any distribution or payment shall be made to the holders of
any junior stock, an amount equal to $50 per share, plus in respect of each
such share a sum computed at the rate of $4.00 per annum from and after the
date on which dividends on such share became cumulative to and including the
date fixed for such payment, less the aggregate of dividends theretofore paid
thereon, but computed without interest. For purposes of this Section 3, a
consolidation or merger of the Corporation with any other corporation or a sale
of all or substantially all of the assets of the Corporation shall not be
deemed to constitute a liquidation, dissolution or winding up of the
Corporation.
4. Redemption at Option of the Corporation. The Corporation may, at the
option of the Board of Directors, at any time, redeem the whole or any part of
the then outstanding Series A Convertible Preferred Stock, subject to the
limitations, if any, imposed by applicable law, at the following prices per
share if redeemed during the twelve-month period ending December 17 of the year
indicated:
<TABLE>
<CAPTION>
Year Price
---- ------
<S> <C>
1999.................................. $51.60
2000.................................. $51.20
2001.................................. $50.80
2002.................................. $50.40
</TABLE>
and $50.00 per share if redeemed at any time thereafter; together in each case
with a sum, for each share so to be redeemed, computed at the rate of $4.00 per
annum from and after the date on which dividends on such share became
cumulative to and including such date fixed for redemption, less the aggregate
of the dividends theretofore and on such redemption date paid thereon, but
computed without interest (such amount being hereinafter referred to as the
"Redemption Price").
Notice of every such redemption of the Series A Convertible Preferred Stock
shall be given by publication at least once in a newspaper printed in the
English language and customarily published on each business day and of general
circulation in the Borough of Manhattan, The City of New York, such publication
to be at least thirty days prior to the date fixed for such redemption. Notice
of every such redemption shall also be mailed not more than sixty nor less than
thirty days prior to the date fixed for such redemption to the holders of
record of the shares so to be redeemed at their respective addresses as the
same shall appear on the books of the Corporation; but no failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceeding for the redemption of any shares so to be redeemed.
In case of redemption of a part only of the Series A Convertible Preferred
Stock at the time outstanding, the redemption may be either pro rata or by lot.
The Board of Directors shall have full power and authority to prescribe the
manner in which the drawings by lot or the pro rata redemption shall be
conducted and, subject to the provisions herein contained, the terms and
conditions upon which the Series A Convertible Preferred Stock shall be
redeemed from time to time.
No fractional shares of Series A Convertible Preferred Stock shall be issued
upon redemption of less than all Series A Convertible Preferred Stock. If more
than one certificate evidencing shares of Series A Convertible Preferred Stock
shall be held at one time by the same holder, the number of full shares
issuable upon redemption of less than all of such shares of Series A
Convertible Preferred Stock shall be computed on the basis of the aggregate
number of shares of Series A Convertible Preferred Stock so held. Instead of
any fractional share of Series A Convertible Preferred Stock that would
otherwise be issuable to a holder upon
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<PAGE>
redemption of less than all shares of Series A Convertible Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share in
an amount equal to the same fraction of the fair value per share of Series A
Convertible Preferred Stock (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the close of business on the date
fixed for redemption.
If such notice of redemption shall have been duly given by publication, and
if, on or before the redemption date specified therein, all 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, so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, all shares so
called for redemption shall no longer be deemed outstanding on and after such
redemption date, and all rights with respect to such shares shall forthwith on
such redemption date cease and terminate, except only the right of the holders
thereof to receive the amount payable on redemption thereof, without interest.
If such notice of redemption shall have been duly given by publication or if
the Corporation shall have given to the bank or trust company hereinafter
referred to irrevocable authorization promptly to give or complete such notice
by publication, and if on or before the redemption date specified therein the
funds necessary for such redemption shall have been deposited by the
Corporation with a bank or trust company in good standing, designated in such
notice, organized under the laws of the United States of America or of the
State of New York, doing business in the Borough of Manhattan, The City of New
York, having a capital, surplus and undivided profits aggregating at least
$5,000,000 according to its last published statement of condition, in trust for
the pro rata benefit of the holders of the shares so called for redemption,
then, notwithstanding that any certificate for shares so called for redemption
shall not have been surrendered for cancellation from and after the time of
such deposit, all shares of the Series A Convertible Preferred Stock so called
for redemption shall no longer be deemed to be outstanding and all rights with
respect to such shares shall forthwith cease and terminate, except only the
right of the holders thereof to receive from such bank or trust company at any
time after the time of such deposit the funds so deposited, without interest,
and the right to exercise on or before the date fixed for redemption,
privileges of exchange or conversion, if any, not theretofore expiring. Any
interest accrued on such funds shall be paid to the Corporation from time to
time.
Any funds so set aside or deposited by the Corporation which shall not be
required for such redemption because of the exercise of any right of conversion
or exchange subsequent to the date of such deposit shall be released or repaid
to the Corporation forthwith. Any funds so set aside or deposited, as the case
may be, and unclaimed at the end of six years from such redemption date shall
be released or repaid to the Corporation, after which the holders of the shares
so called for redemption shall look only to the Corporation for payment
thereof.
So long as any shares of the Series A Convertible Preferred Stock remain
outstanding, but not thereafter, if at any time the Corporation shall fail to
pay dividends in full on the Series A Convertible Preferred Stock for any past
quarter-yearly dividend periods, thereafter and until all accrued dividends for
all past quarter-yearly dividend periods shall have been paid or declared and
funds set aside for their payment, the Corporation shall not redeem (for
sinking fund or otherwise) less than all of the Series A Convertible Preferred
Stock at the time outstanding, and neither the Corporation nor any subsidiary
shall purchase (for sinking fund or otherwise) less than all of the Series A
Convertible Preferred Stock unless such purchase shall be pursuant to tenders
called for on at least twenty days previous notice by mail to the holders of
record of the Series A Convertible Preferred Stock at their respective
addresses as the same shall appear on the books of the Corporation, and the
shares so purchased shall be those tendered at the lowest prices, pursuant to
such call for tenders.
5. Conversion Privilege.
(a) Right of Conversion. Each share of Series A Convertible Preferred Stock
shall be convertible at the option of the holder thereof, at any time prior to
the close of business on the tenth business day prior to the date fixed for
redemption of such share as herein provided, into fully paid and nonassessable
shares of
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<PAGE>
Common Stock, at the rate of that number of shares of Common Stock for each
full share of Series A Convertible Preferred Stock that is equal to $50 divided
by the conversion price applicable per share of Common Stock, or into such
additional or other securities, cash or property and at such other rates as
required in accordance with the provisions of this Section 5. For purposes of
the terms of the Series A Convertible Preferred Stock, the "conversion price"
applicable per share of Common Stock shall initially be equal to $24.302 and
shall be adjusted from time to time in accordance with the provisions of this
Section 5.
(b) Conversion Procedures. Any holder of shares of Series A Convertible
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series A
Convertible Preferred Stock at the office of the transfer agent for the Series
A Convertible Preferred Stock, which certificate or certificates, if the
corporation shall so require, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the Corporation or
in blank and shall be accompanied by irrevocable written notice to the
Corporation that the holder elects so to convert such shares of Series A
Convertible Preferred Stock and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of Common
Stock are to be issued.
Subject to Section 5(j) hereof, no payments or adjustments in respect of
dividends on shares of Series A Convertible Preferred Stock surrendered for
conversion or on account of any dividend on the Common Stock issued upon
conversion shall be made upon the conversion of any shares of Series A
Convertible Preferred Stock. The Corporation shall, as soon as practicable
after such deposit of certificates evidencing shares of Series A Convertible
Preferred Stock accompanied by the written notice and compliance with any other
conditions herein contained, deliver at such office of such transfer agent to
the person for whose account such shares of Series A Convertible Preferred
Stock were so surrendered, or to the nominee or nominees of such person,
certificates evidencing the number of full shares of Common Stock to which such
person shall be entitled as aforesaid, together with a cash adjustment in
respect of any fraction of a share of Common Stock as hereinafter provided.
Such conversion shall be deemed to have been made as of the date of such
surrender of the shares of Series A Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Series A Convertible Preferred Stock shall
be treated for all purposes as the record holder or holders of such Common
Stock on such date.
(c) Adjustment of Conversion Price. The conversion price at which a share of
Series A Convertible Preferred Stock is convertible into Common Stock shall be
subject to adjustment from time to time as follows:
(i) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay
or make a dividend or other distribution on any other class or series of
capital stock of the Corporation which includes Common Stock, the
conversion price in effect at the opening of business on the day following
the date fixed for the determination of stockholders entitled to receive
such dividend or other distribution shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination and the denominator shall be the sum of such
number of shares and the total number of shares of Common Stock included in
such dividend or other distribution or exchange, such reduction to become
effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this
subparagraph (i), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Corporation and the number of shares of Common Stock included in such
dividend or other distribution or exchange shall not be deemed to include
any shares issued or distributed in respect of shares held in the treasury
of the Corporation.
(ii) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, rights or warrants
entitling the holders thereof to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per share
(determined as provided in subparagraph (vii) of this Section 5(c)) of the
Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the conversion price in effect
at the opening of business on the day following the date
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<PAGE>
fixed for such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this subparagraph (ii), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation. The Corporation shall not issue
any rights or warrants in respect of shares of Common Stock held in the
treasury of the Corporation. For purposes of this subparagraph (ii), the
issuance of rights or warrants to subscribe for or purchase stock or
securities convertible into shares of Common Stock shall be deemed to be
the issuance of rights or warrants to purchase the shares of Common Stock
into which such stock or securities are convertible at an aggregate
offering price equal to the aggregate offering price of such stock or
securities plus the minimum aggregate amount (if any) payable upon
conversion of such stock or securities into Common Stock. In case any
rights or warrants referred to in this subparagraph (ii) in respect of
which an adjustment shall have been made shall expire unexercised within 45
days after the same shall have been distributed or issued by the
Corporation, the conversion price shall be readjusted at the time of such
expiration to the conversion price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.
(iii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the conversion
price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, 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.
(iv) Subject to the penultimate sentence of this subparagraph (iv), in
case the Corporation shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any
class or series of capital stock, cash or assets (including securities, but
excluding any rights or warrants referred to in subparagraph (ii) of this
Section 5(c), any dividend or distribution paid exclusively in cash and any
dividend or distribution referred to in subparagraph (i) of this Section
5(c)), the conversion price shall be reduced so that such price shall equal
the price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (iv) by a fraction of which, except to
the extent provided in the second succeeding sentence of this subparagraph
(iv), the numerator shall be the current market price per share (determined
as provided in subparagraph (vii) of this Section 5(c)) of the Common Stock
on the date fixed for the payment of such distribution (the "Reference
Date") less the fair market value (as determined, subject to the last
sentence of this subparagraph (iv), in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors), on the Reference Date, of such
number or amount of the evidences of indebtedness, shares of capital stock,
cash and assets that is so distributed to a holder of one share of Common
Stock and the denominator shall be such current market price per share of
the Common Stock, such reduction to become effective immediately prior to
the opening of business on the day following the Reference Date. If the
Board of Directors determines the fair market value of any distribution for
purposes of this subparagraph (iv) by reference to the actual or when
issued trading market for any securities comprising such distribution, it
shall in doing so consider the prices in such market over the same period
used in computing the current market price per share of Common Stock
pursuant to subparagraph (vii) of this Section 5(c). Notwithstanding the
first sentence of this subparagraph (iv), to the extent the fair market
value of any
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<PAGE>
shares of capital stock distributed to all holders of Common Stock shall be
determined by the Board of Directors by reference to the trading market of
securities listed or admitted to trading or quoted (other than on a subject
to notice of issuance or when issued basis) on a Stock Exchange as of (but
not prior to) the Reference Date, the conversion price shall be reduced so
that such price shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this subparagraph (iv) by a
fraction of which the numerator shall be the current market price per share
(determined as provided in subparagraph (viii) of this subparagraph 5(c))
of the Common Stock on the Reference Date and the denominator shall be such
current market price per share of the Common Stock plus the fair market
value (as determined in good faith by the Board of Directors in accordance
with the last sentence of this subparagraph (iv)), of such number of shares
of capital stock that is so distributed to a holder of one share of Common
Stock, such reduction to become effective retroactively immediately prior
to the opening of business on the day following the Reference Date. For
purposes of this subparagraph (iv), any dividend or distribution that
includes (but is not limited to) shares of Common Stock or rights or
warrants to subscribe for or purchase shares of Common Stock shall be
deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, cash, assets or shares of capital stock other than such
shares of Common Stock or such rights or warrants (so that any conversion
price reduction required by this subparagraph (iv) is made) immediately
followed by (2) a dividend or distribution of such shares of Common Stock
or such rights or warrants (so that there is made any further conversion
price reduction required by subparagraph (i) or (ii) of this Section 5(c),
except (A) the Reference Date of such dividend or distribution as defined
in this subparagraph (iv) shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such rights or warrants"
and "the date fixed for such determination" within the meaning of
subparagraphs (i) and (ii) of this Section 5(c) and (B) any shares of
Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of subparagraph (i) of this Section
5(c)). Notwithstanding any other provision of this subparagraph (iv), if
any shares of capital stock distributed to all holders of Common Stock are
listed or admitted to trading on a Stock Exchange for the five consecutive
Trading Days (as defined in Section 5(h)) prior to and including the
Reference Date, or will be listed or admitted to trading on a Stock
Exchange as of (but not prior to) the Reference Date for the ten
consecutive Trading Days subsequent to and including the Reference Date,
then, the Board of Directors, in making its determination of the fair
market value of such number of shares of capital stock that is so
distributed to a holder of one share of Common Stock, shall make such
determination by reference to the current market price (as determined
pursuant to subparagraphs (vii) and (viii) of this Section 5(c)) of such
shares of capital stock.
(v) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding, in the
case of any quarterly cash dividend on the Common Stock, the portion of
such quarterly cash dividend that does not exceed the per share amount of
the next preceding quarterly cash dividend on the Common Stock (as adjusted
to appropriately reflect any of the events referred to in subparagraph
(iii) of this Section 5(c)), or, all of such quarterly cash dividend if the
amount thereof per share of Common Stock multiplied by four does not exceed
12.5% of the current market price per share (determined as provided in
subparagraph (vii) of this Section 5(c)) of the Common Stock on the Trading
Day next preceding the date of declaration of such dividend), the
conversion price shall be reduced so that such price shall equal the price
determined by multiplying the conversion price in effect immediately prior
to the effectiveness of the conversion price reduction contemplated by this
subparagraph (v) by a fraction of which the numerator shall be the current
market price per share (determined as provided in subparagraph (vii) of
this Section 5(c)) of the Common Stock on the date fixed for the making of
such distribution less the amount of cash so distributed and not excluded
as provided above applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common
Stock, such reduction to become effective immediately prior to the opening
of business on the day following the date fixed for the making of such
distribution.
(vi) In case a tender or exchange offer made by the Corporation or any
subsidiary of the Corporation for all or any portion of the Corporation's
Common Stock shall expire and result in the acquisition by the
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Corporation of shares of Common Stock pursuant thereto and such tender or
exchange offer shall involve the payment by the Corporation or such
subsidiary of consideration per share of Common Stock having a fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) at the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it
shall have been amended) that exceeds the current market price per share
(determined as provided in subparagraph (vii) of this Section 5(c)) of the
Common Stock on the Trading Day next succeeding the Expiration Time, the
conversion price shall be reduced so that such price shall equal the price
determined by multiplying the conversion price in effect immediately prior
to the effectiveness of the conversion price reduction contemplated by this
subparagraph (vi) by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the current market price per
share (determined as provided in subparagraph (vii) of this Section 5(c))
of the Common Stock on the Trading Day next succeeding the Expiration Time
and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders as a result of the Corporation's or subsidiary's acceptance
(up to any maximum specified in the terms of the tender or exchange offer)
of shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the current market price per share (determined as
provided in subparagraph (vii) of this Section 5(c)) of the Common Stock on
the Trading Day next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of business on the day
following the Expiration Time.
(vii) For the purpose of any computation under subparagraphs (ii) and
(v) and, except as otherwise provided in subparagraph (viii) of this
Section 5(c), subparagraph (iv), the current market price per share of
Common Stock or per share of capital stock the fair market value of which
is to be determined as provided in the last sentence of subparagraph (iv)
of this Section 5(c) or pursuant to clause (ii) of Section 5(g)
("Distributed Stock") on any date in question shall be deemed to be the
average of the daily Closing Prices (as defined in Section 5(h)) for the
five (or, with respect to clause (ii) of Section 5(g), ten) consecutive
Trading Days prior to and including the date in question; provided,
however, that (1) if the "ex" date (as hereinafter defined) for any event
(other than the issuance or distribution requiring such computation) that
requires (or, in the case of Distributed Stock, would require if such
Distributed Stock were Common Stock) an adjustment to the conversion price
pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi) above or
Section 5(g) ("Other Event") occurs after the fifth (or, with respect to
Section 5(g), tenth) Trading Day prior to the day in question and prior to
the "ex" date for the issuance or distribution requiring such computation
(the "Current Event"), the Closing Price for each Trading Day prior to the
"ex" date for such Other Event shall be adjusted by multiplying such
Closing Price by the same fraction by which the conversion price is so
required (or, in the case of Distributed Stock, would be so required if
such Distributed Stock were Common Stock) to be adjusted as a result of
such Other Event, (2) if the "ex" date for any Other Event occurs after the
"ex" date for the Current Event and on or prior to the date in question,
the Closing Price for each Trading Day on and after the "ex" date for such
Other Event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the conversion price is so required
(or, in the case of Distributed Stock, would be so required if such
Distributed Stock were Common Stock) to be adjusted as a result of such
Other Event, (3) if the "ex" date for any Other Event occurs on the "ex"
date for the Current Event, one of those events shall be deemed for
purposes of determining which of clauses (1) and (2) of this proviso to
apply to have an "ex" date occurring prior to the "ex" date for the other
event but in applying such clause the actual "ex" date of the other event
shall be utilized, and (4) if the "ex" date for the Current Event is on or
prior to the date in question, the Closing Price for each Trading Day on or
after such "ex" date shall be adjusted after taking into account any
adjustment required pursuant to clause (2) of this proviso, by adding
thereto the amount of any cash and the fair market value on the date in
question (as determined in good faith by the Board of Directors in a manner
consistent with any determination of such value for purposes of paragraph
(iv) or (v) of this
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Section 5(c), whose determination shall be conclusive and described in a
resolution of the Board of Directors) of such number or amount of the
rights, warrants, evidences of indebtedness, shares of capital stock or
assets being distributed to a holder of one share of Common Stock. For the
purpose of any computation under subparagraph (vi) of this Section 5(c),
the current market price per share of Common Stock or Distributed Stock on
any date in question shall be deemed to be the average of the daily Closing
Prices for such date in question and the next two succeeding Trading Days;
provided, however, that if the "ex" date for any other Event occurs after
the Expiration Time for the tender or exchange offer requiring such
computation and on or prior to the second Trading Day following the date in
question, the Closing Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by
the reciprocal of the fraction by which the conversion price is so required
(or, in the case of Distributed Stock, would be so required if such
Distributed Stock were Common Stock) to be adjusted as a result of such
other event. For purposes of this subparagraph and subparagraph (viii) of
this Section 5(c), the term "ex" date, (1) when used with respect to any
issuance or distribution, means the first date on which the Common Stock or
Distributed Stock trades regular way on the relevant exchange or in the
relevant market from which the Closing Price was obtained without the right
to receive such issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock or Distributed Stock,
means the first date on which the Common Stock or Distributed Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (3) when used with
respect to any tender or exchange offer means the first date on which the
Common Stock or Distributed Stock trades regular way on such exchange or in
such market after the Expiration Time of such offer.
(viii) Notwithstanding the provisions of subparagraph (vii) of this
Section 5(c), for the purpose of any computation under subparagraph (iv) of
this Section 5(c) when the Distributed Stock will be listed or admitted to
trading or quoted on a Stock Exchange as of (but not prior to) the
Reference Date, the current market price per share of Common Stock or
shares of capital stock the fair market value of which is to be determined
as provided in the last sentence of subparagraph (iv) of this Section 5(c)
on any date in question shall be deemed to be the average of the daily
Closing Prices (as defined in Section 5(h)) for the ten consecutive Trading
Days subsequent to and including the date in question; provided, however,
that (1) if the "ex" date for any Other Event occurs prior to the tenth
Trading Day after the day in question and after the Reference Date, the
Closing Price for each Trading Day on and after the "ex" date for such
Other Event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the conversion price is so required
(or, in the case of Distributed Stock, would be so required if such
Distributed Stock were Common Stock) to be adjusted as a result of such
Other Event.
(ix) The Corporation may make such reductions in the conversion price,
in addition to those required by subparagraphs (i), (ii), (iii), (iv), (v)
and (vi) of this Section 5(c), as it considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes. The Corporation from time to time may reduce the conversion price
by any amount for any period of time if the period is at least twenty days,
the reduction is irrevocable during the period and the Board of Directors
of the Corporation shall have made a determination that such reduction
would be in the best interest of the Corporation, which determination shall
be conclusive. Whenever the conversion price is reduced pursuant to the
preceding sentence, the Corporation shall mail to holders of record of the
Series A Convertible Preferred Stock a notice of the reduction at least
fifteen days prior to the date the reduced conversion price takes effect,
and such notice shall state the reduced conversion price and the period it
will be in effect.
(x) No adjustment in the conversion price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this
Section 5(c)) would require an increase of at least 1% in the number of
shares of Common Stock into which each share of Series A Convertible
Preferred Stock is then convertible; provided, however, that any
adjustments which by reason of this section 5(c) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this subparagraph (x) shall be made to
the nearest one-hundred thousandth of a share.
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(xi) Whenever any adjustment is made to the conversion price, the
Corporation shall forthwith (i) file with each Transfer Agent of such
Series A Convertible Preferred Stock a statement describing in reasonable
detail the adjustment and the method of calculation used, and (ii) cause a
copy of such statement to be mailed to the holders of record of the Series
A Convertible Preferred Stock as of the effective date of such adjustment.
(d) Reclassification, Consolidation, Merger or Sale of Assets.
(i) In the event that the Corporation shall be a party to any
transaction (including without limitation any recapitalization or
reclassification of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination of the Common Stock), any
consolidation of the Corporation with, or merger of the Corporation into,
any other person, any merger of another person into the Corporation (other
than a merger which does not result in a reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the
Corporation) or any sale or transfer of all or substantially all of the
assets of the Corporation or any compulsory share exchange) pursuant to
which all Common Stock is converted into the right to receive other
securities, cash or other property, to the extent permitted by law,
provisions shall be made as part of the terms of such transaction whereby
the holder of each share of Series A Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such share only into
(A) in the case of any such transaction other than a Common Stock
Fundamental Change (as defined in Section 5(h)) and subject to funds being
legally available for such purpose under applicable law at the time of such
conversion, the kind and amount of securities, cash and other property
receivable upon such transaction by a holder of the number of shares of
Common Stock into which such share of Series A Convertible Preferred Stock
might have been converted immediately prior to such transaction, after
giving effect, in the case of any Non-Stock Fundamental Change (as defined
in Section 5(h)), to any adjustment in the conversion price required by the
provisions of Section 5(g), and (B) in the case of a Common Stock
Fundamental Change, common stock of the kind received by holders of Common
Stock as a result of such Common Stock Fundamental Change at a conversion
price determined pursuant to the provisions of Section 5(g).
(ii) In the event the Corporation determines in good faith that there is
doubt whether the adjustment otherwise required by subparagraph (i) of this
Section 5(d) can be made in a manner consistent with then applicable law,
then the Corporation may elect (which election shall be evidenced by a
resolution of the Board of Directors) that, in lieu of the Corporation's
making such adjustment, the holder of each share of Series A Convertible
Preferred Stock then outstanding shall have the right thereafter to convert
such share into, but only into, shares of the common stock (the "New Common
Stock") of the principal corporation surviving the transaction which gives
rise to the adjustment (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at a conversion price (based upon a
value of a share of Series A Convertible Preferred Stock of $50 for such
purpose) determined by multiplying $50 by a fraction the numerator of which
is the fair market value (as so determined by the Board of Directors) per
share of the New Common Stock (but without any adjustment pursuant to
Section 5(g)) and the denominator of which is the fair market value on the
date the transaction becomes effective (as so determined by the Board of
Directors) of the kind and amount of securities, cash and other property
receivable in such transaction by a holder of the number of shares of
Common Stock into which such share of Series A Convertible Preferred Stock
might have been converted immediately prior to such transaction.
(iii) The Corporation or the person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires
the Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such rights as are created by this subparagraph (d). Such
certificate or articles of incorporation or other constituent document
shall provide, in respect of any shares of capital stock into which the
Series A Convertible Preferred Stock has become convertible, for
adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5. The above provisions shall similarly apply
to successive transactions of the foregoing type.
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(e) Special Conversion Option. Notwithstanding any other provision in this
Section 5, if the Corporation pays a dividend or makes another distribution on
its Common Stock consisting of capital stock of one or more Public Companies in
a Public Company Distribution, then, in lieu of making any adjustment that
would otherwise be applicable in respect of the distribution of any one or more
such Public Companies in accordance with Section 5 (including without
limitation Section 5(g) hereof) and to the extent permitted by law, the Board
of Directors may elect (which election shall be evidenced by a resolution of
the Board of Directors) that, immediately following each distribution of
capital stock of each Public Company as to which an election is made, the
Series A Convertible Preferred Stock shall be convertible into (i) fully paid
and nonassessable shares of Common Stock at the rate of such number of shares
of Common Stock for each full share of Series A Convertible Preferred Stock
that is equal to $50 divided by the conversion price per share of Common Stock
applicable immediately prior to such adjustment, and (ii) fully paid and
nonassessable shares of capital stock of each such Public Company at the rate
of such number of shares of capital stock of such Public Company for each full
share of Series A Convertible Preferred Stock that is equal to $50 divided by
the conversion price applicable per share of capital stock of such Public
Company. The initial conversion price of the Series A Convertible Preferred
Stock applicable to shares of capital stock of each such Public Company shall
be equal to $50 divided by the Allocable Public Company Shares and shall
thereafter be subject to adjustment as provided in Section 5, provided that,
with respect to adjustments relating to such capital stock and except where the
context otherwise requires, references in Sections 5(c), (d), (e), (g), (h)
(excluding Subsection 7 thereof), (i), (j), (k) and (m) to the "Corporation,"
"Common Stock" and "Board of Directors" shall be deemed to refer to such Public
Company. As used herein, the term "Allocable Public Company Shares" shall mean,
with respect to a Public Company, the product of (i) such number of shares of
capital stock of such Public Company as is distributed to a holder of one share
of Common Stock in the Public Company Distribution, and (ii) such number of
shares of Common Stock of the Corporation as would have been received by a
holder of one share of Series A Convertible Preferred Stock had the Series A
Convertible Preferred Stock been converted immediately prior to such
distribution into Common Stock that received such distribution. The term
"Public Company" shall mean any corporation (other than the Corporation) the
capital stock of which is distributed in the Public Company Distribution and is
listed, admitted to trading or quoted, including upon notice of issuance or on
a when-issued basis, on a Stock Exchange (as defined in Section 5(h)) prior to
the sixth business day after the date of such distribution. The term "Public
Company Distribution" shall mean any dividend or another distribution by the
Corporation on its Common Stock consisting of capital stock of one or more
Public Companies in which the Market Value of the capital stock of all of the
Public Companies so distributed on the date of such distribution is greater
than 10% of the aggregate of the Market Value of the Corporation and the Market
Value of all such Public Companies on the date of the Public Company
Distribution. The term "Market Value" shall mean, with respect to the capital
stock of any corporation, the product of (i) the fair market value of such
capital stock as shall be determined in good faith by the Board of Directors
(whose determination shall be conclusive and described in a resolution of the
Board of Directors) by reference to the daily Closing Prices for the first ten
consecutive Trading Days subsequent to and including the date of such
distribution and (ii) the number of shares of capital stock of such corporation
outstanding on the date of the Public Company Distribution.
(f) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash out of its retained
earnings other than any special or nonrecurring or other extraordinary
dividend or (2) declare or authorize a redemption or repurchase of in
excess of 10% of the then outstanding shares of Common Stock; or
(ii) the corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value,
or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Corporation is a party and for
which
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approval of any stockholders of the Corporation shall be required, or of
the sale or transfer of all or substantially all of the assets of the
Corporation whereby the Common Stock is converted into other securities,
cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation or winding
up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
Series A Convertible Preferred Stock and shall cause to be mailed to the
holders of record of the Series A Convertible Preferred Stock, at their last
address as they shall appear upon the stock transfer books of the Corporation,
at least fifteen days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record (if any)
is to be taken for the purpose of such dividend, distribution, redemption,
repurchase, rights or warrants or, if a record is not taken, the date as of
which the holders of record of Common Stock to be entitled to such dividend,
distribution, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
(g) Adjustments in Case of Fundamental Changes. Notwithstanding any other
provision in this Section 5 to the contrary, if any Fundamental Change (as
defined in Section 5(h)) occurs, then the conversion price in effect will be
adjusted immediately after such Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change (as defined in
Section 5(h)), each share of Series A Convertible Preferred Stock shall be
convertible, to the extent permitted by applicable law, solely into common
stock of the kind received by holders of Common Stock as the result of such
Common Stock Fundamental Change; provided, that, in the event the Board of
Directors determines in good faith (such determination to be conclusive and
described in a resolution of the Board of Directors) that there is doubt
whether the adjustment provided in this sentence can be made in a manner
consistent with then applicable law or that despite the Corporation's
reasonable efforts the issuer of common stock will not agree to provide such
shares of common stock as would be needed for the purposes of satisfying the
provisions of this sentence (or resulting from any subsequent adjustments of
the conversion right pursuant to this Section 5), on reasonable terms (with
reference to the Applicable Price of such common stock, determined as if the
first reference to "Common Stock" in clause (ii) in the definition of
Applicable Price were references to such common stock), then, by election of
the Corporation (which election shall be evidenced by a resolution of the Board
of Directors) the Fundamental Change that would otherwise be a Common Stock
Fundamental Change shall be a Non-Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section 5(g) in the event of a Fundamental Change, immediately after such
Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined in Section
5(h)), the conversion price of the Series A Convertible Preferred Stock
shall thereupon become the lower of (A) the conversion price in effect
immediately prior to such Non-Stock Fundamental Change, and (B) the result
obtained by multiplying the greater of the Applicable Price (as defined in
Section 5(h)) or the then applicable Reference Market Price (as defined in
Section 5(h)) by a fraction of which the numerator shall be $50 and the
denominator shall be the then-current Redemption Price per share of Series
A Convertible Preferred Stock, provided that at such time after such Non-
Stock Fundamental Change as dividends shall have been paid to the holders
of the Series A Convertible Preferred Stock in an amount equal to dividends
accrued and unpaid thereon at the time of the foregoing adjustment, the
conversion price as adjusted shall be readjusted to increase it to the
conversion price which would have then existed if there would have been no
dividend accrued and unpaid on the date of such Non-Stock Fundamental
Change; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Series A Convertible Preferred Stock in effect immediately
prior to such Common Stock Fundamental Change shall
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thereupon be adjusted by multiplying such conversion price by a fraction of
which the numerator shall be the Purchaser Stock Price (as defined in
Section 5(h)) and the denominator shall be the Applicable Price; provided,
however, that in the event of a Common Stock Fundamental Change or a Non-
Stock Fundamental Change (other than a Non-Stock Fundamental Change as to
which Section 5(d) is not applicable) in which (A) 100% by value of the
consideration received by a holder of Common Stock is common stock of the
successor, acquiror or other third party (and cash, if any, is paid with
respect to any fractional interests in such common stock resulting from
such Fundamental Change) and (B) all of the Common Stock shall have been
exchanged for, converted into or acquired for common stock (and cash with
respect to fractional interests) of the successor, acquiror or other third
party, the conversion price of the Series A Convertible Preferred Stock in
effect immediately prior to such Fundamental Change shall thereupon be
adjusted by multiplying such conversion price by a fraction of which the
numerator shall be one (1) and the denominator shall be the number of
shares of common stock of the successor, acquiror, or other third party
received by a holder of one share of Common Stock as a result of such
Fundamental Change.
(h) Definitions. The following definitions shall apply to terms used in this
Section 5:
(1) "Applicable Price" shall mean (i) in the event of a Non-Stock
Fundamental Change in which the holders of the Common Stock receive only
cash, the amount of cash received by the holder of one share of Common
Stock and (ii) in the event of any other Non-Stock Fundamental Change or
any Common Stock Fundamental Change, the average of the daily Closing
Prices of the Common Stock for the ten consecutive Trading Days prior to
and including the record date for the determination of the holders of
Common Stock entitled to receive cash, securities, property or other assets
in connection with such Non-Stock Fundamental Change or Common Stock
Fundamental Change, or, if there is no such record date, the date upon
which the holders of the Common Stock shall have the right to receive such
cash, securities, property or other assets, in each case, as adjusted in
good faith by the Board of Directors of the Corporation (whose
determination shall be conclusive and described in a resolution of the
Board of Directors) appropriately to reflect any of the events referred to
in subparagraph (i), (ii), (iii), (iv), (v) and (vi) of Section 5(c) or in
Section 5(g).
(2) "Closing Price" of any common stock on any day shall mean the last
reported sale price regular way 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 of the common stock in each case 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 or quotation
system on which the common stock is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the closing bid and
asked prices of the common stock in the over-the-counter market on the day
in question as reported by the National Quotation Bureau Incorporated, or a
similarly 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 of the Corporation for
that purpose.
(3) "Common Stock Fundamental Change" shall, except as provided in the
second sentence of this Section 5(h), mean any Fundamental Change in which
(i) more than 50% by value (as determined in good faith by the Board of
Directors of the Corporation (whose determination shall be conclusive and
described in a resolution of the Board of Directors)) of the consideration
received by holders of Common Stock consists of common stock that for each
of the ten consecutive Trading Days referred to with respect to such
Fundamental Change in Section 5(h)(1) above has been admitted for listing
or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the National Association of Securities
Dealers, Inc. ("NASDAQ") National Market System and (ii) either (A) the
Corporation continues to exist after the occurrence of such Fundamental
Change and the outstanding shares of Series A Convertible Preferred Stock
continue to exist as outstanding shares of Series A Convertible Preferred
Stock, or (B) not later than the occurrence of such Fundamental Change, the
outstanding shares of Series A Convertible Preferred Stock are converted
into or exchanged for shares of convertible preferred stock of
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a corporation succeeding to the business of the Corporation, and such
convertible preferred stock has powers, preferences and relative,
participating, optional or other rights, and qualifications, limitations
and restrictions, substantially similar to those of the Series A
Convertible Preferred Stock.
(4) "Fundamental Change" shall mean the occurrence of any transaction or
event in connection with a plan to which the Corporation is a party
pursuant to which 90% or more of the outstanding Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right
to receive cash, securities, property or other assets (whether by means of
an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise); provided,
however, in the case of a plan involving more than one such transaction or
event, for purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when 90% of the outstanding Common
Stock of the Corporation shall be exchanged for, converted into, or
acquired for or constitute solely the rights to receive cash, securities,
property or other assets, but the adjustment shall be based upon the
highest weighted average of consideration per share which a holder of
Common Stock could have received in such transactions or events as a result
of which more than 50% of the Common Stock of the Corporation shall have
been exchanged for, converted into, or acquired for or constitute solely
the right to receive cash, securities, property or other assets.
(5) "Non-Stock Fundamental Change" shall mean any Fundamental Change
other than a Common Stock Fundamental Change.
(6) "Purchaser Stock Price" shall mean, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Prices of the common
stock received in such Common Stock Fundamental Change for the ten
consecutive Trading Days prior to and including the record date for the
determination of the holders of common Stock entitled to receive such
common stock, or, if there is no such record date, the date upon which the
holders of the Common Stock shall have the right to receive such common
stock, in each case, as adjusted in good faith by the Board of Directors of
the Corporation (whose determination shall be conclusive and described in a
resolution of the Board of Directors) appropriately to reflect any of the
events referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of
Section 5(c) or in Section 5(g) or to give appropriate weight to the
relative values in the event that more than one series or class of common
stock is received; provided, however, if no such Closing Prices of the
common stock for such Trading Days exist, then the Purchaser Stock Price
shall be set at a price to be determined in good faith by the Board of
Directors of the Corporation.
(7) "Reference Market Price" shall initially mean $12.859 and in the
event of any adjustment to the conversion price other than as a result of a
Fundamental Change, the Reference Market Price shall also be adjusted so
that the ratio of the Reference Market Price to the conversion price after
giving effect to any such adjustment shall always be the same as the ratio
of the foregoing amount to the initial conversion price per share set forth
in the first sentence of Section 5(a).
(8) "Stock Exchange" with respect to shares of capital stock, shall mean
the principal national securities exchange or quotation system on which
such evidences of indebtedness or shares of capital stock are listed or
admitted to trading or quoted.
(9) "Trading Day" shall mean a day on which securities are traded or
quoted on the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
(i) Dividend or Interest Reinvestment Plans. Notwithstanding the foregoing
provisions, the issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities
of the Corporation and the investment of additional optional amounts in shares
of Common Stock under any such plan, and the issuance of any shares of Common
Stock or options or rights to purchase such shares pursuant to any employee
benefit plan or program of the Corporation or pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of
the date the Series A Convertible Preferred Stock was first authorized, shall
not be deemed to constitute an issuance of Common Stock or exercisable,
exchangeable or convertible securities by the Corporation to which any of the
adjustment
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provisions described above applies. There shall also be no adjustment of the
conversion price in case of the issuance of any stock (or securities
convertible into or exchangeable for stock) of the Corporation except as
specifically described in this Section 5. If any action would require
adjustment of the conversion price pursuant to more than one of the provisions
described above, only one adjustment shall be made and, except as expressly
otherwise provided, such adjustment shall be the amount of adjustment which
has the highest absolute value to holders of Series A Convertible Preferred
Stock.
(j) Certain Additional Rights. In case the Corporation shall, by dividend
or otherwise, declare or make a distribution on its Common Stock referred to
in Section 5(c)(iv) or 5(c)(v) (including, without limitation, dividends or
distributions referred to in the last sentence of Section 5(c)(iv)), the
holder of each share of Series A Convertible Preferred Stock, upon the
conversion thereof subsequent to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution and
prior to the effective date (whether or not determined retroactively) of any
conversion price adjustment in respect of such distribution, shall also be
entitled to receive for each share of Common Stock into which such share of
Series A Convertible Preferred Stock is converted, such number or amount of
shares of Common Stock, rights, warrants, evidences of indebtedness, shares of
capital stock, cash and assets that is so distributed to a holder of one share
of Common Stock; provided, however, that, at the election of the Corporation
(whose election shall be evidenced by a resolution of the Board of Directors)
with respect to all holders so converting, the Corporation may, in lieu of
distributing to such holder any portion of such distribution not consisting of
cash or securities of the Corporation, pay such holder an amount in cash equal
to the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors). If any conversion of a share of Series
A Convertible Preferred Stock described in the immediately preceding sentence
occurs prior to the payment date for a distribution to holders of Common Stock
which the holder of the share of Series A Convertible Preferred Stock so
converted is entitled to receive in accordance with the immediately preceding
sentence, the Corporation may elect (such election to be evidenced by a
resolution of the Board of Directors) to distribute to such holder a due bill
for the shares of Common Stock, rights, warrants, evidences of indebtedness,
shares of capital stock, cash or assets to which such holder is so entitled,
provided that such due bill (i) meets any applicable requirements of the
principal national securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.
(k) No Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of Series A Convertible
Preferred Stock. If any such conversion would otherwise require the issuance
of a fractional share, an amount equal to such fraction multiplied by the
Closing Price (as defined in Section 5(h)) of the Common Stock on the day of
conversion shall be paid to the holder in cash by the Corporation.
(l) Reservation of Shares. The Corporation shall at all times reserve and
keep available out of its authorized Common Stock the full number of shares of
Common Stock into which all shares of Series A Convertible Preferred Stock
from time to time outstanding are convertible. If at any time the number of
authorized and unissued shares of Common Stock shall not be sufficient to
effect the conversion of all outstanding shares of Series A Convertible
Preferred Stock at the conversion price then in effect, the Corporation shall
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized and unissued shares of Common Stock to such number
as shall be sufficient for such purpose.
(m) Computation of Adjustments. The certificate of any independent firm of
public accountants of recognized standing selected by the Board of Directors
shall be evidence of the correctness of any computation made under this
Section 5.
(n) Cancellation of Shares Upon Conversion. All shares of Series A
Convertible Preferred Stock redeemed, purchased or otherwise acquired by the
Corporation or surrendered to it for conversion into Common Stock as provided
above shall be cancelled and thereupon restored to the status of authorized
but unissued shares of Preferred Stock undesignated as to series.
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6. Voting Rights.
(a) Except as otherwise expressly required by law, the Series A Convertible
Preferred Stock shall have no voting rights except as set forth in Section 6(b)
below.
(b) So long as any shares of the Series A Convertible Preferred Stock remain
outstanding, but not thereafter, in the event that four quarterly dividends
(whether or not consecutive) payable on the Series A Convertible Preferred
Stock or any class or series of stock which ranks on a parity with the Series A
Convertible Preferred Stock in the payment of dividends (collectively,
including the Series A Convertible Preferred Stock, the "Parity Preferred
Stock") shall be in default, in whole or in part, the holders of the
outstanding Parity Preferred Stock, in addition to any right of holders of any
series of Parity Preferred Stock to vote with the Common Stock at the election
of other directors or otherwise, shall be entitled at the next annual meeting
of stockholders, voting separately as a class regardless of series, each share
of Parity Preferred Stock having one vote, to elect one director of the class
of directors then being elected, and, in the event such default continues to
exist at succeeding annual meetings, the holders of the outstanding Parity
Preferred Stock shall be entitled in like manner to elect one director of the
class of directors being elected at such meetings; the Parity Preferred Stock
thus, in the event of such default, being entitled as a class to elect a
maximum of three directors, each to hold office for a term of three years or
until his successor is elected and qualified; provided, however, that each
person elected a director by the holders of Parity Preferred Stock shall, as a
condition to his qualification as a director of the corporation, submit to the
Board of Directors his written resignation effective if and when all dividends
in default on the Parity Preferred Stock shall be paid in full. If, after any
such default in the payment of dividends on Parity Preferred Stock, all such
dividends in default shall be paid in full, the Parity Preferred Stock shall
then be divested of its right as a class to elect directors, subject to the
revesting of same in the event of any similar future default or defaults. Upon
the payment in full of all dividends then in default on the Parity Preferred
Stock, the directors of the Corporation, exclusive of those elected by the
Parity Preferred Stock, may by a majority vote accept the aforesaid
resignations of the directors so elected by the Parity Preferred Stock, and
thereupon elect in the place and stead of such directors new directors to
fulfill the unexpired terms of such resigning directors.
If at any time, when the holders of Parity Preferred Stock as a class are
represented by only one director on the Board of Directors, and for any reason
other than acceptance of the aforesaid resignation of such director, the office
of such director becomes vacant, the remaining directors shall not be entitled
to elect a successor, but instead, such vacancy shall be filled at the next
annual meeting of stockholders by the holders of Parity Preferred Stock, voting
separately as a class. If, after the holders of Parity Preferred Stock as a
class are represented by more than one director on the Board of Directors, any
vacancy occurs among the directors elected by the holders of Parity Preferred
Stock, other than as a result of acceptance of the aforesaid resignations, the
remaining director or directors so elected by the Parity Preferred Stock shall
be entitled to nominate for election by the Board of Directors a successor-
director to hold office for the unexpired term of the director whose position
has become vacant. If the vacancy is not so filled prior to the next succeeding
annual meeting of stockholders, it may be filled at such meeting by the holders
of Parity Preferred Stock, voting separately as a class.
7. Relation to Other Preferred Stock. The holders of the Series A
Convertible Preferred Stock shall not be entitled to receive any amount upon
the dissolution, liquidation or winding up of the Corporation until the
liquidation preference of any other class of stock of the Corporation ranking
senior to the Series A Convertible Preferred Stock as to rights upon
liquidation, dissolution or winding up shall have been paid in full. If, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation the assets available for distribution are insufficient to pay in
full the amounts payable with respect to the Series A Convertible Preferred
Stock and any other shares of stock of the Corporation ranking as to any such
distribution on a parity with the Series A Convertible Preferred Stock, the
holders of the Series A Convertible Preferred Stock and of such other shares
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 to the holders of the Series A Convertible Preferred
Stock of the full preferential amounts provided for in Section 3, the holders
of the Series A Convertible Preferred Stock shall be entitled to no further
participation in any distribution of assets by the Corporation.
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FIFTH: The name and mailing address of the Sole Incorporator is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Deborah M. Reusch.................................... P.O. Box 636
Wilmington, DE 19899
</TABLE>
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
B. The number of directors constituting the whole Board of Directors
shall be such number not less than one (1) nor more than twenty (20) which
is authorized from time to time exclusively by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized directors, whether or not there exists any vacancies in
previously authorized directorships (such total number of authorized
directorships being the "Entire Board" and such majority being a "Majority
of the Entire Board"). The Board of Directors will initially consist of
sixteen (16) directors, and such number shall not be changed prior to the
annual meeting of stockholders in the year 2002 unless such resolution is
approved unanimously by the Entire Board. No decrease in the number of
directors shall shorten the term of any incumbent director.
C. The directors, other than those who may be elected by the holders of
any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation, of the Corporation shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. The term of the
initial Class I directors shall terminate on the date of the 2000 annual
meeting of stockholders; the term of the initial Class II directors shall
terminate on the date of the 2001 annual meeting of stockholders; and the
term of the initial Class III directors shall terminate on the date of the
2002 annual meeting of stockholders. At each annual meeting of stockholders
beginning with the annual meeting in 2000, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from
an increase in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in
the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which
his or her term expires and until his or her successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Subject to the rights, if any, of
the holders of shares of Preferred Stock then outstanding, any or all of
the directors of the Corporation may be removed from office at any time,
but only for cause and only by the affirmative vote of the holders of at
least 75% of the voting power of the Corporation's then outstanding capital
stock entitled to vote generally in the election of directors. This Section
C. shall not be repealed, altered, amended or rescinded, and no provisions
inconsistent herewith shall be adopted, without the affirmative vote of the
holders of at least 75% of the voting power of the Corporation's then
outstanding capital stock entitled to vote generally in the election of
directors.
D. Subject to the terms of any one or more classes or series of
Preferred Stock and to the terms of Section 2.4 of the Bylaws, any vacancy
on the Board of Directors that results from an increase in the number of
directors may be filled by a majority of the Board of Directors then in
office, provided that a quorum is present, and any other vacancy occurring
on the Board of Directors may be filled by a majority of the Board of
Directors then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to fill a vacancy
resulting from an increase in the number of directors of such class shall
hold office for a term that shall coincide with the remaining term of that
class. Any director
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elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of this Amended and Restated Certificate of
Incorporation applicable thereto, and such directors so elected shall not
be divided into classes pursuant to this Article SIXTH unless expressly
provided by such terms.
E. In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL and this Amended and Restated Certificate of
Incorporation; provided, however, that no Bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would
have been valid if such Bylaws had not been adopted.
SEVENTH: No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for any breach of
fiduciary duty as a director to the full extent authorized or permitted by law
(as now or hereafter in effect). Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the GCL, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article SEVENTH
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.
EIGHTH: Any action required or permitted to be taken at any annual or
special meeting of stockholders of the Corporation may be taken only upon the
vote of the stockholders at an annual or special meeting duly noticed and
called, as provided in the Bylaws of the Corporation and may not be taken by a
written consent of the stockholders pursuant to the GCL.
NINTH: Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by law, may be called by the Chairman of the Board
or the Chief Executive Officer (or, if there is no Chief Executive Officer, the
President) and shall be called by the Chairman of the Board, the Chief
Executive Officer, the President or Secretary at the request in writing of a
Majority of the Entire Board. Such request shall state the purpose or purposes
of the proposed meeting. Special meetings of the Corporation may not be called
by any other person or persons.
TENTH: The Corporation shall indemnify its directors and officers to the
fullest extent authorized or permitted by law, as now or hereafter in effect,
and such right to indemnification shall continue as to a person who has ceased
to be a director or officer of the Corporation and shall inure to the benefit
of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors. The right to indemnification conferred
by this Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending or otherwise participating in any proceeding in
advance of its final disposition. The Corporation may, to the extent authorized
from time to time by the Board of Directors, provide rights to indemnification
and to the advancement of expenses to employees and agents of the Corporation
similar to those conferred in this Article TENTH to directors and officers of
the Corporation. The rights to indemnification and to the advancement of
expenses conferred in this Article TENTH shall not be exclusive of any other
right which any person may have or hereafter acquire under this Amended and
Restated Certificate of Incorporation, the Bylaws of the Corporation, any
statute, agreement, vote of stockholders or disinterested directors or
otherwise.
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Any repeal or modification of this Article TENTH by the stockholders of the
Corporation shall not adversely affect any rights to indemnification and to the
advancement of expenses of a director or officer of the Corporation existing at
the time of such repeal or modification with respect to any acts or omissions
occurring prior to such repeal or modification.
ELEVENTH: In furtherance and not in limitation of the powers conferred by
statute, a Majority of the Entire Board shall have the power, without the
assent or vote of the stockholders, to adopt, repeal, alter, amend or rescind
the Bylaws of the Corporation. Except as otherwise expressly prescribed by law,
the stockholders may adopt, repeal, alter, amend or rescind the Bylaws of the
Corporation by the affirmative vote of the holders of two-thirds or more of the
entire voting power of the then issued and outstanding stock of the Corporation
entitled to vote for the election of directors, considered as one class.
TWELFTH: The Corporation reserves the right to repeal, alter, amend or
rescind any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate to be executed on its behalf this xx day of xxxxxxx, 1999.
Asarco Cyprus Incorporated
By: _________________________________
Name:
Title:
By: _________________________________
Name:
Title:
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<PAGE>
EXHIBIT D TO APPENDIX A
FORM OF
AMENDED AND RESTATED BYLAWS
OF
ASARCO CYPRUS INCORPORATED
EFFECTIVE [XXXXX] [XX], 1999
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<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ASARCO CYPRUS INCORPORATED
(hereinafter called the "Corporation")
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1.1. Annual Meeting. A meeting of stockholders shall be held annually
for the election of directors and the transaction of such other business as is
related to the purpose or purposes set forth in the notice of meeting on such
date and at such time as may be fixed from time to time by the Board of
Directors; or if no date and time are so fixed, at 2:00 p.m. on the last
Wednesday in April in each and every year, unless such day shall fall on a
legal holiday, in which case such meeting shall be held on the next succeeding
business day, at such time as may be fixed by the Board of Directors.
Any business to be conducted at an annual meeting, including, without
limitation, any nomination for election to the Board of Directors, must be (a)
specified in the notice of meeting given by or at the direction of the Board of
Directors; (b) brought before the annual meeting by or at the direction of the
chair of the meeting, the Board of Directors, or a committee thereof; or (c)
brought before the annual meeting, in compliance with the notice procedures set
forth in this section, by any stockholder of the Corporation who is a
stockholder of record on the record date for the determination of stockholders
entitled to vote at such meeting.
A stockholder intending to nominate a candidate for election to the Board of
Directors or to bring any other business before an annual meeting must give
timely written notice thereof to the secretary of the Corporation. In order to
be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation, not less than 90 days
nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within the 30 days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the meeting was made, whichever
first occurs.
A stockholder's notice to the secretary shall set forth:
(a) as to each nominee for election or reelection to the Board of Directors,
(i) that person's consent to such nomination, (ii) the name, age (including
date of birth), business address and residence address of the proposed nominee,
(iii) the principal occupation or employment of the proposed nominee, (iv) the
class and number of shares of stock of the Corporation which are beneficially
owned by the proposed nominee;
(b) as to each matter of any other business, (i) a brief description of the
business desired to be brought before the annual meeting and (ii) the reasons
for conducting such business at the annual meeting; and
(c) as to the stockholder proposing any such nomination or other business,
(i) the name and record address of the stockholder, (ii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of the stockholder in such nomination or business, and (iv) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to bring such business before the meeting.
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The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as director of the Corporation.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that the nomination was not made in accordance with the
foregoing procedure, and if he should so determine, shall so declare to the
meeting and the nomination shall be disregarded.
Section 1.2. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by law or by the Certificate
of Incorporation, may be called by the Chairman or the Chief Executive Officer
(or, if there is no Chief Executive Officer, the President) and shall be called
by the Chairman, the Chief Executive Officer, the President, or Secretary at
the request in writing of a Majority of the Entire Board (as defined herein).
Such request shall state the purpose or purposes of the proposed meeting.
Special meetings of the Corporation may not be called by any other person or
persons.
Section 1.3. Place of Meetings. Meetings of stockholders shall be held at
such place as may be designated by the Board of Directors (or by the Chief
Executive Officer, in the absence of a designation by the Board of Directors).
Section 1.4. Notice of Meeting; Adjourned Meetings. Notice of each meeting of
stockholders shall be given in accordance with the Delaware General Corporation
Law ("GCL").
Section 1.5. Quorum. Except as otherwise provided by law or in the
Certificate of Incorporation, at any meeting of the stockholders, the presence,
in person or by proxy, of the holders of a majority of the shares entitled to
vote thereat shall constitute a quorum for the transaction of any business.
When a quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any stockholders. The stockholders present may adjourn
the meeting despite the absence of a quorum.
Section 1.6. Proxies. Subject to applicable law, the Board of Directors may
impose such restrictions and requirements on the validity and use of proxies as
it deems appropriate. Any restriction or requirement so imposed shall be set
forth in the notice of any meeting to which it may be applicable.
Section 1.7. Voting. Except as otherwise required by law, directors shall be
elected by a plurality of the votes cast at a meeting of stockholders by the
holders of shares entitled to vote in the election. The directors who are to be
elected at the annual meeting of stockholders shall be elected by ballot by the
holders of shares entitled to vote. Whenever any corporate action, other than
the election of directors, is to be taken by vote of the stockholders at a
meeting, it shall, except as otherwise required by law, the Certificate of
Incorporation or these Bylaws, be authorized by a majority of the votes cast
thereat, in person or by proxy. Except as otherwise provided in the Certificate
of Incorporation, every stockholder of record shall be entitled to one vote for
each and every share of stock standing in such holder's name on the record of
stockholders on all matters requiring stockholders action.
Section 1.8. Conduct of Stockholders Meetings. Each meeting of stockholders
shall be presided over by the Chairman of the Board of Directors. In the
absence of the Chairman of the Board the meeting of stockholders shall be
presided over by such person as shall be designated by the Board of Directors.
If the Board fails to make such designation, the meeting shall be presided over
by the Chief Executive Officer, or in his absence, the next highest ranking
officer of the Corporation who is able to attend such meeting. The person
presiding over any meeting of stockholders shall have the power, without the
need for any vote of stockholders, to adjourn such meeting for any reason.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1. Power of Board. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
Section 2.2. Number of Directors. The number of directors constituting the
whole Board of Directors shall be such number not less than one (1) nor more
than twenty (20) which is authorized from time to time exclusively by the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of authorized directors, whether or not there exists any vacancies in
previously authorized directorships (such total number of authorized
directorships being the "Entire Board" and such majority being a "Majority of
the Entire Board"). The Board of Directors will initially consist of sixteen
(16) directors, and such number shall not be changed prior to the Annual
Meeting of Stockholders in the year 2002 unless such resolution is approved by
the unanimous vote of the Entire Board. No decrease in the number of directors
shall shorten the term of any incumbent director.
Section 2.3. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Board of Directors, the Chairman of the
Board, the Chief Executive Officer, the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein;
and unless otherwise specified therein the acceptance of such resignation shall
not be necessary to make it effective.
Section 2.4. Newly Created Directorships and Vacancies.
(a) Vacancies Occurring after the Annual Meeting in 2002. Following the
Annual Meeting of Stockholders in the year 2002, any newly-created
directorships resulting from an increase in the number of directors may be
filled by a majority of the Board of Directors then in office, provided a
quorum is present, and any other vacancies on the Board of Directors shall be
filled by a majority of the Board of Directors then in office, though less than
a quorum, or by a sole remaining director.
(b) Vacancies Occurring Prior to the Annual Meeting in 2002. Prior to the
Annual Meeting of Stockholders in the year 2002, any ASARCO Vacancies (as
hereinafter defined) on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled by a
majority vote of the remaining ASARCO Directors (as hereinafter defined), and
any Cyprus Vacancies (as hereinafter defined) on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled by a majority vote of the remaining Cyprus Directors (as
hereinafter defined). As used herein, an "ASARCO Director" is any one of the
eight directors initially designated as a member of the Board of Directors by
ASARCO Incorporated pursuant to the Agreement and Plan of Merger, dated as of
July 15, 1999, among the Corporation, ACO Acquisition Corp., CAM Acquisition
Corp., ASARCO Incorporated and Cyprus Amax Minerals Company (the "Merger
Agreement"), and any successor to such ASARCO Director selected in accordance
with this paragraph (b); an "ASARCO Vacancy" is a vacancy in a directorship
held by an ASARCO Director; a "Cyprus Director" is any one of the eight
directors initially designated as a member of the Board of Directors by Cyprus
Amax Minerals Incorporated pursuant to the Merger Agreement and any successor
to such Cyprus Director selected in accordance with this paragraph (b); and a
"Cyprus Vacancy" is a vacancy in a directorship held by a Cyprus Director.
(c) Successors; Amendments. Any directors appointed to the Board of Directors
in accordance with Section 2.4 shall hold office for the remainder of the full
term of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected
and qualified. Any amendment to or modification or repeal of, or the adoption
any provision inconsistent with this Section 2.4 adopted prior to the Annual
Meeting of Stockholders in 2002 shall require the affirmative vote of the
Entire Board.
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Section 2.5. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a Majority of the Entire Board, may
designate from among its members an executive committee and other committees to
serve at the pleasure of the Board of Directors, each consisting of one or more
directors, and each of which, to the extent provided in the resolution, shall
have all the authority of the Board to the fullest extent authorized by law,
including the power or authority to declare a dividend or to authorize the
issuance of stock. The Board of Directors may designate one or more directors
as alternate members of any such committee, who may replace any absent or
disqualified member or members at any meeting of such committee. Prior to the
Annual Meeting of Stockholders in 2002, the membership of each and every such
committee designated by the Board of Directors shall consist of an equal number
of ASARCO Directors and Cyprus Directors, and vacancies on such committees
shall be filled in the manner prescribed in Section 2.4(b).
Section 2.6. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity, or
to allow a fixed sum plus expenses, if any, for attendance at meetings of the
Board or of committees designated thereby.
Section 2.7. Eligibility. The eligibility criterion specified in this Section
2.7 shall not apply to the designation of the initial Board of Directors of the
Corporation pursuant to the Merger Agreement. Beginning with the first Annual
Meeting of Stockholders to be held in 2000, no person shall be eligible for
nomination or election to the Board of Directors if prior to December 31 of the
year of the Annual Meeting such person shall have attained the age of 70.
ARTICLE III
MEETINGS OF THE BOARD
Section 3.1. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such times and places, within or without the State of
Delaware or the United States of America, as may from time to time be fixed by
the Board.
Section 3.2. Special Meetings; Notice; Waiver. Special meetings of the Board
of Directors may be held at any time and place, within or without the State of
Delaware or the United States of America, upon the call of the Chairman of the
Board, the Chief Executive Officer, or a Majority of the Entire Board. Notice
of a special meeting need not be given to any director who submits a signed
waiver of notice whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to him. A notice, or waiver of notice, need not specify the purpose of
any special meeting of the Board of Directors.
Section 3.3. Adjournment. A majority of the directors present, whether or not
a quorum is present, may adjourn any meeting to another time and place.
ARTICLE IV
OFFICERS
Section 4.1. Officers. The following shall be the officers of the
Corporation: one Chairman of the Board of Directors, one or more Chief
Executive Officers, one President, one Chief Financial Officer, one Chief
Operating Officer, one or more Vice Presidents, one or more Secretaries, one or
more Assistant Secretaries, one or more Treasurers, and one or more Assistant
Treasurers. The Board of Directors may from time to time may elect or appoint
such other officers as it may determine. Any two or more offices may be held by
the same person. The officers shall be appointed by the Board of Directors. The
Board of Directors may leave any officer position unfilled for such period it
deems appropriate.
Securities of other corporations held by the Corporation may be voted by any
officer designated by the Board and, in the absence of any such designation, by
the Chief Executive Officer, President, any Vice President, the Secretary or
the Treasurer.
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The Board of Directors may require any officer to give security for the
faithful performance of his duties.
Section 4.2. Chairman of the Board. The Chairman of the Board shall preside
as chairman of all meetings of directors and stockholders. The Chairman of the
Board shall report to the Board of Directors. The Cyprus Director who was also
the Chairman of the Board of Cyprus Amax Minerals Company (the "Cyprus
Chairman") shall serve as the initial Chairman of the Board of the Corporation
until December 31, 2000, unless he earlier retires or otherwise ceases to be
able to serve. As of December 31, 2000, or the date of such earlier occurrence,
the ASARCO Director who was also the Chairman of the Board of ASARCO
Incorporated (the "ASARCO Chairman") shall succeed to the office of Chairman of
the Board.
Section 4.3. Chief Executive Officer. The Chief Executive Officer shall be
the chief executive officer of the Corporation with all the rights and powers
incident to that position. The Chief Executive Officer shall, in the absence of
the Chairman of the Board, preside as the chairman of director meetings. The
Chief Executive Officer shall report to the Board of Directors. If there shall
be more than one Chief Executive Officer, each such Chief Executive Officer
shall be a Co-Chief Executive Officer of the Corporation, and each such Chief
Executive Officer, acting alone, shall have all the powers of the Chief
Executive Officer; provided, however, the Chief Executive Officers shall
consult with one another prior to taking any significant action. Until the
first Annual Meeting of Stockholders in 2000 the Cyprus Chairman and the ASARCO
Chairman shall act as Co-Chief Executive Officers of the Corporation. Effective
with the Annual Meeting of Stockholders in 2000 the Cyprus Chairman shall cease
to be a Co-Chief Executive Officer and the ASARCO Chairman shall thereafter be
the sole Chief Executive Officer of the Corporation until his successor is
elected and qualified.
Section 4.4 President. The President (who may also be the Chief Executive
Officer) shall perform all the duties customary to that office with all the
rights and powers incident to that position. The ASARCO Chairman shall be the
President of the Corporation until his successor is elected and qualified.
Section 4.5. Chief Financial Officer. The Chief Financial Officer shall be
the chief financial officer of the Corporation with all the rights and powers
incident to that position.
Section 4.6. Chief Operating Officer. The Chief Operating Officer shall be
the chief operating officer of the Corporation with all the rights and powers
incident to that position.
Section 4.7. Vice President. The Vice Presidents shall perform such duties as
may be prescribed or assigned to them by the Board of Directors, the Chief
Executive Officer or the President. In the absence of the President, the
highest-ranking Vice President shall perform the duties of the President. In
the event of the refusal or incapacity of the President to function as such,
the highest-ranking Vice President shall so perform the duties of the
President; and the order of rank of the Vice Presidents shall be determined by
the designated rank of their offices or, in the absence of such designation, by
seniority in the office of Vice President; provided that said order or rank may
be established otherwise by action of the Board of Directors from time to time.
Section 4.8. Treasurer. The Treasurer shall perform all the duties customary
to that office and shall have the care and custody of the funds and securities
of the Corporation. He shall at all reasonable times exhibit his books and
accounts to any director upon application and shall give such bond or bonds for
the faithful performance of his duties with such surety or sureties as the
Board of Directors from time to time may determine.
Section 4.9. Secretary. The Secretary shall act as secretary of the
Corporation, shall keep the minutes of the meetings of the Board of Directors
and of the stockholders and shall perform all of the other duties usual to that
office.
Section 4.10 Assistant Treasurer and Assistant Secretary. Any Assistant
Treasurer or Assistant Secretary shall perform such duties as may be prescribed
or assigned to him by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer or the President. An Assistant Treasurer shall give
such bond or bonds for the faithful performance of his duties with such surety
or sureties as the Board of Directors from time to time may determine.
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Section 4.11 Term of Office; Removal.
(a) Subject to Section 4.2 and Section 4.3 of this Article IV, all officers,
agents and employees of the Corporation shall hold their respective offices or
positions at the pleasure of the Board of Directors and may be removed at any
time by the Board of Directors with or without cause, provided, however, any
request for any resignation or removal of any officer of the Corporation whose
designation is specified in Section 3.2 of the Merger Agreement or in Sections
4.2, 4.3 or 4.4 of these Bylaws prior to the Annual Meeting of Stockholders in
the year 2002 shall require the affirmative vote of 75% of the Entire Board,
and, prior to the Annual Meeting of Stockholders in the year 2002, the
designation of any successor officer to fill a vacancy in any such office which
is not provided for in Section 3.2 of the Merger Agreement or in Sections 4.2,
4.3 or 4.4 of these Bylaws shall also require the affirmative vote of 75% of
the Entire Board.
(b) Any amendment to or modification or repeal of, or the adoption of any
provision inconsistent with Sections 4.2, 4.3 or 4.4 prior to the Annual
Meeting of Stockholders in 2002 shall require the affirmative vote of 75% of
the Entire Board.
(c) The removal of an officer without cause shall be without prejudice to his
contract rights, if any. Except as otherwise set forth in this Article IV, if
the office of any officer becomes vacant for any reason, the vacancy shall be
filled by a Majority of the Entire Board. The election or appointment of an
officer shall not of itself create contract rights.
Section 4.12 Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
ARTICLE V
CERTIFICATES OF STOCK
Section 5.1. Form of Stock Certificates. The shares of the Corporation shall
be represented by certificates, in such form as the Board of Directors may from
time to time prescribe. The signatures of the officers upon a certificate may
be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation or its employees. In case
any such 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 it were such
officer, transfer agent or registrar, as the case may be, at the date of issue.
Notwithstanding the foregoing, to the extent permitted by applicable law, the
Board of Directors may (i) dispense with the requirement that any or all shares
of the Corporation be represented by certificates and (ii) provide that shares
be evidenced in such form as the Board of Directors deems appropriate.
Section 5.2. Lost Certificates. In case of the loss, theft, mutilation or
destruction of a stock certificate, a duplicate certificate will be issued by
the Corporation upon notification thereof and receipt of such proper indemnity
as shall be prescribed by the Board of Directors.
Section 5.3. Transfer of Stock. Transfers of shares of stock shall be made
upon the books of the Corporation by the registered holder in person or by duly
authorized attorney, upon surrender of the certificate or certificates for such
shares properly endorsed.
Section 5.4. Registered Stockholders. Except as otherwise provided by law,
the Corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends or other
distributions and to vote as such owner and to hold such person liable for
calls and assessments, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such share or shares on the part of
any other person.
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ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification. The Corporation shall indemnify to the fullest
extent authorized or permitted by law (as now or hereafter in effect) any
person made, or threatened to be made, a party to or otherwise involved in any
action or proceeding (whether civil or criminal or otherwise) by reason of the
fact that he, his testator or intestate, is or was a director or officer of the
Corporation or by reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
in any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers may be
entitled by law. No amendment or repeal of this Section 6.1 shall apply to or
have any effect on any right to indemnification provided hereunder with respect
to any acts or omissions occurring prior to such amendment or repeal.
Section 6.2. Insurance, Indemnification Agreements and Other Matters. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of the law. The Corporation may create a trust fund, grant
a security interest and/or use other means (including, without limitation,
letters of credit, surety bonds and/or other similar arrangements), as well as
enter into contracts providing for indemnification to the fullest extent
authorized or permitted by law and including as part thereof any or all of the
foregoing, to ensure the payment of such sums as may become necessary to effect
full indemnification.
Section 6.3. Advancement of Expenses. In furtherance and not in limitation of
the foregoing provisions, all reasonable expenses incurred by or on behalf of
any person entitled to indemnification by the Corporation pursuant to this
Article VI shall be advanced to such person by the Corporation within 20
calendar days after the receipt by the Corporation of a statement or statements
from such person requesting such advance or advances from time to time, whether
prior to or after final disposition of the action or proceeding giving rise to
the right of indemnification. Such statement or statements shall reasonably
evidence the expenses incurred by the indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an undertaking by or
on behalf of such indemnitee to repay the amounts advanced if it should
ultimately be determined that such indemnitee is not entitled to be indemnified
against such expenses pursuant to this Article VI.
Section 6.4. Nonexclusivity. The rights to indemnification conferred in this
Article VI shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, the Certificate of Incorporation of the
Corporation, these Bylaws or any agreement, vote of stockholders or directors
or otherwise.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Corporate Seal. The Corporation shall not have a formal or
official seal unless the Board of Directors so determines. The Board of
Directors may adopt one or more seals, and may revoke the adoption of any seal.
To the extent any officer deems it appropriate to expedite any action to be
taken by the Corporation, such officer may utilize a seal purporting to be a
corporate seal of the corporation.
Section 7.2. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January in each year and shall end on the thirty-first day of
the following December or be for such other period as may be prescribed by the
Board of Directors.
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ARTICLE VIII
AMENDMENTS
Section 8.1. Power to Amend. Except as otherwise set forth herein, a Majority
of the Entire Board shall have the power, without the assent or vote of the
stockholders, to adopt, repeal, alter, amend or rescind the Bylaws of the
Corporation. Except as otherwise expressly prescribed by law, the stockholders
may adopt, repeal, alter, amend or rescind the Bylaws of the Corporation,
provided, that any such adoption, repeal, alteration, amendment or rescission
by the stockholders shall require the affirmative vote of the holders of two-
thirds or more of the entire voting power of the then issued and outstanding
shares of capital stock of the Corporation entitled to vote for the election of
directors, considered as one class.
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EXHIBIT E TO APPENDIX A
The Form of the Rights Agreement between Asarco Cyprus Incorporated and The
Bank of New York is included as Exhibit 4.1 to the Registration Statement on
Form S-4 of Asarco Cyprus Incorporated of which this joint proxy statement and
prospectus forms a part.
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EXHIBIT F TO APPENDIX A
FORM OF AFFILIATE LETTER FOR AFFILIATES OF
CYPRUS AMAX MINERALS COMPANY
Asarco Cyprus Incorporated
180 Maiden Lane
New York, New York 10038
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Cyprus Amax Minerals Company, a Delaware corporation
("Cyprus"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 15, 1999 (the "Merger
Agreement"), among Asarco Cyprus Incorporated, a Delaware corporation
("Parent"), ACO Acquisition Corp., a New Jersey corporation ("SubA"), CAM
Acquisition Corp., a Delaware corporation ("SubC"), ASARCO Incorporated, a New
Jersey corporation ("ASARCO"), and Cyprus, pursuant to which (i) SubA will be
merged with and into ASARCO, with ASARCO continuing as the surviving
corporation (the "ASARCO Merger"), (ii) SubC will be merged with and into
Cyprus, with Cyprus continuing as the surviving corporation (the "Cyprus
Merger" and together with the ASARCO Merger, the "Mergers"), and (iii) each of
ASARCO and Cyprus will become a subsidiary of Parent and stockholders of each
of ASARCO and Cyprus will become stockholders of Parent. Capitalized terms used
in this letter without definition shall have the meanings assigned to them in
the Merger Agreement.
As a result of the Cyprus Merger, I may receive shares of common stock, par
value $.01 per share, of Parent (the "Parent Common Stock"). I would receive
such Parent Stock in exchange for shares (or upon exercise of options for
shares) owned by me of common stock, no par value per share of Cyprus (the
"Cyprus Common Stock").
1. I hereby represent, warrant and covenant to Parent, ASARCO and Cyprus that
in the event I receive any shares of Parent Common Stock as a result of the
Cyprus Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
shares of Parent Common Stock, to the extent I felt necessary, with my
counsel or counsel for Cyprus.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the Cyprus Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
I have also been advised that, because at the time the Merger is submitted
for a vote of the stockholders of Cyprus, (a) I may be deemed to be an
affiliate of Cyprus and (b) the distribution by me of the shares of Parent
Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose of the shares of Parent Common Stock issued
to me in the Cyprus Merger unless (i)
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such sale, transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated by the Commission
under the Act, (ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel reasonably
acceptable to Parent, or a "no action" letter obtained by the undersigned
from the staff of the Commission, such sale, transfer or other disposition
is other wise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
Parent's transfer agent with respect to the shares of Parent Common Stock
issued to me in the Cyprus Merger, and there will be placed on the
certificates for such shares of Parent Common Stock, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED [MONTH
DAY], 1999 BETWEEN THE REGISTERED HOLDER HEREOF, ASARCO INCORPORATED,
CYPRUS AMAX MINERALS COMPANY, AND ASARCO CYPRUS INCORPORATED, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF ASARCO CYPRUS
INCORPORATED."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of Cyprus as described in the first paragraph
of this letter, nor as a waiver of any rights I may have to object to any
claim that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable
best efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b) otherwise
use its reasonable efforts to permit such sales pursuant to Rule 145 and
Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date the undersigned acquired the Parent Stock received in the Cyprus
Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
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undersigned acquired the shares of Parent Common Stock received in the
Cyprus Merger and the provisions of Rule 145(d)(3) are then applicable to
the undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to Parent, or a
"no-action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 144 and
Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
_____________________________________
Name:
Agreed and accepted this day of , 1999, by
Asarco Cyprus Incorporated
By: _________________________________
Name:
Title:
Asarco Incorporated
By: _________________________________
Name:
Title:
Cyprus Amax Minerals Company
By: _________________________________
Name:
Title:
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EXHIBIT G TO APPENDIX A
FORM OF AFFILIATE LETTER FOR AFFILIATES OF
ASARCO INCORPORATED
Asarco Cyprus Incorporated
180 Maiden Lane
New York, New York 10038
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of ASARCO Incorporated, a New Jersey corporation ("ASARCO"), as
the term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 15, 1999 (the "Merger Agreement"), among
Asarco Cyprus Incorporated, a Delaware corporation ("Parent"), ACO Acquisition
Corp., a New Jersey corporation ("SubA"), CAM Acquisition Corp., a Delaware
corporation ("SubC"), ASARCO, and Cyprus Amax Minerals Company, a Delaware
corporation ("Cyprus"), pursuant to which (i) SubA will be merged with and into
ASARCO, with ASARCO continuing as the surviving corporation (the "ASARCO
Merger"), (ii) SubC will be merged with and into Cyprus, with Cyprus continuing
as the surviving corporation (the "Cyprus Merger" and together with the ASARCO
Merger, the "Mergers"), and (iii) each of ASARCO and Cyprus will become a
subsidiary of Parent and stockholders of each of ASARCO and Cyprus will become
stockholders of Parent. Capitalized terms used in this letter without
definition shall have the meanings assigned to them in the Merger Agreement.
As a result of the ASARCO Merger, I may receive shares of common stock, par
value $.01 per share, of Parent (the "Parent Common Stock"). I would receive
such Parent Stock in exchange for shares (or upon exercise of options for
shares) owned by me of common stock, no par value per share of ASARCO (the
"ASARCO Common Stock").
1. I hereby represent, warrant and covenant to Parent, ASARCO and Cyprus
that in the event I receive any shares of Parent Common Stock as a result
of the ASARCO Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the
Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
the shares of Parent Common Stock, to the extent I felt necessary, with
my counsel or counsel for ASARCO.
C. I have been advised that the issuance of the shares of Parent
Common Stock to me pursuant to the ASARCO Merger has been registered
with the Commission under the Act on a Registration Statement on Form
S-4. However, I have also been advised that, because at the time the
Merger is submitted for a vote of the stockholders of ASARCO, (a) I may
be deemed to be an affiliate of ASARCO and (b) the distribution by me
of the shares of Parent Common Stock has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the shares of
Parent
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Common Stock issued to me in the ASARCO Merger unless (i) such sale,
transfer or other disposition is made in conformity with the volume and
other limitations of Rule 145 promulgated by the Commission under the
Act, (ii) such sale, transfer or other disposition has been registered
under the Act or (iii) in the opinion of counsel reasonably acceptable
to Parent, or a "no action" letter obtained by the undersigned from the
staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. I understand that except as provided for in the Merger Agreement,
Parent is under no obligation to register the sale, transfer or other
disposition of the Parent Stock by me or on my behalf under the Act or,
except as provided in paragraph 2(A) below, to take any other action
necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
Parent's transfer agent with respect to the shares of Parent Common
Stock issued to me in the ASARCO Merger, and there will be placed on
the certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
[MONTH DAY], 1999 BETWEEN THE REGISTERED HOLDER HEREOF, ASARCO
INCORPORATED, CYPRUS AMAX MINERALS COMPANY, AND ASARCO CYPRUS
INCORPORATED, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF ASARCO CYPRUS INCORPORATED."
F. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a
registration statement, Parent reserves the right to put the following
legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE
IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
G. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of ASARCO as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell
the shares of Parent Common Stock pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Act, Parent shall (a) use its
reasonable best efforts to (i) file, on a timely basis, all reports and
data required to be filed with the Commission by it pursuant to Section
13 of the Securities Exchange Act of 1934, as amended, and (ii) furnish
to me upon request a written statement as to whether Parent has
complied with such reporting requirements during the 12 months
preceding any proposed sale of the shares of Parent Common Stock by me
under Rule 145, and (b) otherwise use its reasonable efforts to permit
such sales pursuant to Rule 145 and Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed
from the date the undersigned acquired the Parent Stock received in the
ASARCO Merger and the provisions of Rule 145(d)(2) are then available
to the undersigned, (ii) two years shall have
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elapsed from the date the undersigned acquired the shares of Parent
Common Stock received in the ASARCO Merger and the provisions of Rule
145(d)(3) are then applicable to the undersigned, or (iii) Parent has
received either an opinion of counsel, which opinion and counsel shall
be reasonably satisfactory to Parent, or a "no-action" letter obtained
by the undersigned from the staff of the Commission, to the effect that
the restrictions imposed by Rule 144 and Rule 145 under the Act no
longer apply to the undersigned.
Very truly yours,
_____________________________________
Name:
Agreed and accepted this day
of , 1999, by
Asarco Cyprus Incorporated
By:__________________________________
Name:
Title:
ASARCO Incorporated
By:__________________________________
Name:
Title:
Cyprus Amax Minerals Company
By:__________________________________
Name:
Title:
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<PAGE>
APPENDIX B
[Credit Suisse First Boston Corporation Letterhead]
July 15, 1999
Board of Directors
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of ASARCO Incorporated ("Asarco") from a financial point of
view of the Exchange Ratio (as defined below) set forth in the Agreement and
Plan of Merger, dated as of July 15, 1999 (the "Merger Agreement"), by and
among ACA Holding Incorporated ("Parent"), ACO Acquisition Corp., a wholly
owned subsidiary of Parent ("Sub A"), CAM Acquisition Corp., a wholly owned
subsidiary of Parent ("Sub C"), Asarco and Cyprus Amax Minerals Company
("Cyprus"). The Merger Agreement provides for, among other things, and subject
to the terms and conditions thereof, (i) the merger of Sub A with and into
Asarco (the "Asarco Merger") pursuant to which each outstanding share of the
common stock, no par value per share, of Asarco (the "Asarco Common Stock")
will be converted into the right to receive one share (the "Asarco Exchange
Ratio") of the common stock, par value $0.01 per share, of Parent (the "Parent
Common Stock") and (ii) the merger of Sub C with and into Cyprus (the "Cyprus
Merger" and, together with the Asarco Merger, the "Mergers") pursuant to which
each outstanding share of the common stock, no par value per share, of Cyprus
will be converted into the right to receive 0.765 of a share (the "Cyprus
Exchange Ratio," collectively, such ratio and the Asarco Exchange Ratio being
hereinafter referred to as the "Exchange Ratio") of Parent Common Stock and
each outstanding share of $4.00 Series A Convertible Preferred Stock of Cyprus
will be converted into the right to receive one share of a new series of
preferred stock of Parent (the "Parent Preferred Stock").
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to Asarco and
Cyprus. We have also reviewed certain other information relating to Asarco and
Cyprus, including financial forecasts, provided to or discussed with us by
Asarco and Cyprus, and have met with the managements of Asarco and Cyprus to
discuss the businesses and prospects of Asarco and Cyprus. We have also
considered certain financial and stock market data of Asarco and Cyprus, and we
have compared those data with similar data for other publicly held companies in
businesses similar to Asarco and Cyprus, and we have considered, to the extent
publicly available, the financial terms of certain other business combinations
and other transactions which have recently been effected. We also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.In connection
with our review, we have not assumed any responsibility for independent
verification of any of the foregoing information and have relied on its being
complete and accurate in all material respects. With respect to the financial
forecasts, you have informed us, and we have assumed, that such forecasts have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of Asarco and Cyprus as to the
future financial performance of Asarco and Cyprus and the strategic benefits
and potential synergies (including the amount, timing and achievability
thereof) anticipated to result from the Mergers. We also have assumed, with
your consent, that the Mergers will be treated as tax-free reorganizations for
federal income tax purposes. We have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Asarco or Cyprus, nor have we been furnished with
any such evaluations or appraisals. Our opinion is necessarily based upon
information available to us, and financial, economic, market and other
conditions as they exist and can be evaluated, on the date hereof. We are not
expressing any opinion as to what the value of the Parent Common Stock actually
will be when issued pursuant to the Mergers or the prices at which the Parent
Common Stock will
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Board of Directors
ASARCO Incorporated
July 15, 1999
Page 2
trade or otherwise be transferable subsequent to the Mergers. In connection
with our engagement, we were not requested to, and we did not, solicit third
party indications of interest in acquiring all or any part of Asarco.
We have acted as financial advisor to Asarco in connection with the Mergers
and will receive a fee for such services, a significant portion of which is
contingent upon the consummation of the Mergers. We have in the past provided
financial services to Asarco and Cyprus, for which services we have received
compensation. In the ordinary course of business, Credit Suisse First Boston
and its affiliates may actively trade the debt and equity securities of both
Asarco and Cyprus for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of Asarco in connection with its evaluation of the Mergers, does not
constitute a recommendation to any stockholder as to how such stockholder
should vote with respect to the Mergers, and is not to be quoted or referred
to, in whole or in part, in any registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Asarco Common Stock
from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
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APPENDIX C
[Merrill Lynch Letterhead]
July 15, 1999
Board of Directors
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Members of the Board of Directors:
ASARCO Incorporated ("ASARCO"), Cyprus Amax Minerals Company ("Cyprus"), ACA
Holding Incorporated, a newly formed corporation of which one half of the
outstanding capital stock is owned by each of ASARCO and Cyprus ("Parent"),
ACO Acquisition Corp., a newly formed wholly owned subsidiary of Parent, and
CAM Acquisition Corp., a newly formed wholly owned subsidiary of Parent,
propose to enter into an Agreement and Plan of Merger (the "Agreement")
pursuant to which (i) ACO Acquisition Corp. will be merged with and into
ASARCO in a transaction (the "ASARCO Merger") in which each outstanding share
of ASARCO's common stock, no par value, ("ASARCO Shares") will be converted
into one share ("the ASARCO Merger Exchange Ratio") of the common stock of
Parent, par value $.01, ("Parent Shares") and (ii) CAM Acquisition Corp. will
be merged with and into Cyprus in a transaction (the "Cyprus Merger," and
together with the ASARCO Merger, the "Transaction") in which each outstanding
share of Cyprus's common stock, no par value, ("Cyprus Shares") will be
converted into 0.765 of a Parent Share (the "Cyprus Merger Exchange Ratio").
For the purposes of this opinion, the "Exchange Ratio" shall mean the ratio of
the Cyprus Merger Exchange Ratio to the ASARCO Merger Exchange Ratio. In
addition, each outstanding share of Cyprus Preferred Stock, as defined in the
Agreement, other than Dissenting Preferred Shares, as defined in the
Agreement, will be converted into one share of Parent Preferred Stock (the
"Preferred Merger Consideration") and be convertible into such Parent Shares
in accordance with the Certificate of Incorporation of Cyprus.
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the stockholders of Cyprus.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to ASARCO and Cyprus that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of ASARCO and Cyprus, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result from the
Transaction (the "Expected Synergies") furnished to us by ASARCO and
Cyprus, respectively;
(3) Conducted discussions with members of senior management and
representatives of Cyprus and conducted limited discussions with
members of senior management and representatives of ASARCO concerning
the matters described in clauses 1 and 2 above, as well as their
respective businesses and prospects before and after giving effect to
the Transaction and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for ASARCO Shares
and Cyprus Shares and compared them with those of certain publicly
traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of ASARCO and Cyprus and compared
them with those of certain publicly traded companies that we deemed to
be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of ASARCO and Cyprus and their financial and legal
advisors;
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(8) Reviewed the potential pro forma impact of the Transaction;
(9) Reviewed a draft dated July 14, 1999 of the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of ASARCO or Cyprus or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of ASARCO or Cyprus. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by ASARCO or Cyprus, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of ASARCO's or Cyprus's management as to the expected
future financial performance of ASARCO or Cyprus, as the case may be, and the
Expected Synergies. We have further assumed that the Transaction will qualify
as a tax-free reorganization for U.S. federal income tax purposes. We have also
assumed that the final form of the Agreement will be substantially similar to
the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Transaction.
In connection with the preparation of this opinion, we have not been
authorized by Cyprus or the Board of Directors to solicit, nor have we
solicited, third party indications of interest for the acquisition of all or
any part of Cyprus.
We are acting as financial advisor to Cyprus in connection with the
Transaction and will receive a fee from Cyprus for our services, a significant
portion of which is contingent upon the consummation of the Transaction. In
addition, Cyprus has agreed to indemnify us for certain liabilities arising out
of our engagement. We have, in the past, provided financial advisory and
financing services to Cyprus and/or its affiliates and may continue to do so
and have received, and may receive, fees for the rendering of such services. In
addition, in the ordinary course of our business, we may actively trade ASARCO
Shares and other securities of ASARCO as well as Cyprus Shares and other
securities of Cyprus, for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of Cyprus.
Our opinion does not address the merits of the underlying decision by Cyprus to
engage in the Transaction and does not constitute a recommendation to any
shareholder of Cyprus as to how such shareholder should vote on the proposed
Transaction or any matter related thereto.
We are not expressing any opinion herein as to the prices at which Cyprus
Shares or Parent Shares will trade following the announcement or consummation
of the Transaction.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view
to the stockholders of Cyprus.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to Section
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or any depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event of the stock of a subsidiary Delaware corporation party
to a merger effected under (S)253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by the separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall also notify such stockholders of
the effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within twenty days after the date of mailing of
such notice, demand in writing from the surviving or resulting corporation
the appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only to
be sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given; provided, that if the notice
is given on or after the effective date of the merger or
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consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after his written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings any may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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PART II--Information Not Required in Prospectus
Item 20. Indemnification of Directors and Officers.
The Amended and Restated Certificate of Incorporation and the Amended and
Restated Bylaws of Asarco Cyprus Incorporated require the indemnification of
directors and officers to the fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law authorizes and empowers
Asarco Cyprus Incorporated to indemnify the directors, officers, employees and
agents of Asarco Cyprus Incorporated against liabilities incurred in connection
with and related expenses resulting from any claim, action or suit brought
against any such person as a result of his relationship with Asarco Cyprus
Incorporated, provided that such persons acted in good faith and in a manner
such persons reasonably believed to be in, and not opposed to, the best
interests of Asarco Cyprus Incorporated in connection with the acts or events
on which such claim, action or suit is based. The finding of either civil or
criminal liability on the part of such persons in connection with such acts or
events is not necessarily determinative of the question of whether such persons
have met the required standard of conduct and are, accordingly, entitled to be
indemnified. The foregoing statements are subject to the detailed provisions of
Section 145 of the General Corporation law of the State of Delaware.
Article 6 of the Amended and Restated Bylaws of the Registrant provides that
the Registrant shall indemnify to the fullest extent permitted by law any
person who is made, or threatened to be made a party to, or who is otherwise
involved in, any action or proceeding by reason of the fact that he or she is
or was a director or officer of the Registrant, or by reason of the fact that
such director or officer, at the request of the Registrant, is or was serving
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, in any capacity.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of July 15, 1999, among Asarco
Cyprus Incorporated, ACO Acquisition Corp., CAM Acquisition Corp.,
ASARCO Incorporated and Cyprus Amax Minerals, is included as Appendix A
to the Joint Proxy Statement and Prospectus which is part of this
Registration Statement.
3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant, is included as Exhibit C to Appendix A to the Joint Proxy
Statement and Prospectus which is part of this Registration Statement.
3.2 Form of Amended and Restated Bylaws of the Registrant, is included as
Exhibit D to Appendix A to the Joint Proxy Statement and Prospectus
which is part of this Registration Statement.
4.1 Form of Rights Agreement between Asarco Cyprus Incorporated and The
Bank of New York, as Rights Agent.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality
of the shares being issued.
12.1 Statement Re: Computation of Consolidated Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
15.1 Letter from PricewaterhouseCoopers LLP, New York, New York, re:
unaudited interim financial information.
15.2 Letter from PricewaterhouseCoopers LLP, Denver, Colorado, re: unaudited
interim financial information.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, New York, New York.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of PricewaterhouseCoopers LLP, Denver, Colorado.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included as part of the signature page of this Registration Statement).
99.1 Consent of Credit Suisse First Boston Corporation, New York, New York.
99.2 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, New York.
</TABLE>
(b) Financial Statement Schedules.
None.
(c) Item 4(b) Information.
None.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder, through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c) of
the Securities Act of 1933, the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(c) The undersigned registrant hereby undertakes that every prospectus: (i)
that is filed pursuant to the paragraph immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities subject to Rule
415, will be filed
II-2
<PAGE>
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(f) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on August 20, 1999.
Asarco Cyprus Incorporated
/s/ Milton H. Ward
By: _________________________________
Name: Milton H. Ward
Title:Chairman and Co-Chief
Executive Officer
/s/ Francis R. McAllister
By: _________________________________
Name: Francis R. McAllister
Title:President and Co-Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Kevin R. Morano, Jeffery
G. Clevenger, Augustus B. Kinsolving and Philip C. Wolf and each one of them,
his attorneys-in-fact each with the power of substitution, for him in any and
all capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes may do or cause to be done
by virture hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated and on August 20, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Milton H. Ward Chairman of the Board and Co-Chief
___________________________________________ Executive Officer and Director (Principal
Milton H. Ward Executive Officer)
/s/ Francis R. McAllister President and Co-Chief Executive Officer
___________________________________________ and Director (Principal Executive Officer)
Francis R. McAllister
/s/ Jeffrey G. Clevenger Executive Vice President and Chief
___________________________________________ Operating Officer and Director
Jeffrey G. Clevenger
/s/ Kevin R. Morano Executive Vice President and Chief
___________________________________________ Financial Officer and Director (Principal
Kevin R. Morano Financial Officer and Principal Accounting
Officer)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of July 15, 1999, among
Asarco Cyprus Incorporated, ACO Acquisition Corp., CAM Acquisition
Corp., ASARCO Incorporated and Cyprus Amax Minerals, is included
as Appendix A to the Joint Proxy Statement and Prospectus which is
part of this Registration Statement.
3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant, is included as Exhibit C to Appendix A to the Joint
Proxy Statement and Prospectus which is part of this Registration
Statement.
3.2 Form of Amended and Restated Bylaws of the Registrant, is included
as Exhibit D to Appendix A to the Joint Proxy Statement and
Prospectus which is part of this Registration Statement.
4.1 Form of Rights Agreement between Asarco Cyprus Incorporated and
The Bank of New York, as Rights Agent.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the
legality of the shares being issued.
12.1 Statement Re: Computation of Consolidated Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends.
15.1 Letter from PricewaterhouseCoopers LLP, New York, New York, re:
unaudited interim financial information.
15.2 Letter from PricewaterhouseCoopers LLP, Denver, Colorado, re:
unaudited interim financial information.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, New York, New York.
23.2 Consent of PricewaterhouseCoopers LLP, Denver, Colorado.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (included as part of the signature page of this
Registration Statement).
99.1 Consent of Credit Suisse First Boston Corporation, New York, New
York.
99.2 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, New
York.
</TABLE>
(b) Financial Statement Schedules.
None.
(c) Item 4(b) Information.
None.
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
ASARCO CYPRUS INCORPORATED.
and
[THE BANK OF NEW YORK]
Rights Agent
------------------
Rights Agreement
Dated as of [xxxx] [xx], 1999
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Certain Definitions................................................................................2
2. Appointment of Rights Agent........................................................................5
3. Issue of Rights Certificates.......................................................................5
4. Form of Rights Certificates........................................................................7
5. Countersignature and Registration..................................................................8
6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates.................................................9
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.....................................10
8. Cancellation and Destruction of Rights Certificates...............................................12
9. Reservation and Availability of Capital Stock.....................................................12
10. Preferred Stock Record Date......................................................................14
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights......................15
12. Certificate of Adjusted Purchase Price or Number of Shares.......................................24
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.............................25
14. Fractional Rights and Fractional Shares..........................................................27
15. Rights of Action.................................................................................29
16. Agreement of Rights Holders......................................................................29
17. Rights Certificate Holder Not Deemed a Stockholder...............................................30
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
18. Concerning the Rights Agent......................................................................30
19. Merger or Consolidation or Change of Name of Rights Agent........................................31
20. Duties of Rights Agent...........................................................................32
21. Change of Rights Agent...........................................................................34
22. Issuance of New Rights Certificates..............................................................35
23. Redemption and Termination.......................................................................36
24. Exchange.........................................................................................36
25. Notice of Certain Events.........................................................................38
26. Notices..........................................................................................39
27. Supplements and Amendments.......................................................................40
28. Successors.......................................................................................41
29. Determinations and Actions by the Board of Directors, etc........................................41
30. Benefits of this Agreement.......................................................................42
31. Severability.....................................................................................42
32. Governing Law....................................................................................42
33. Counterparts.....................................................................................42
34. Descriptive Headings.............................................................................42
Exhibit A -- Amended and Restated Certificate of Incorporation.......................................A-1
Exhibit B -- Form of Rights Certificate..............................................................B-1
</TABLE>
ii
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of [xxxx] [xx], 1999 (the "Agreement"), between
Asarco Cyprus Incorporated, a Delaware corporation (the "Company"), and [The
Bank of New York], a organized under the laws of the State of [New York] (the
"Rights Agent").
W I T N E S S E T H
WHEREAS, on July 15, 1999, the Company, ACO Acquisition Corp., a New Jersey
corporation, CAM Acquisition Corp., a Delaware corporation, ASARCO Incorporated,
a New Jersey company ("ASARCO"), and Cyprus Amax Minerals Company, a New Jersey
Company ("Cyprus"), entered into the Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which, among other things, ASARCO and Cyprus will
become wholly owned subsidiaries of the Company and the former stockholders of
ASARCO and Cyprus will become stockholders of the Company (the "Transaction");
WHEREAS, as a part of the Transaction, ASARCO and Cyprus determined that it
would be desirable to distribute Rights (as hereinafter defined) associated with
the shares of Common Stock (as hereinafter defined) of the Company to be issued
in the Transaction to the former stockholders of ASARCO and Cyprus and that
certificates representing such Common Stock would also evidence such Rights and
that the registered holders of Common Stock would also be the registered holders
of the associated Rights;
WHEREAS, Section 5.17(c) of the Merger Agreement provides that ASARCO and
Cyprus will take all actions necessary to cause the Company to adopt a Rights
Plan providing for the distribution of Rights prior to the consummation of the
Transaction;
WHEREAS, in order to effectuate the foregoing, ASARCO and Cyprus, as the
sole stockholders of Parent, are authorizing and directing the Company to create
a stockholder rights plan, to issue Rights to the former stockholders of ASARCO
and Cyprus in connection with the Transaction, which Rights will be attached to
the shares of Common Stock and evidenced by certificates representing Common
Stock and to enter into a rights agreement substantially in the form of this
Agreement;
<PAGE>
WHEREAS, the Board of Directors of the Company has authorized the
distribution as of the Effective Time (as defined in the Merger Agreement) of
the Mergers (as defined in the Merger Agreement) of one Right for each share of
Common Stock of the Company issued in connection with the Mergers, and
authorized the issuance of one Right (as such number may hereafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Effective Time (whether originally
issued or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined), each Right initially representing the right to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock
of the Company having the rights, powers and preferences set forth in the
Amended and Restated Certificate of Incorporation of the Company attached hereto
as Exhibit A, upon the terms and subject to the conditions hereinafter set forth
(the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall after the
Effective Time be the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding, but shall not include (i) the Company, (ii)
any Subsidiary of the Company, (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company, or (iv) any Person or entity
organized, appointed or established by the Company for or pursuant to the
terms of any such plan, or any Person who becomes an Acquiring Person
solely as a result of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of shares of Common Stock by the Company,
unless and until such Person shall purchase or otherwise become the
Beneficial Owner of additional shares of Common Stock constituting 1% or
more of the then outstanding shares of Common Stock. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an Acquiring Person has become
such inadvertently, and such Person divests as promptly as practicable a
sufficient number of shares of Common Stock so that such Person would no
longer be an Acquiring Person, then such Person shall not be deemed to be
an Acquiring Person for any purposes of this Agreement.
2
<PAGE>
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended and in effect on the
date of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or understanding,
whether or not in writing; provided, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy
given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the
General Rules and
3
<PAGE>
Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (c)) or disposing of any voting securities of the
Company; provided, however, that nothing in this paragraph (c) shall
cause a Person engaged in the business as an underwriter of securities
to be deemed the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good faith
in a firm commitment underwriting until the expiration of forty (40)
days after the date of such acquisition.
(d) "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.
(e) "Close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(f) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(g) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(h) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company
and, to the extent that there are not a sufficient number of shares of
Series A Junior Participating Preferred
4
<PAGE>
Stock authorized to permit the full exercise of the Rights, any other
series of preferred stock, par value $.01 per share, of the Company
designated for such purpose containing terms substantially similar to the
terms of the Series A Junior Participating Preferred Stock.
(i) "Section 11(a)(ii) Event" shall mean the event described in
Section 11(a)(ii) hereof.
(j) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(k) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(l) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by
such Person.
(m) "Triggering Event" shall mean the Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of business on the tenth Business
Day after the Stock Acquisition Date or (ii) the close of business on the tenth
Business Day (or such later date as the Board of Directors shall determine)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company
5
<PAGE>
for or pursuant to the terms of any such plan) is first published or sent or
given within the meaning of Rule 14d-2(a) of the General Rules and Regulations
under the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
(the earlier of (i) and (ii) being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for the Common Stock registered in
the names of the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock (including a transfer to
the Company). As soon as practicable after the Distribution Date, the Rights
Agent will send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
right certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) Rights shall be issued in respect of all shares of Common Stock which
are issued after the Effective Time but prior to the earlier of the Distribution
Date or the Expiration Date. Certificates representing such shares of Common
Stock shall also be deemed to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Asarco Cyprus
Incorporated and [The Bank of New York], dated as of [xxxx] [xx], 1999 (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of Asarco
Cyprus Incorporated. Under certain circum stances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. Asarco Cyprus
Incorporated will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request
6
<PAGE>
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever distributed, shall be dated as of the
Effective Time and on their face shall entitle the holders thereof to purchase
such number of one one-hundredths of a share of Preferred Stock as shall be set
forth therein at the price set forth therein (such exercise price per one
one-hundredth of a share, the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
7
<PAGE>
interests in such Acquiring Person or to any Person with whom such Acquiring
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration
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and transfer of the Rights Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Rights Certificates,
the number of Rights evidenced on its face by each of the Rights Certificates
and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-hundredths of a share of Preferred Stock (or, following
a Triggering Event, Common Stock, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then entitled
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersigna-
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ture and delivery to the registered owner in lieu of the Rights Certificate so
lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i) the
close of business on July 1, 2009 (the "Final Expiration Date"), or (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof (the
earlier of (i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $[ ], and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a share of
Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct
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<PAGE>
the depositary agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to, or upon the order of,
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to, or upon the order of, the registered holder of
such Rights Certificate. The payment of the Purchase Price (as such amount may
be reduced pursuant to Section 11(a)(iii) hereof) may be made (x) in cash or by
certified bank check or bank draft payable to the order of the Company, or (y)
by delivery of a certificate or certificates (with appropriate stock powers
executed in blank attached thereto) evidencing a number of shares of Common
Stock equal to the then Purchase Price divided by the closing price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock on the
Trading Day immediately preceding the date of such exercise. In the event that
the Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the occurrence of the Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of
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<PAGE>
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and unissued shares of
Common Stock and/or other securities or out of its authorized and issued shares
held in its treasury), the number of shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
that, as provided in this Agreement including
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<PAGE>
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the occurrence of the Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933 (the
"Act"), with respect to the securities purchasable upon exercise of the Rights
on an appropriate form, (ii) to cause such registration statement to become
effective as soon as practicable after such filing, and (iii) to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law or a registration statement shall not have
been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-hundredths of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery
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<PAGE>
of the certificates for such shares (subject to payment of the Purchase Price),
be duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be
14
<PAGE>
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs
which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person becomes an Acquiring Person, unless the
event causing the 15% threshold to be crossed is a transaction set forth in
Section 13(a) hereof, then, promptly following the occurrence of such
event, proper provision shall be made so that each holder of a Right
(except as provided below and in Section
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<PAGE>
7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of
this Agreement, in lieu of a number of one one-hundredths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
occurrence of the Section 11(a)(ii) Event, and (y) dividing that product
(which, following such occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by
50% of the current market price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date of such occurrence (such
number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which are
authorized by the Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights
are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2)
the Purchase Price (such excess, the "Spread"), and (B) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision to
substitute for the Adjustment Shares, upon exercise of the Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred
stock which the Board of Directors of the Company has deemed to have the
same value as shares of Common Stock (such shares of preferred stock,
"common stock equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice
of a nationally recognized investment banking firm selected by the Board
of Directors of the Company; provided, however, if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the occurrence of the
Section 11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Sec-
16
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tion 23(a) expires (the later of (x) and (y) being referred to herein as
the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or cash
have an aggregate value equal to the Spread. If the Board of Directors of
the Company shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon
exercise in full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek stockholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To the
extent that the Company determines that some action need be taken pursuant
to the first and/or second sentences of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of each Adjustment Share
shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of the Common Stock on the Section 11(a)(ii) Trigger Date
and the per share or per unit value of any "common stock equivalent" shall
be deemed to be equal to the current market price (as determined pursuant
to Section 11(d) hereof) of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
17
<PAGE>
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed, and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred
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Stock and the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the "current market price" per
share of Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided,
however, that in the event that the current market price per share of the
Common Stock is determined during a period following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities
convertible into shares of such Common Stock (other than the Rights), or
(B) any subdivision, combination or reclassification of such Common Stock,
and the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite thirty (30) Trading Day
or ten (10) Trading Day period, as set forth above, then, and in each such
case, the "current market price" shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any
national
19
<PAGE>
securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day. If
the Common Stock is not publicly held or not so listed or traded, "current
market price" per share shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the current market price per
share of Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market
price" per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement) multiplied
by the current market price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, "current market price" per share of the Preferred Stock shall mean
the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed
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with the Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the "current market price" of one one-hundredth
of a share of Preferred Stock shall be equal to the "current market price"
of one share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of
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<PAGE>
one one-hundredths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjust ment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-hundredths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredths of a
share and the number
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of one one-hundredths of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-hundredths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-hundredths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof),
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(ii) merge with or into any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in one transaction, or
a series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Effective Time and prior to
the Distribution Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares
of Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief
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statement of the facts accounting for such adjustment, (b) promptly file with
the Rights Agent, and with each transfer agent for the Preferred Stock and the
Common Stock, a copy of such certificate, and (c) mail or cause the Rights Agent
to mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 25 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if the Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such one one-hundredths of a share for which a Right was
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<PAGE>
exercisable immediately prior to the occurrence of the Section 11(a)(ii) Event
by the Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the current market price (determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted
in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two
26
<PAGE>
or more of which are and have been so registered, "Principal Party" shall refer
to whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value.
(c) The Company shall not consummate any such consolida tion, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of the Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard
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<PAGE>
to which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable. The
closing price of the Rights for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock), which may, at the option of the
Company, be evidenced by depositary receipts upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon
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exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one (1) share of
Common Stock shall be the closing price of one (1) share of Common Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or
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<PAGE>
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-hundredths of a
share of Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
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(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or
in the name of the
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successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
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Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
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Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or miscon duct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered
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holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of New York), in good standing, having a principal office in the State of
New York, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which either has or is an affiliate of a corporation which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would
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create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth Business Day
following the Stock Acquisition Date or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.01 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the occurrence of the Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder
has expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the "current market price," as defined in
Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any
other form of consider ation deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the
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then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Stock for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or equivalent preferred stock, as such
term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-hundredth of a share of
Preferred Stock (or equivalent preferred stock) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.
(d) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any ex-
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change of Rights as contemplated in accordance with this Section 24, the shares
of Company shall take all such acton as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 25 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the
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shares of Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Preferred Stock whichever shall be the earlier.
(b) In case the Section 11(a)(ii) Event shall occur, (i) the Company shall
as soon as practicable thereafter give to each holder of a Rights Certificate,
to the extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Asarco Cyprus Incorporated
180 Maiden Lane
New York, New York 10038
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
[The Bank of New York]
New York, NY
Attention:
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be
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sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
26, the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price or the number of one one-hundredths of a share of Preferred Stock
for which a Right is exercisable; provided, however, that at any time prior to
(i) the Stock Acquisition Date or (ii) the date that a tender or exchange offer
by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
and if at the time of any amendment or supplement such tender or exchange offer
has not expired or been terminated, the Board of Directors of the Company may
amend this Agreement to increase the Purchase Price or extend the Final
Expiration Date. Prior to
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the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d- 3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
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Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth Business Day following the date of such determi nation by the Board of
Directors.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: ASARCO CYPRUS INCORPORATED
By __________________________ By ____________________________
Name: Name:
Title: Title:
Attest: [THE BANK OF NEW YORK]
By __________________________ By ____________________________
Name: Name:
Title: Title:
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[Form of Rights Certificate]
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER JULY 1, 2009 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH
TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1
Rights Certificate
ASARCO CYPRUS INCORPORATED
This certifies that , or registered assigns, is the registered owner of the
number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated
as of July 15, 1999 (the
- --------
(1) The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
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"Rights Agreement"), between Asarco Cyprus Incorporated, a Delaware corporation
(the "Company"), and [The Bank of New York], a trust company organized under the
State of New York (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (New York City time) on July 1, 2009 at the office or offices
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one one-hundredth of a fully paid, nonassessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $[ ] per one one-hundredth of a share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The Purchase Price
shall be paid, at the election of the holder, in cash or shares of Common Stock
of the Company having an equivalent value. The number of Rights evidenced by
this Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of July 15, 1999, based on the
Preferred Stock as constituted at such date.
Upon the occurrence of the Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of the Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities, which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth in
the Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
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This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right at any time prior to the earlier of the close of
business on (i) the tenth Business Day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date.
The Company is not required to issue fractional shares of Preferred Stock
upon the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of one one-hundredth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary receipts),
but in lieu thereof a cash payment may be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
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WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of __________, 1999
ATTEST: ASARCO CYPRUS INCORPORATED
_____________________ By_________________________
Secretary Title:
Countersigned:
[THE BANK OF NEW YORK]
By_________________________
Authorized Signature
47
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _____________________________________________ hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Date: __________________, ____
___________________________________
Signature
Signature Guaranteed:
48
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person.
Dated: ___________, ____ _________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
49
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the
Rights Certificate.)
To: ASARCO CYPRUS INCORPORATED:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _______________, ____
_________________________
Signature
50
<PAGE>
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such
terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate
or Associate of an Acquiring Person.
Dated: ___________, ____ _________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
51
<PAGE>
EXHIBIT 5.1
August 20, 1999
Asarco Cyprus Incorporated
180 Maiden Lane
New York, New York 10038
Re: Asarco Cyprus Incorporated
Registration on Form S-4
----------------------------
Ladies and Gentlemen:
We have acted as special counsel to Asarco Cyprus Incorporated, a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-4 (the "Registration Statement") of the Company
to be filed by the Company with the Securities and Exchange Commission (the
"Commis sion") pursuant to the Securities Act of 1933, as amended (the "Act"),
which Registra tion Statement relates to the proposed issuance by the Company
of (i) 124,869,738 shares of the Company's common stock, par value $.01 per
share (together with the attached Series A Junior Participating Preferred Stock
Purchase Rights, the "Common Stock"), and (ii) 4,666,667 shares of $4.00 Series
A Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
pursuant to the Agreement and Plan of Merger, dated as of July 15, 1999 (the
"Merger Agreement"), among the Company, ACO Acquisition Corp. ("SubS"), CAM
Acquisition Corp. ("SubC"), ASARCO Incorporated ("ASARCO"), and Cyprus Amax
Minerals Company ("Cyprus Amax"). The Merger Agreement provides that SubA will
be merged with and into ASARCO (the "ASARCO Merger"), and SubC will be merged
with and into Cyprus Amax (the "Cyprus Amax Merger" and, together with the
ASARCO Merger, the "Mergers"). Upon consummation of the Mergers, each of ASARCO
and Cyprus Amax will become a wholly owned subsidiary of the Company. The
Registration Statement includes a joint proxy statement and prospectus (the
"Joint Proxy Statement/Prospectus") to be furnished to the stockholders of
ASARCO and Cyprus Amax in connection with the approval and adoption of the
Merger Agreement.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Registration Statement.
In connection with rendering this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of such documents as we have deemed necessary or appropriate as a
basis for the opinion set forth herein, including, without limitation, (i) the
Registration Statement (including the Joint Proxy Statement/Prospectus forming a
part thereof); (ii) the form of Amended and Restated Certificate of
Incorporation of the Company (the "Company Charter"), filed as Exhibit 3.1 to
the Registration Statement; (iii) the form of the Amended and Restated Bylaws of
the Company (the "Company Bylaws"), filed as Exhibit 3.2 to the Registration
Statement; (iv) the form of Rights Agreement between the Company and The Bank
of New York, as Rights Agent (the "Rights Agreement"), filed as Exhibit 4.1 to
the Registration Statement; (v) the Merger Agreement; (vi) certain resolutions
of the Board of Directors of the Company relating to the transactions
contemplated by the Merger Agreement; and (vii) such other certificates,
instruments and documents as we considered necessary or appropriate for the
purposes of this opinion.
<PAGE>
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company, we have assumed that such parties had the power, corporate or other, to
enter into and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and the validity and binding effect
thereof. As to any facts material to the opinions expressed herein which we
have not independently established or verified, we have relied upon statements
and representations of officers and other representatives of the Company and
others.
For purposes of this opinion, we have assumed that prior to the
issuance of any of the shares of Common Stock or Preferred Stock (i) the
Registration Statement (including all necessary post-effective amendments)
becomes effective; (ii) ASARCO's stockholders and Cyprus Amax's stockholders
approve and adopt the Merger Agreement; (iii) the Company Charter will be
properly executed and filed with the Secretary of State of the State of
Delaware, as the case may be; (iv) the Board of Directors of the Company will
properly adopt the Company Bylaws; (v) the Company and the Rights Agent will
duly execute the Rights Agreement; (vi) the Certificates of Merger which will
give effect to the Mergers will be properly filed with the Secretary of State of
the State of Delaware and the Secretary of the State of New Jersey; (vii) the
transactions contemplated by the Merger Agreement will be consummated; and
(viii) certificates representing the Common Stock and the Preferred Stock will
be manually signed by an authorized officer of the transfer agent and registrar
for the respective securities and will be registered by the transfer agent and
registrar and such securities will conform to the specimens thereof examined by
us.
Members of our firm are admitted to the Bar of the State of Delaware,
and we do not express any opinion as to the laws of any jurisdiction other than
the federal laws of the United States of America and the laws of the State of
Delaware.
Based upon and subject to the foregoing, we are of the opinion that
the shares of Common Stock and the shares of Preferred Stock, when issued in
accordance with the terms and conditions of the Merger Agreement, will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Joint Proxy
Statement/Prospectus forming a part of the Registration Statement. In giving
this consent, however, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Act and the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE>
EXHIBIT 12.1
Ratios of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------- ------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ---- ---- ---- ---- ----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cyprus Amax Historical
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividend Requirements.............. (b) (b) (b) 1.3 (b) 3.4 1.9
ASARCO Historical
Ratio of Earnings to Fixed
Charges(a)......................... (c) (c) (c) 4.5 4.9 5.2 1.6
Asarco Cyprus Pro Forma
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividend Requirements.............. (d) -- (d) -- -- -- --
</TABLE>
- --------
(a) ASARCO has not issued any shares of preferred stock.
(b) Earnings for the six months ended June 30, 1999 and 1998 and the years
ended December 31, 1998 and 1996 were insufficient to cover fixed charges
and preferred stock dividend requirements by $83,100, $70,100, $105,200 and
$108,300, respectively.
(c) Earnings for the six months ended June 30, 1999 and 1998 and the year ended
December 31, 1998 were insufficient to cover fixed charges by $82,200,
$50,500 and $166,600, respectively.
(d) Pro forma earnings for the six months ended June 30, 1999 and the year
ended December 31, 1998 were insufficient to cover fixed charges and
preferred stock dividend requirements by $131,400 and $209,200,
respectively.
For purposes of the ratio of earnings to fixed charges, "earnings" includes
income from continuing operations before income taxes and fixed charges. "Fixed
charges" consist of interest on all indebtedness and that portion of rental
expense that management believes to be representative of interest. For purposes
of calculating the ratio of earnings to combined fixed charges and preferred
stock dividends, the preferred stock dividend requirements were assumed to be
equal to the pre-tax earnings which would be required to cover such dividend
requirements. The amount of such pre-tax earnings required to cover preferred
stock dividends was computed using tax rates for the applicable year.
<PAGE>
[Letterhead of PricewaterhouseCoopers]
EXHIBIT 15.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners
We are aware that our reports dated April 19, 1999 and July 21, 1999 on our
reviews of the interim financial information of ASARCO Incorporated and
Subsidiaries for the three-month and six-month periods ended March 31, 1999 and
1998 and June 30, 1999 and 1998, respectively, and included in the Company's
quarterly reports on Form 10-Q for the quarters then ended are incorporated by
reference in this Registration Statement on Form S-4 of Asarco Cyprus
Incorporated dated August 20, 1999.
Your very truly,
PricewaterhouseCoopers LLP
<PAGE>
[Letterhead of PricewaterhouseCoopers]
Exhibit 15.2
August 20, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Commissioners:
We are aware that our reports dated May 14, 1999 and August 4, 1999 on our
reviews of interim financial information of Cyrus Amax Minerals Company for the
three-month and six-month periods ended March 31, 1999 and 1998 and June 30,
1999 and 1998, respectively, and included in the Company's quarterly reports on
Form 10-Q for the quarters then ended are incorporated by reference in this
Registration Statement on Form S-4 of Asarco Cyprus Incorporated dated August
20, 1999.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
<PAGE>
Exhibit 21.1
ASARCO CYPRUS INCORPORATED
AND SUBSIDIARIES
SCHEDULE OF CONSOLIDATED SUBSIDIARIES
The following text sets forth the subsidiaries of the Company and of such
subsidiaries:
ASARCO INCORPORATED
CYPRUS AMAX MINERALS COMPANY
Percentage of
voting securities
owned or other
SUBSIDIARIES OF ASARCO INCORPORATED: bases of control
---------------------
Air Resources Corporation (Delaware) 100.0
American Limestone Company, Inc. (Delaware) 100.0
AR Mexican Explorations Inc. (Delaware) 100.0
Minera San Bernardo, S.A. de C.V. (Mexico) 100.0
AR Mexican Holdings, Inc. (Delaware) 100.0
AR Specialty Chemicals, S.A. de C.V. (Mexico) 100.0
Enthone-OMI de Mexico S.A. de C.V. (Mexico) 100.0
AR Silver Bell, Inc. (Delaware) 100.0
Silver Bell Mining, L.L.C. (Delaware) 75.0
AR Montana Corporation (Delaware) 100.0
Montana Resources (Montana Partnership) 49.9
Asarco Arizona, Inc. (Delaware) 100.0
Asarco Exploration Company, Inc. (New York) 100.0
Asarco Guiane Francaise S.A.R.L. 100.0
Empresa Minera Manquiri S.R.L. (Bolivia) 50.0
Asarco Exploration Company of Canada, Limited (Canada) 100.0
Asarco International Corporation (Delaware) 100.0
Asarco International Corp. FSC (Virgin Islands) 100.0
Asarco Oil and Gas Company, Inc. (New York) 100.0
Asarco Peruvian Exploration Company (Delaware) 100.0
ASARCO Santa Cruz, Inc. (Delaware) 100.0
Covington Land Company (Delaware) 100.0
CP Water Company (Arizona) 100.0
Bridgeview Management Company, Inc. (New Jersey) 100.0
Compania Minera Asarco, S.A. (Chile) 100.0
Domestic Realty Company, Inc. (Montana) 100.0
Encycle, Inc. (Delaware) 100.0
Hydrometrics, Inc. (Delaware) 100.0
Compania Hydrometrics de Mexico S.A. de C.V. 100.0
<PAGE>
Encycle/Texas, Inc. (Delaware) 100.0
Enthone, Incorporated (New York) 100.0
Enthone-OMI, Inc. (Delaware) 100.0
Enthone-OMI (Austraila) Pty. Ltd. (Victoria, Australia) 100.0
Enthone-OMI Holding GmbH (Austria) 100.0
Enthone-OMI (Benelux) B.V. (The Netherlands) 100.0
Enthone-OMI (Austria) GmbH 100.0
Enthone-OMI (France) S.A. (France) 28.5
Enthone-OMI Holdings (Deutschland) GmbH (Germany) 100.0
Deutsche Oberflachentichnik GmbH (Germany) 100.0
DOT Rechenzentrum GmbH (Germany) 100.0
L.P.W. Benelux B.V. (Netherlands) 100.0
L.P.W. Chemie GmbH (Germany) 51.0
Blasberg Oberflachentechnik GmbH (Germany) 100.0
Blasberg GTL Service and Vertriebs GmbH (Germany) 100.0
Blasberg Ytteknik AB (Sweden) 100.0
Galvano Production Chemie GmbH (Germany) 100.0
L.P.W. France SARL (France) 95.0
Riedel Oberflachentichnik GmbH (Germany) 100.0
L.P.W. Oberflachentichnik Sp.z.o.o. (Poland) 100.0
Nihon LPW K.K. (Japan) 30.0
Wunsch Chemie GmbH (Germany) 100.0
Enthone-OMI (Italia) S.A.R.L. (Italy) 51.6
Enthone-OMI Holdings (Europe) S.A.S. (France) 100.0
Enthone-OMI (Italia) S.A.R.L. (Italy) 48.4
Internacional de Manufacturas Asociadas S.A. (Spain) 100.0
Imasa A.G. (Switzerland) 40.0
Enthone-OMI Holdings (U.K.) Ltd. (United Kingdom) 17.6
AMZA Ltd. (Israel) 33.3
Enthone-OMI (U.K.) Limited (United Kingdom) 100.0
Enthone-OMI (Sverige) A.B. (Sweden) 100.0
Enthone-OMI Finance N.V. (Netherlands Antilles) 100.0
Enthone-OMI (Canada) Inc. (Ontario, Canada) 100.0
IMASA B.V. (The Netherlands) 100.0
Enthone-OMI (Hong Kong) Company Limited (Hong Kong) 5.5
Enthone-OMI K.K. (Japan) 100.0
IMASA Kemi A.B. (Sweden) 100.0
Enthone-OMI Holdings (U.K.) Ltd. (United Kingdom) 82.4
OMI Holdings S.A. (Switzerland) 100.0
Electroplating Engineers of Japan Ltd. (Japan) 25.0
Enthone-OMI (Suisse) S.A. (Switzerland) 100.0
OMI International Corporation (Delaware) 100.0
Enthone-OMI (Espana) S.A. (Spain) 100.0
Enthone-OMI (Europe) Corporation (Delaware) 100.0
2
<PAGE>
Enthone-OMI (Hong Kong) Company Limited (Hong Kong) 94.5
Hua-Mei Electroplating Technology Company, Ltd. (China) 51.0
Hua-Mei (Tianjin) Electroplating Technology Company, Ltd. 51.0
Enthone-OMI (Singapore) Pte. Ltd. (Singapore) 98.4
Enthone-OMI (Malaysia) Sdn. Bhd. (Malaysia) 100.0
Federated Metals Canada Limited (Canada) 100.0
Federated Metals Corporation (New York) 100.0
Geominerals Insurance Company, Ltd. (Bermuda) 100.0
Lac d'Amiante du Quebec, Ltee (Delaware) 100.0
LAQ Canada, Ltd. (Delaware) 100.0
Mining Development Company (Delaware) 100.0
Empresa Minera Manquiri S.R.L. (Bolivia) 50.0
Minto Explorations Ltd. (British Columbia) 55.8
Mission Exploration Company (Delaware) 100.0
Lesarco, Inc. (Philippines) 30.0
NCBR, Inc. (Delaware) 100.0
Northern Peru Mining Corporation (Delaware) 100.0
Silver Valley Resources Corporation (Delaware) 50.0
Southern Peru Copper Corporation (Delaware) 63.1
Fomenta, S.A. (Peru) 99.5
Pegasus Travels, S.A. (Peru) 90.0
Logistics Services Incorporated (Delaware) 100.0
LSI-Peru, S.A. (Peru) 98.2
Multimines Corporation (Delaware) 100.0
Multimines Insurance Company, Ltd. (Bermuda) 100.0
Recursos e Inversiones Andinas, S.A. (Peru) 91.0
Compania Minera Los Tolmos, S.A. (Peru) 98.1
The International Metal Company (New York) 100.0
Tulipan Company, Inc. (Delaware) 63.0
- -------------------
Not included in this listing are subsidiaries which in the aggregate would not
constitute a significant subsidiary.
SUBSIDIARIES OF CYPRUS AMAX MINERALS COMPANY:
Cyprus Metals Company (Delaware) 100.0
Cyprus Climax Metals Company (Delaware) 100.0
Byner Cattle Company (Nevada) 100.0
Amax Metals Recovery, Inc. (Delaware) 100.0
Copper Market, Inc. (Arizona) 100.0
Climax Molybdenum Company (Delaware) 100.0
Climax Molybdenum Marketing Corporation (Delaware) 100.0
Climax Molybdenum B.V. (The Netherlands) 100.0
3
<PAGE>
Climax Molybdenum GmbH (Germany) 100.0
Climax Molybdenum S.R.L. (Italy) 100.0
Cyprus Amax del Peru Corporation (Delaware) 100.0
Cyprus Amax Finance Chile Corporation (Delaware) 100.0
Cyprus Amax PNG Holdings, Inc. (Delaware) 100.0
Cyprus Bagdad Copper Corporation (Delaware) 100.0
Cyprus Copper Marketing Corporation (Delaware) 100.0
Cyprus El Abra Corporation (Delaware) 100.0
Sociedad Contractual Minera El Abra (Chile) (a) 51.0
Cyprus Miami Mining Corporation (Delaware) 100.0
Cyprus Pima Mining Company (California) (b) 75.01
Cyprus Pinos Altos Corporation (Delaware) 100.0
Cyprus Rod Chicago Corporation (Delaware) 100.0
Cyprus Sierrita Corporation (Delaware) 100.0
Las Quintas Serenas Water Co. (Arizona) (c) 59.0
Cyprus Tohono Corporation (Delaware) 100.0
Cyprus Tonopah Mining Corporation (Delaware) 100.0
Mt. Emmons Mining Company (Delaware) 100.0
Silver Springs Ranch, Inc. (Colorado) 100.0
Sociedad Minera Cerro Verde S.A. (Peru) (d) 82.5
Cyprus Gold Company (Delaware) 100.0
Cyprus Copperstone Gold Corporation (Delaware) 100.0
Cyprus Amax Australia Corporation (Delaware) 100.0
Cyprus Exploration and Development Corporation (Delaware) 100.0
Cyprus Amax China Corporation (Delaware) 100.0
Cyprus Amax Indonesia Corporation (Delaware) 100.0
PT Cyprus Amax Indonesia (Indonesia) (e) 95.0
Cyprus Amax Philippines Corporation (Delaware) 100.0
Cyprus Amax Zambia Corporation (Delaware) 100.0
Cyprus Amax Zimbabwe Corporation (Delaware) 100.0
Cyprus Canada Inc. (Canada) 100.0
Cyprus Gold Exploration Corporation (Delaware) 100.0
Cyprus Metals Exploration Corporation (Delaware) 100.0
Cyprus Minera de Panama, S.A. (Panama) 100.0
Minera Cyprus Antacori Corporation (Delaware) 100.0
Rio Blanco Exploration, LLC (Colorado) (f) 50.0
Compania Mexicana de Exploracion Cyprus, S.A. de C.V. (Mexico) 100.0
Cyprus Mexico Corporation (Delaware) 100.0
Cyprus Minera de Chile Inc. (Delaware) 100.0
Minera Cuicuilco S.A. de C.V. (Mexico) 100.0
Servicios Cyprus S.A. de C.V. (Mexico) 100.0
4
<PAGE>
Cyprus Specialty Metals Company (Delaware) 100.0
Cyprus Zinc Corporation (Delaware) 100.0
Cyprus Amax Kansanshi Holdings Limited (Ireland) 100.0
Cyprus Amax Kansanshi PLC (Zambia) (g) 17.8
Cyprus Amax Chile Holdings, Inc. (Delaware) 100.0
Minera Cyprus Chile Limitada (Chile) (i) 90.33
Minera Cyprus Amax Chile Limitada (Chile) (h) 67.0
Cyprus Mines Corporation (Delaware) 100.0
Cyprus Amax Minerals Japan Corporation (Delaware) 100.0
Cyprus Amax Leasing Corporation 100.0
Amax Nickel Overseas Ventures, Inc. (Delaware) 100.0
American Metal Climax, Inc. (Delaware) 100.0
Ametalco Inc. (New York) 100.0
Ametalco Limited (England) 100.0
Climax Molybdenum U.K. Limited (England) 100.0
Climax Canada Ltd. (Delaware) 100.0
Amax Energy Inc. (Delaware) 100.0
Amax Zinc (Newfoundland) Limited (Delaware) 100.0
Cyprus Meullaboho Coal Mining Limited (Bermuda) 100.0
Cyprus Australia Coal Company (Delaware) 100.0
McIlwraith McEacharn Pty Limited (Australia) 100.0
McIlwraith Mining Pty Limited (New South Wales) 100.0
Oakbridge Pty Limited (New South Wales) (k) 47.96
Cyprus Springvale Pty Limited (New South Wales) 100.0
Cyprus (Queensland) Pty Limited (New South Wales) 100.0
5
<PAGE>
Kinross Gold Corporation (Ontario) (k) 30.42
Amax de Chile, Inc. (Delaware) 100.0
Amax Exploration, Inc. (Delaware) 100.0
Amax Exploration (Ireland), Inc. (Delaware) 100.0
Amax Investment (France), Inc. (Delaware) 100.0
Amax Research & Development, Inc. (Delaware) 100.0
Amax Arizona, Inc. (Nevada) 100.0
United States Metals Refining Company (Delaware) 100.0
Amax Realty Development, Inc. (Bermuda) 100.0
Amax Specialty Coppers Corporation (Delaware) 100.0
Amax Specialty Metals (Driver), Inc. (Delaware) 100.0
Blackwell Zinc Company, Inc. (New York) 100.0
CAM Receivables Corporation (Delaware) 100.0
Cyprus Amax Finance Corporation (Delaware) 100.0
Missouri Lead Smelting Company (Delaware) 100.0
- --------------------
(a) 49% owned by Corporacion Nacional del Cobre de Chile
(b) 24.99% owned by BHP Minerals International Inc.
(c) 34% owned by John and Mary Gay; 7% owned by various individuals
(d) 9.2% owned by Cia. De Minas Buenaventura S.A.; 8.3% owned by various
individuals
(e) 5% owned by Cyprus Amax Australia Corporation
(f) 50% owned by Newcrest International Pty. Ltd.
(g) 82.2% owned by Zambia Consolidated Copper Mines Limited
(h) 33% owned by Cyprus Specialty Metals Company
(i) 9.67% owned by Cyprus Exploration and Development Corporation
(j) 25.62% owned by Tomen Corporation; 23.57% owned by Nippon Oil (Australia)
Pty. Ltd.; 2.85% owned by Kawasho Corporation. One fully paid "A" Class
ordinary share owned by McIlwraith Mining Pty. Limited.
6
<PAGE>
(k) 15.48% owned by Cyprus Amax Minerals Company; 8.57% owned by Amax Energy
Inc.; 4.20% owned by Cyprus Gold Company; 2.17% owned by Minera Cyprus Amax
Chile Limitada
7
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Asarco Cyprus Incorporated of our report dated January
26, 1999 relating to the financial statements and financial statement schedules,
which appears in Asarco Incorporated's Annual Report on Form 10-K/A for the
year ended December 31, 1998. We also consent to the references to us under the
heading "Independent Accountants" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
New York, New York
August 20, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Asarco Cyprus Incorporated of our report dated
February 11, 1999 relating to the consolidated financial statements, which
appears in the Cyprus Amax Minerals Company 1998 Annual Report to Shareholders,
which is incorporated by reference in its Annual Report on Form 10-K for
the year ended December 31, 1998. We also consent to the incorporation by
reference of our report dated February 11, 1999 relating to the financial
statement schedules, which appears in such Annual Report on Form 10-K. We also
consent to the reference to us under the heading "Independent Accountants" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
August 20, 1999
<PAGE>
Exhibit 99.1
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of ASARCO Incorporated ("ASARCO") as Appendix B to the Joint Proxy
Statement and Prospectus of ASARCO and Cyprus Amax Minerals Company ("Cyprus
Amax") relating to the proposed business combination involving ASARCO and Cyprus
Amax and references thereto in such Joint Proxy Statement and Prospectus under
the captions "SUMMARY - Opinions of Financial Advisors" and "THE BUSINESS
COMBINATION -- Opinion of ASARCO'S Financial Advisor." In giving such consent,
we do not admit that we come within the category of persons whose consent is
required under, and we do not admit that we are "experts" for purposes of, the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
By: /s/ Credit Suisse First Boston Corporation
----------------------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
New York, New York
August 20, 1999
<PAGE>
Exhibit 99.2
[Merrill Lynch Letterhead]
We hereby consent to the use of our opinion letter dated July 15, 1999 to
the Board of Directors of Cyprus Amax Minerals Company included as Annex C to
the Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed business combination among ASARCO
Incorporated, Cyprus Amax Minerals Company, ACA Holding Incorporated, ACO
Acquisition Corp. and CAM Acquisition Corp., and to the references to such
opinion in such Joint Proxy Statement/Prospectus. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
nor do we thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act, as amended, or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Keith Phillips
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Name: Keith Phillips
Title: Managing Director
New York, New York
August 20, 1999
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EXHIBIT 99.3
ASARCO INCORPORATED
Proxy Solicited By Board of Directors For Special Meeting
of Stockholders to be Held September 30, 1999
The undersigned hereby appoints Francis R. McAllister, Kevin R. Morano and
Augustus B. Kinsolving, and each of them, with full power of substitution and
revocation, the proxies to vote for and in the name of the undersigned all of
the shares of common stock of ASARCO Incorporated which the undersigned may be
entitled to vote at the special meeting of stockholders to be held at the New
York Information Technology Center, 55 Broad Street, 4th Floor, New York, New
York, on September 30, 1999, at 10:00 a.m., and at any adjournments or
postponements thereof, upon the matter set forth below and described in the
accompanying joint proxy statement and prospectus and upon all matters that may
properly come before the special meeting.
THE ASARCO BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
To consider and vote on a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of July 15, 1999, among Asarco Cyprus Incorporated,
ACO Acquisition Corp., CAM Acquisition Corp., ASARCO Incorporated and Cyprus
Amax Minerals Company, and to approve the ASARCO merger.
FOR [_] AGAINST [_] ABSTAIN [_]
THE PROXY WILL BE VOTED AS YOU SPECIFY ABOVE WITH RESPECT TO THE MATTER SET
FORTH ABOVE. IF THIS PROXY IS EXECUTED BUT NO CHOICE IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER AND OTHERWISE IN THE DISCRETION OF THE PROXY
HOLDERS.
Please be sure to sign and date the Proxy on the reverse side.
(Continued and to be signed on reverse side)
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[Reverse]
(Continued from other side)
Mark here to elect to have your vote kept confidential. [_]
NOTE: Please sign exactly as name or names appear hereon. If acting as
executor, administrator, trustee, guardian, etc., please give your full
title as it appears hereon. When signing as joint tenants, all parties
in the joint tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer and the corporate seal
affixed. No postage is required if returned in the enclosed envelope
and mailed in the United States.
Dated: _______________________________, 1999
Signed: ____________________________________
______________________________________
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT 99.4
CYPRUS AMAX MINERALS COMPANY
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 30, 1999
This Proxy/Voting Instruction Card is Solicited On Behalf of
The Board of Directors or the Trustees Named Below
The undersigned hereby constitutes and appoints Milton H. Ward, Philip C.
Wolf, and Dale E. Huffman, and each or any of them, the proxies and agents of
the undersigned, with full power of substitution and revocation, to represent
and vote in accordance with the instructions given herein all the shares of
common stock of Cyprus Amax Minerals Company (the "Company") held of record by
the undersigned at the close of business on August 25, 1999, at the special
meeting of stockholders to be held at World Financial Center--North Tower, 250
Vesey Street, New York, New York, on September 30, 1999, at 10:00 a.m., and at
any adjournments or postponements thereof, and directs the Trustees of the
Company Savings Plan and Trust, the Company Thrift Plan For Bargaining Unit
Employees, the Equatorial Mining North America, Inc. ("Equatorial") 401(k)
Profit Sharing Plan, and the Chemetall Corporation ("Chemetall") Savings Plan
(as applicable, with respect to shares of common stock held for the benefit of
the undersigned) to vote in person or by proxy at such special meeting, all
shares held by or for the benefit of the undersigned. The Trustee of the
Equatorial Plan may or may not vote undirected shares of the Company's stock in
the plan, the Trustee of the Chemetall Plan will vote solely in accordance with
written directions of the participants in the plan, and the Trustees of the
remaining plans will vote undirected shares of the Company's stock held by them
in direct proportion to the voting of shares for which instructions have been
received.
THE CYPRUS AMAX BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING
PROPOSAL:
To consider and vote on a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of July 15, 1999, among Asarco Cyprus Incorporated,
ACO Acquisition Corp., CAM Acquisition Corp., ASARCO Incorporated and Cyprus
Amax Minerals Company, and to approve the Cyprus Amax merger.
FOR [_] AGAINST [_] ABSTAIN [_]
THE PROXY WILL BE VOTED AS YOU SPECIFY ABOVE WITH RESPECT TO THE MATTER SET
FORTH ABOVE. IF THIS PROXY IS EXECUTED BUT NO CHOICE IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER AND OTHERWISE IN THE DISCRETION OF THE PROXY
HOLDERS.
Please be sure to sign and date the Proxy on the reverse side.
(Continued and to be signed on reverse side)
<PAGE>
[Reverse]
(Continued from other side)
NOTE: Please sign exactly as name or names appear hereon. If acting as
executor, administrator, trustee, guardian, etc., please give your full
title as it appears hereon. When signing as joint tenants, all parties
in the joint tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer and the corporate seal
affixed. No postage is required if returned in the enclosed envelope
and mailed in the United States.
Dated ________________________________, 1999
X __________________________________________
X __________________________________________
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED ENVELOPE.
