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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D) (4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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MAGMA COPPER COMPANY
(NAME OF SUBJECT COMPANY)
MAGMA COPPER COMPANY
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK
5 5/8% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D
6% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES E
(TITLE OF CLASS OF SECURITIES)
559177 20 9
559177 30 8
559177 40 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
DOUGLAS J. PURDOM
VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
MAGMA COPPER COMPANY
7400 NORTH ORACLE ROAD, SUITE 200
TUCSON, ARIZONA 85704
(520) 575-5600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATION ON BEHALF OF THE PERSON(S) FILING STATEMENT).
WITH COPIES TO:
JACK H. NUSBAUM, ESQ. STEVEN D. PIDGEON, ESQ.
WILLKIE FARR & GALLAGHER SNELL & WILMER L.L.P.
153 EAST 53RD STREET ONE ARIZONA CENTER
NEW YORK, NEW YORK 10022 PHOENIX, ARIZONA 85004
(212) 821-8000 (602) 382-6000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Magma Copper Company, a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 7400 North Oracle Road, Suite 200, Tucson, Arizona
85704. The titles of the classes of equity securities to which this statement
relates are the common stock, par value $0.01 per share (the "Common Stock" or
the "Shares"), the 5 5/8% Cumulative Convertible Preferred Stock, Series D,
par value $.01 per share (the "Series D Preferred Stock"), and the 6%
Cumulative Convertible Preferred Stock, Series E, par value $.01 per share
(the "Series E Preferred Stock" and, together with the Series D Preferred
Stock, the "Preferred Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
The statement relates to the tender offer by BHP Sub Inc., a Delaware
corporation ("Purchaser"), which is a wholly owned subsidiary of BHP Holdings
(USA) Inc., a Delaware corporation ("Sub"), which in turn is an indirect,
wholly owned subsidiary of The Broken Hill Proprietary Company Limited, a
Victoria, Australia corporation ("BHP"), disclosed in a Tender Offer Statement
on Schedule 14D-1, dated December 5, 1995 (the "Schedule 14D-1"), to purchase
(i) all outstanding Common Stock at a price of $28.00 per share net to the
seller in cash, (ii) all outstanding shares of Series D Preferred Stock, at a
price of $96.544 per share net to the seller in cash, and (iii) all
outstanding shares of Series E Preferred Stock, at a price of $100.646 per
share net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated December 5, 1995 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with the
Offer to Purchase, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 30, 1995 (the "Merger Agreement"), among BHP, Purchaser, Sub, and
the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, Purchaser will be merged with and into the Company (the
"Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is filed as Exhibit 1
hereto and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of BHP
are located at BHP Tower, 600 Bourke Street, Melbourne, Victoria, 3000
Australia, the principal executive offices of Purchaser are located at 550
California Street, San Francisco, California 94104, and the principal
executive offices of Sub are located at 900 Market Street, Suite 200,
Wilmington, Delaware 19801.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements,
arrangements or understandings and actual or potential conflicts of interest
between the Company or its affiliates and: (i) the Company, its executive
officers, directors or affiliates; or (ii) BHP, its executive officers,
directors or affiliates.
1. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into certain employment agreements, termination of
employment and change-in-control arrangements, as described on pages 8-19 of
the Proxy Statement dated May 18, 1995 for the Company's Annual Meeting of
Stockholders (the "1995 Proxy Statement"), a copy of which is filed as Exhibit
2 hereto and is incorporated herein by reference.
The Company has entered into certain employment agreements, termination of
employment and change-in-control arrangements since May 18, 1995, which are
summarized below:
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Employment Agreements. The Company and certain officers (the "Executives")
of the Company have entered into separate employment agreements ("Employment
Agreements"). The Employment Agreements with Marc W. Ingelbinck and Robert P.
Mueller are dated October 13, 1995; and the Employment Agreements with Terrell
I. Ackerman, Michael A. Eamon, George A. Eltringham, Thomas L. Garrett,
Douglas R. McGregor, James K. Schultz and Craig A. Steinke are dated November
21, 1995. Certain of the Employment Agreements are an amendment and
restatement of prior agreements between the Company and the Executive and
supersede and nullify in all respects the terms of and benefits under such
prior agreements. A copy of the form of Employment Agreement is filed as
Exhibit 9 hereto and is incorporated herein by reference.
The Employment Agreements each have an initial three year term, and provide
for automatic one year extensions, unless prior notice is given by the Company
that the Employment Agreement will not be extended; provided, however, that
the Employment Agreement shall remain in effect for two years following a
"change in control" (as defined below). Prior to a change in control, and
except as may be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is
"at will" and may be terminated by either the Company or the Executive at any
time. The Employment Agreements provide for certain benefits to these
Executives upon the occurrence of a "change in control", including lost value
compensation in the event that an Executive is unable to freely exercise stock
options or is unable to freely sell or exchange Common Stock acquired pursuant
to restricted stock grants under the 1987 Plan, the 1989 Plan, or the 1993
Plan (as such terms are defined below). In addition, if following a change in
control, the Executive is terminated (other than for Good Reason) or resigns
following a Termination Event (which includes a material change in the duties,
responsibilities or status of the Executive, a reduction in Base Compensation,
relocation outside of the United States, or a material breach by the Company
of the Employment Agreement), then the Executive shall be entitled to the
following benefits: (a) an extension, for a period of two years, of life,
health, and disability benefits, (b) a pension supplement equal to the amount
that the Executive would have received had the Executive's pension benefits
under the Company's regular retirement plan and the Special Executive
Supplemental Benefit Plan been increased on the basis of two additional years
of service, (c) for two of the Executives, a lump sum payment based on a
percentage of the Executive's average base compensation, and (d) payment by
the Company of certain excise taxes imposed on the Executive. Certain of these
benefits are not payable under the Employment Agreements to the extent that
they are provided under other Company benefit plans.
A "change in control" is defined in the Employment Agreements as: (i) a
shareholder approval of a merger or consolidation with any other corporation,
other than Warburg, Pincus Capital Company, L.P. ("Warburg"), in which the
Company's shareholders prior to the change in control do not retain 65% or
more of the voting power of the merged or consolidated company, (ii) the
acquisition of 35% or more of the voting power of the Company's Common Stock
by a party other than Warburg; provided, however, that a change of control
shall not be deemed to occur for so long as Warburg continues to beneficially
own at least 10% more of the combined voting power of the Company than such
other party, unless a majority of the Board of Directors immediately prior to
such acquisition shall have deemed a change in control to have occurred, (iii)
a change in identity of the majority of the members of the Board of Directors,
except in the case of such a change which both follows the acquisition by
Warburg of fifty-one percent (51%) or more of the voting securities of the
Company and which is approved by a majority of the Board of Directors and the
management executive committee prior to such acquisition, (iv) a sale of all
or substantially all of the assets of the Company, (v) a transfer of all or
substantially all of the Company's assets to a partnership or joint venture in
which the Company's interest is 50% or less, (vi) a complete liquidation of
the Company, and (vii) the execution or approval by the Board of Directors of
an agreement which would result in any of the foregoing.
The Employment Agreements also provide for retention benefits should a
change in control of the Company occur. The retention benefits are designed to
encourage the Executives to remain with the Company following a change in
control, and include: (i) the continuation of the Employment Agreements for
two years following a change in control, during which period each Executive
would continue to receive compensation at a rate comparable to his or her
respective rate of compensation on the date of the change in control, (ii)
payment of
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bonuses on each of the first and second anniversaries of the date of the
change in control equal to varying percentages (ranging from 15% to 70%) of
the annual base salary, and (iii) payment by the Company of any excise taxes
imposed pursuant to Section 4999 of the Internal Revenue Code.
Amendment of Chief Executive Officer Supplemental Retirement Plan. In
September 1995, the Company amended several of its benefit plans, including
the Chief Executive Officer Supplemental Retirement Plan, to conform the
definition of the term "change in control." As a result of the amendment,
"change in control" is defined as described above under "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements--Employment
Agreements." A copy of such amendment is filed as Exhibit 15 hereto and is
incorporated herein by reference.
Salary Increases and Bonuses. Effective November 1, 1995, the Board of
Directors of the Company authorized a 9% increase, from $550,000 to $600,000,
in the annual base salary of J. Burgess Winter, the President and Chief
Executive Officer of the Company, and approved increases in the annual base
salaries of the Company's executive officers, which in the case of Mr. Mills
reflected his promotion to Executive Vice President, as described below:
<TABLE>
<CAPTION>
PRIOR % NEW
EMPLOYEE TITLE SALARY INCREASE SALARY
- -------- ----- -------- -------- --------
<S> <C> <C> <C> <C>
Browne, K. L. .......... President, Magma Tintaya $210,000 7% $225,000
Campbell, M. H. ........ VP, Human Resources $160,000 6% $170,000
Durazo, F. E. .......... VP & General Manager, SMMD $220,000 5% $231,000
Ingelbinck, M. W. ...... VP Marketing, MMC $210,000 4% $219,000
Mills, B. A. ........... Executive Vice President $250,000 40% $350,000
Purdom, D. J. .......... VP & Chief Financial Officer $250,000 10% $275,000
Smith, H. C. ........... President, Magma Nevada $250,000 8% $270,000
</TABLE>
On November 21, 1995, the Board of Directors authorized incentive
compensation plan bonuses to be paid prior to the end of 1995 to the Company's
executive officers as described below:
<TABLE>
<CAPTION>
1995
INCENTIVE
COMPENSATION
NAME PAYMENTS
---- ------------
<S> <C>
Brodkey, A. A................................................ $ 84,013
Browne, K. L................................................. $162,000
Campbell, M. H. ............................................. $ 88,400
Durazo, F. E................................................. $ 87,780
Ingelbinck, M. W............................................. $ 61,320
Mills, B. A.................................................. $297,500
Purdom, D. J................................................. $176,000
Smith, H. C.................................................. $205,200
Winter, J. B................................................. $684,000
</TABLE>
On November 21, 1995, the Board of Directors authorized the payment of
performance bonuses under the Company's long term incentive compensation plan
in amounts to be determined as of year end. Such bonuses may be deferred under
the Special Executive Deferred Compensation Plan.
First Amendment to the Magma Copper Company Trust Fund for Executive
Benefits. In September 1995, the Company amended several of its benefit plans,
including the Magma Copper Company Trust Fund for Executive Benefits, to
conform the definition of the term "change in control." As a result of the
amendment, "change in control" is defined as described above under "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements--
Employment Agreements." The Trust Fund was also amended to provide that in the
event of a change in control, the Company will transfer to the Trustee of the
Magma Copper Company
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Trust Fund for Executive Benefits an amount equal to the present value of the
liability for benefits accrued to the date of the change in control pursuant
to the Benefit Arrangements, less amounts already contributed to the Trust
Fund. A copy of such amendment is filed as Exhibit 16 hereto and is
incorporated herein by reference.
First Amendment to the Magma Copper Company 1993 Long Term Incentive
Plan. In September 1995, the Company amended its 1993 Long Term Incentive Plan
to permit deferrals of payments made in Common Stock. A copy of such amendment
is filed as Exhibit 17 hereto and is incorporated herein by reference.
Fourth Amendment to the Magma Copper Company Special Executive Deferred
Compensation Plan. In the Fall of 1995, the Company amended several of its
benefit plans, including the Magma Copper Company Special Executive Deferred
Compensation Plan, to conform the definition of the term "change in control."
As a result of the amendment, "change in control" is defined as described
above under "Employment Contracts, Termination of Employment and Change-in-
Control Arrangements--Employment Agreements." The Special Executive Deferred
Compensation Plan was also amended to provide that: (i) a participant in the
1993 Long Term Incentive Plan may elect to defer all or a portion of any award
thereunder, (ii) a participant may elect to defer payment of his base pay for
services to be rendered during the following calendar year according to the
participant's Deferred Compensation Agreement, (iii) in the event of a change
in control the Company will transfer to the Trustee of the Magma Copper
Company Trust Fund for Executive Benefits the present values of the liability
for the benefits accrued to the date of the change in control, less amounts
already contributed. A copy of such amendment is filed as Exhibit 18 hereto
and is incorporated herein by reference.
Fifth Amendment to the Magma Copper Company Special Executive Deferred
Compensation Plan. On November 30, 1995, the Company approved an amendment to
the Magma Copper Company Special Executive Deferred Compensation Plan to
permit the deferral of amounts received from the cancelation of presently
unexercisable stock options in the event of the Merger. A copy of such
amendment is filed as Exhibit 19 hereto and is incorporated herein by
reference.
First Amendment to the Magma Copper Company Special Executive Supplemental
Benefit Plan. On November 30, 1995, the Company adopted the First Amendment to
the Magma Copper Company Special Executive Supplemental Benefit Plan, which is
subject to participant consent, to delete the automatic pay-out of benefits
after a change in control. A copy of such amendment is filed as Exhibit 10
hereto and is incorporated herein by reference.
2. STOCK OPTIONS AND STOCK AWARDS
The Company maintains the 1987 Stock Option and Stock Award Plan (the "1987
Plan"), the 1989 Stock Option and Stock Award Plan (the "1989 Plan"), the 1989
Stock Option Plan for Non-Employee Directors (the "1989 Director Plan"), the
1992 Restricted Stock Plan for Non-Employee Directors (the "1992 Director
Plan") and the 1993 Stock Option and Stock Award Plan (the "1993 Plan"),
pursuant to which options (the "Options") to purchase the Company's Common
Stock and awards of restricted Common Stock have been granted and remain
outstanding as of the date of this Schedule 14D-9.
In September 1995, the Company amended several of its benefit plans,
including the 1993 Plan, the 1989 Plan, and the 1987 Plan, to conform the
definition of the term "change in control." As a result of the amendments,
"change in control" is defined as described above under "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements--Employment
Agreements." Copies of such amendments are filed as Exhibits 12, 13, and 14
hereto and are incorporated herein by reference.
Pursuant to the Merger Agreement, upon consummation of the Merger (the
"Effective Time"), the Company will pay each holder of a then outstanding
Option, whether or not then exercisable, in settlement of the Options, an
amount (subject to any applicable withholding tax) in cash equal to $28.00 per
Share less the per Share exercise price of the Option as in effect immediately
prior to the Effective Time, and the Option will be canceled. On November 30,
1995, the Board of Directors authorized the surrender of the Options in
exchange for such cash payment in connection with the Merger, and lifted the
restrictions on the restricted stock awards in
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order to permit the tender of the Common Stock in the Offer. As of November
30, 1995, there were outstanding awards of options and restricted stock for
3,453,844 Shares under the 1987 Plan, 1989 Plan, and 1993 Plan and awards of
options and restricted stock for 54,124 Shares under the 1989 Director Plan
and 1992 Director Plan.
On November 30, 1995, the Board of Directors canceled a previously adopted
amendment to the 1992 Director Plan which would have increased the annual
grant of options thereunder, and concurrently rescinded the grants which had
been made pursuant to such amendment.
See Item 6(a) for a discussion of stock options granted to executive
officers since May 18, 1995. In 1995, five directors received grants of
options for 4,078 Shares under the 1989 Director Plan as part of their
election to defer the 1994 regular annual retainer for serving as directors.
Effective as December 31, 1995, non-employee directors of the Company who
have deferred retainers under the 1989 Director Plan will be issued options
pursuant to such plan. In addition, on January 2, 1996, each non-employee
director will receive a grant of 1,000 Shares pursuant to the 1992 Director
Plan.
3. THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement,
which is qualified in its entirety by reference to the Merger Agreement. A
copy of the Merger Agreement has been filed as Exhibit 1 hereto and is
incorporated herein by reference.
The Offer. The Merger Agreement provides for the commencement of the Offer
within five business days after November 30, 1995, the date of the Merger
Agreement. The obligation of Purchaser to accept for payment Shares and
Preferred Shares tendered pursuant to the Offer is subject to the tender of
such number of Shares and Preferred Shares as represents at least a majority
of the outstanding Shares of the Company on a fully diluted basis assuming
conversion of all outstanding options and securities convertible into Shares
including Preferred Shares (the "Minimum Condition") and certain other
conditions that are described below under "Conditions to the Offer." Purchaser
has agreed that it will not, without the prior written consent of the Board of
Directors of the Company, (i) decrease or change the form of the consideration
payable in the Offer, (ii) reduce the number of Shares sought pursuant to the
Offer, (iii) amend the conditions or impose additional conditions to the
Offer, (iv) amend any term of the Offer or (v) waive the Minimum Condition.
Assuming all of the conditions to consummation of the Offer are satisfied,
Sub and Purchaser have agreed to consummate the Offer as promptly as possible.
Purchaser is required to extend the Offer upon the failure of the conditions
to the Offer to the dates specified below under "Conditions to the Offer."
Board Composition. The Merger Agreement provides that, promptly upon the
purchase by Purchaser of such number of Shares and Preferred Shares as
represents at least a majority of the outstanding Shares (on a fully diluted
basis) and from time to time thereafter, Purchaser shall be entitled to
designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as will give Purchaser, subject to
compliance with Section 14(f) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), representation on the Board of Directors of the
Company equal to the product of (a) the number of directors on the Board of
Directors of the Company (after giving effect to the appointment of such
directors) and (b) the percentage that such number of Shares so purchased
bears to the number of Shares outstanding, and the Company will, upon request
by Purchaser, promptly (i) increase the size of the Board of Directors of the
Company to the extent permitted by its Restated Certificate of Incorporation
and By-Laws (and amend the Restated Certificate of Incorporation and By-Laws,
if so required, to increase the size of the Board of Directors to allow for
such additional directors); or (ii) take all steps necessary and appropriate
to secure the resignations of such number of directors as is necessary to
enable Purchaser's designees to be elected to the Board of Directors of the
Company (and will hold a Board meeting for such purpose); provided, however,
that the Company is required to maintain no fewer than three (3) Continuing
Directors (as such term is defined in the Restated Certificate of
Incorporation) of whom at least two are Independent Directors (as such term is
defined in
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the Warburg Standstill Agreement (as defined below)). Prior to the Effective
Time, in addition to any other approval of the directors required by
applicable law or the Restated Certificate of Incorporation or By-Laws of the
Company, the affirmative vote of a majority of the Continuing Directors is
required (i) to amend or terminate the Merger Agreement by the Company, (ii)
to waive any of the Company's rights or to exercise any of its remedies under
the Merger Agreement, (iii) to extend the time for performance of Purchaser's
obligations under the Merger Agreement or (iv) to take any other action by the
Company in connection with the Merger Agreement required to be taken by the
Board of Directors of the Company.
Section 14(f) of the Exchange Act requires the Company to mail to its
stockholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder at
least ten days prior to a change in a majority of the Board of Directors other
than as a result of a meeting of security holders. The Company intends to mail
such an Information Statement setting forth the persons designated by
Purchaser to serve on the Company's Board of Directors on or prior to December
24, 1995.
The Merger. The Merger Agreement provides that subsequent to the
consummation of the Offer, the Merger will, if required under applicable law,
be submitted for approval by the holders of a majority of the outstanding
Shares. Purchaser has indicated that it will vote, or cause to be voted, in
favor of the Merger all shares of the Company's Common Stock beneficially
owned by it and its subsidiaries. Accordingly, if Purchaser acquires a
majority of the outstanding shares of the Company's Common Stock pursuant to
the Offer or otherwise, Purchaser may be able, without the affirmative vote of
any other holder of Shares, to adopt the Merger Agreement and approve the
Merger.
As promptly as practicable after the satisfaction or waiver of the
conditions described below under "Conditions Precedent to Merger", Purchaser
will be merged with and into the Company. As a result of the Merger, the
corporation surviving the Merger (the "Surviving Corporation") will become an
indirect, wholly owned subsidiary of BHP. The Restated Certificate of
Incorporation of the Company will become the Certificate of Incorporation of
the Surviving Corporation, and the By-Laws of Purchaser will become the By-
Laws of the Surviving Corporation. In addition, the directors of Purchaser
immediately prior to the Effective Time will become the initial directors of
the Surviving Corporation, and the officers of the Company, other than the
Chairman of the Board, holding office immediately prior to the Effective Time
will be the initial officers of the Surviving Corporation, in each case until
their successors are duly elected or appointed and qualified.
Conversion of Shares. At the Effective Time, each Share (other than Shares
held by the Company as treasury Shares, Shares owned by Purchaser and Shares
as to which appraisal rights under the Delaware General Corporation Law (the
"DGCL") are perfected ("Dissenting Shares")) will be converted into and become
solely a right to receive $28.00 net in cash (adjusted for stock splits or
other similar events) per Share upon the surrender of the certificate formerly
representing such Share. Each Preferred Share issued and outstanding
immediately prior to the Effective Time (other than Preferred Shares held by
the Company as treasury shares, Preferred Shares owned by Purchaser, and
Dissenting Shares) will be converted into and become solely a right to receive
cash in an amount equal to (x) the number of Shares into which such Preferred
Share was convertible immediately prior to the Effective Time multiplied by
(y) $28.00 in cash (adjusted for stock splits or other similar events) without
interest. The consideration to be received by the holder of a Share or
Preferred Share is referred to as the Merger Consideration.
Options. Pursuant to the Merger Agreement, at the Effective Time, each
option to purchase Shares issued by the Company (the "Company Stock Options")
will be canceled by virtue of the Merger. In consideration of such
cancelation, the Surviving Corporation will deliver on or promptly after the
Effective Time to each holder thereof cash in an amount equal to the excess of
$28.00 over the exercise price per Share of such Company Stock Option.
Dissenting Shares. The Merger Agreement provides that the Dissenting Shares
will not be exchanged for the right to receive the appropriate Merger
Consideration, and holders of such Dissenting Shares will be entitled
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to receive payment of the appraised value of such Dissenting Shares in
accordance with the provisions of Section 262 of the DGCL, unless and until
such holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any holder
fails to perfect or effectively withdraws or loses such right, such Dissenting
Shares will thereupon be treated as if they had been converted into and have
become exchangeable for, at the Effective Time, the right to receive the
appropriate Merger Consideration.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Purchaser, Sub
and BHP, including, but not limited to, representations and warranties
relating to the Company's organization and qualification, its subsidiaries,
its capitalization, its authority to enter into the Merger Agreement and carry
out the transactions contemplated thereby, filings made by the Company with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended and the Exchange Act, its litigation, its employee relations and
benefits, its taxes, and its compliance with laws. The Company has also made
representations regarding certain environmental matters, mineral properties,
water rights and title to properties.
Purchaser, Sub and BHP have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to Purchaser, Sub and BHP's organization and authority to
enter into the Merger Agreement, that Purchaser as of the expiration of the
Offer will have sufficient funds available to it to purchase the Shares and
Preferred Shares and that as of November 30, 1995, BHP, Sub and Purchaser do
not own (other than through their employee benefit plans) any Shares or
Preferred Shares.
Covenants Relating to the Conduct of Business. Pursuant to the Merger
Agreement, the Company has agreed that, subject to certain limited exceptions,
it will, and will cause its subsidiaries to, in all material respects, carry
on their respective businesses in the ordinary course, not take any action to
sell or encumber in any manner their capital stock or material assets, not
enter into any material transaction other than in the ordinary course of
business, not incur any indebtedness other than in the ordinary course of
business, not enter into any agreement to change any of their existing
contracts with respect to the foregoing, not enter into or change any
employment agreements, not amend or adopt any employee benefit plans and, to
the extent consistent therewith, use their reasonable best efforts to keep
intact their insurance policies, preserve intact their current business
organizations, keep available the services of their current officers and
employees or preserve their relationships with customers, suppliers and others
having business dealings with them.
Acquisition Proposals. The Company and its subsidiaries have agreed in the
Merger Agreement, from the date of the Merger Agreement until the termination
of the Merger Agreement, that they will not directly or indirectly make,
solicit, initiate or encourage submission of proposals or offers from any
persons (including any of its officers or employees), with respect to any
liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or substantially all of the assets of, or
equity interest in, the Company or other similar transaction or business
combination involving the Company or its subsidiaries (such proposal or offer
referred to in the Merger Agreement as an "Acquisition Proposal"). Subject to
the fiduciary duty of the Board of Directors, the Company has agreed that it
shall (i) immediately cease and cause to be terminated all discussions or
negotiations with third parties with respect to any Acquisition Proposal, if
any, existing on November 30, 1995; and (ii) promptly notify Purchaser after
receipt of a bona fide Acquisition Proposal or any inquiry from any person
relating to an Acquisition Proposal and provide Purchaser with a reasonable
summary of the financial terms and other material terms of such Acquisition
Proposal. The Merger Agreement provides that, if the Board of Directors of the
Company shall conclude, acting in good faith, after receiving advice from
legal counsel or its financial advisor that the following action is necessary
or appropriate in order to act in a manner which is consistent with its
fiduciary duties under applicable law, the Company may furnish information to
third parties concerning itself and its business or assets, engage in
discussions or negotiations with third parties regarding an Acquisition
Proposal initiated by a third party, or following receipt of an Acquisition
Proposal, through its Board of Directors, withdraw, modify or amend its
recommendation of the transactions contemplated by the Merger Agreement and/or
enter into an agreement providing for the consummation of such Acquisition
Proposal.
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Director and Officer Indemnification and Insurance. Pursuant to the Merger
Agreement, Purchaser has agreed to indemnify, defend and hold harmless the
officers, directors and employees of the Company or any of its subsidiaries
against all losses, expenses, claims, damages or liabilities brought or made
by third parties arising out of the transactions contemplated by the Merger
Agreement to the fullest extent permitted or required under applicable law,
including the advancement of expenses. Purchaser has also agreed that all
rights to indemnification existing in favor of the directors, officers or
employees of the Company or its subsidiaries (including, without limitation,
any person who was or becomes a director, officer or employee prior to the
Effective Time) (the "Indemnified Parties") under the DGCL or as provided in
the Company's Restated Certificate of Incorporation or By-Laws with respect to
matters occurring on or prior to the Effective Time will survive the Merger
and will continue in full force and effect for a period of not less than six
years after the Effective Time (or, in the case of claims or other matters
occurring on or prior to the expiration of such six-year period which have not
been resolved prior to the expiration of such six-year period, until such
matters are finally resolved) and Purchaser will honor, and will cause the
Company to honor, all such rights. Purchaser will cause to be maintained in
effect for not less than six years from the Effective Time the current
policies of the directors' and officers' liability insurance maintained by the
Company (provided that Purchaser may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less
advantageous) with respect to matters occurring on or prior to the Effective
Time; provided that in no event will Purchaser or the Company be required to
expend annually more than 150% of the amount that the Company spent for these
purposes in the last fiscal year to maintain or procure such insurance
coverage and further provided that if Purchaser or the Company is unable to
obtain such insurance Purchaser or the Company will obtain as much comparable
insurance as is available for such amount per year.
Employee Benefits. The Company and Purchaser have agreed that the employer-
provided benefits for nonunion employees under the Company's employee benefit
plans which are in effect as of the Effective Time (other than any feature of
any such plan that relates to the Shares or the Preferred Shares) will not be
reduced after the Effective Time (except to the extent consistent with the
terms of the Merger Agreement and except to the extent necessary to comply
with applicable law) at least until the second anniversary of the Effective
Time. The Company's cash-based Long-Term Incentive Plan will continue for one
additional three-year cycle beginning January 1, 1996, with performance
measures appropriate to the business plan of the Surviving Corporation.
Purchaser has affirmed that it intends to provide during the two-year period
following the Effective Time overall compensation and benefits for persons
serving on the Company's executive committee at the time of the consummation
of the Merger Agreement which are competitive with those provided by the
Company's competitors.
BHP Guarantee. BHP has unconditionally and irrevocably guaranteed to the
Company the due, prompt and faithful performance of, and compliance with, all
agreements and obligations of Purchaser and Sub in the Merger Agreement.
Conditions to the Offer. Purchaser is not required to continue the Offer
beyond January 4, 1996 or to accept for payment or pay for any Shares
tendered, may postpone the acceptance for payment, purchase of and/or payment
for Shares, may amend or terminate the Offer, and may extend the Offer beyond
January 4, 1996 (the "Initial Expiration Date") in which event the expiration
date (the "Expiration Date") shall mean the latest time and date which the
Offer as so extended by Purchaser shall expire, whether or not any Shares have
theretofore been purchased or paid for, (i) if the Minimum Condition is not
satisfied or (ii) if, at any time on or after December 5, 1995 and prior to
the time of payment for any such Shares or Preferred Shares any of following
events (each referred to as an "Event") has occurred (an Event shall be deemed
to have occurred notwithstanding, where applicable, the provision for a cure
period) (each of paragraphs (a) through (i) providing a separate and
independent condition to Purchaser's obligations pursuant to the Offer),
provided that if the Purchaser does not accept for payment, purchase or pay
for any Shares or Preferred Shares tendered due to the occurrence of any Event
specified in paragraph (a), (b), (d), (e), (f) or (g), then Purchaser shall be
required to extend the Offer for the cure period specified in such paragraph;
provided, however, that Purchaser may terminate
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the Offer at any time if any of the other Events shall have occurred
(including during the period of any such extension) and may waive any Event at
any time (including during the period of any such extension):
(a) there shall be in effect any preliminary or final injunction or
temporary restraining order or other order or decree issued by any foreign
or United States federal or state court or foreign or United States federal
or administrative agency or authority, enjoining, restraining or otherwise
prohibiting the Offer, the Merger or the acquisition by Sub or Purchaser of
Shares and Preferred Shares, and such order or decree either shall be
incapable of being cured by, or shall not be cured by May 31, 1996;
(b) an action or a proceeding shall have been commenced by any
governmental agency under federal or state antitrust laws or any other
applicable law before any court or any governmental or other administrative
or regulatory authority or agency, domestic or foreign, or there shall be
an imminent threat which would reasonably be expected to result in the
foregoing, or any of the governmental authorization specified in the Merger
Agreement shall have been conditioned in such a manner, that would
reasonably be expected to (i) materially restrict or prohibit consummation
of the Offer or the Merger or any other merger or business combination
between the Company, Sub and Purchaser, (ii) impose material limitations on
the ability of Sub or Purchaser effectively to acquire or hold or to
exercise full rights of ownership of the Shares and Preferred Shares
acquired by it, including, but not limited to, the right to vote the Shares
purchased by it on all matters properly presented to the stockholders of
the Company, or (iii) impose material limitations on the ability of either
Purchaser or the Company to continue effectively to conduct all or any
material portion of its respective business as heretofore conducted or to
continue to own or operate effectively all or any material portion of its
respective assets as heretofore owned or operated, and such action or
proceeding either shall be incapable of being cured by, or shall not be
cured by, May 31, 1996;
(c) there shall have been any law, statute, rule or regulation, domestic
or foreign, enacted, promulgated or proposed that, directly or indirectly,
would reasonably be expected to result in any of the consequences referred
to in paragraph (b) above;
(d) a material adverse change in the business, property, financial
condition or results of operations of the Company and its subsidiaries
taken as a whole shall have occurred, and such change shall either be
incapable of being cured or shall not be cured within ten days of the
Initial Expiration Date or, in the event such change is discovered during
any extension of the Offer, within ten days after the discovery of such
change;
(e) there shall have occurred (i) any general suspension of trading in
securities on the New York Stock Exchange, (ii) a declaration of a banking
moratorium or any suspension of payments by United States or Australian
authorities on the extension of credit by lending institutions, or (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, Australia or
Peru which would reasonably be expected to have a material adverse effect
on the business, property, financial condition or results of operations of
the Company and its subsidiaries taken as a whole, and any such event shall
continue to have such material adverse effect on May 31, 1996;
(f) any representation or warranty of the Company in the Merger Agreement
shall at any time prove to have been incorrect in any material respect at
the time made, and shall either be incapable of being cured or shall not be
cured within ten days of the Initial Expiration Date or, in the event such
breach is discovered during any extension of the Offer, ten days after
discovery of such breach;
(g) the Company shall fail to perform or comply in any material respect
with any covenant or agreement to be performed or complied with by the
Company under the Merger Agreement and such failure is unremedied ten days
after the Initial Expiration Date or, in the event such failure is
discovered during any extension of the Offer, ten days after discovery of
such nonperformance or noncompliance;
(h) the Company and Purchaser shall have agreed to terminate the Offer or
the Merger Agreement;
(i) the Board of Directors of the Company or the Company, as the case may
be, shall have (i) publicly (including by amendment of the Schedule 14D-9)
withdrawn its recommendation to stockholders of acceptance of the Offer and
adoption of the Merger Agreement, or shall have resolved to do so; or (ii)
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entered into an agreement with a third party providing for the acquisition
or purchase of all or substantially all of the assets of, or equity
interest, in the Company by such third party; and
(j) the Offer shall not have been consummated by May 31, 1996.
The foregoing conditions are for the sole benefit of Sub and Purchaser and
may be asserted by Sub and Purchaser regardless of the circumstances giving
rise to such condition or may be waived by Sub or Purchaser in whole at any
time or in part from time to time in its reasonable discretion.
Conditions Precedent to Merger. The respective obligations of Purchaser,
Sub, BHP and the Company to effect the Merger are subject to the fulfillment
at or prior to the Effective Time of the following conditions: (a) the Offer
shall have been consummated in accordance with its terms; provided, however,
that this condition shall be considered satisfied if Purchaser fails to accept
for payment and pay for Shares and Preferred Shares pursuant to the Offer
other than as a result of a failure of a condition to the Offer; (b) the
waiting period applicable to the consummation of the Merger under the Hart-
Scott-Rodino Antitrust Improvement Act shall have expired or been terminated;
(c) no law, statute, rule or regulation, domestic or foreign, shall have been
enacted or promulgated or is in effect which has the effect of making the
acquisition of Shares illegal or otherwise prohibits consummation of the
Merger; and (d) no preliminary or final injunction or temporary restraining
order or other order or decree has been issued by any foreign or United States
federal or state court or foreign or United States federal or administrative
agency enjoining, restraining or otherwise prohibiting the Offer, the Merger
or the acquisition by Purchaser of the Shares and Preferred Shares.
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of the
Company: (a) by mutual written consent of Purchaser and the Company; (b) by
either Purchaser or the Company if: (i) the Offer shall not have been
consummated by May 31, 1996; or (ii) at any time after June 30, 1996, if any
of the conditions to the Offer have not been satisfied or waived; (c) by
Purchaser, (i) if the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn its approval or recommendation of the Offer
or the Merger or shall have resolved to do any of the foregoing or if the
Company shall have entered into a definitive agreement to accept an
Acquisition Proposal; (ii) if the Board of Directors of the Company shall have
modified its approval of the Offer or the Merger in a manner adverse to
Purchaser and the Minimum Condition shall not have been met on the Expiration
Date; (iii) if as a result of the failure of any conditions to the Offer, the
Offer shall have terminated or expired without Purchaser or a subsidiary of
BHP having purchased any Shares in the Offer; and (d) by the Company if the
Board of Directors of the Company, acting on the advice of counsel or its
financial advisor and in accordance with its fiduciary duties, withdraws its
recommendations in favor of the Offer or the Merger or enters into an
agreement providing for the consummation of an Acquisition Proposal; provided,
however, that the right to terminate the Merger Agreement pursuant to any of
the events set forth above will not be available to any party if the event
which gave rise to such termination right is a result of or arose in
connection with any action or inaction of the party seeking to terminate taken
or not taken in breach of the terms of the Merger Agreement.
Fees and Expenses. Except as described in the next sentence, whether or not
the Merger is consummated, the Company and Purchaser have agreed to pay their
own respective costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby. The Company has agreed in
the Merger Agreement that, if the Merger Agreement is terminated pursuant to:
(a) clause (b)(ii) set forth above under "Termination" and at the time of such
termination any person, entity or group (as defined in Section 13(d)(3) of the
Exchange Act) (other than Sub or Purchaser) shall have become the beneficial
owner of more than 20% of the outstanding Shares (with appropriate adjustments
for reclassifications of capital stock, stock dividends, stock splits, reverse
stock splits and similar events) and such person, entity or group thereafter
enters into a definitive agreement with the Company to accept an Acquisition
Proposal at any time on or prior to the date which is six months after the
termination of the Merger Agreement and such transaction is thereafter
consummated; (b) clause c(i) or (d) set forth above under "Termination"; (c)
clause (c)(ii) set forth above under "Termination" and at the time of
termination of the Merger Agreement, the Tender Agreement shall have expired
in accordance with Section 2 thereof and the Company shall enter into a
definitive agreement to accept an Acquisition Proposal at
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any time on or prior to the date which is six months after the termination of
the Merger Agreement; (d) clause (c)(iii) set forth above under "Termination"
and such failure was the result of any action taken by or on behalf of the
Company giving rise to an Event specified in clause (a), (b), (c), (d), (f),
(g) or (i) above under "Conditions to the Offer" and such action was in breach
of the Company's obligations under the Merger Agreement and with respect to an
Event specified in paragraph (g), if such action was taken by the Company for
the purpose of causing Purchaser to terminate the Merger Agreement, then the
Company shall pay to Purchaser the sum of $40 million. The Merger Agreement
provides that such payment will be made as promptly as practicable but in no
event later than (i) in the case of clauses (b) and (d) of this paragraph, two
business days following termination of the Merger Agreement; (ii) in the case
of clause (a), upon consummation of such Acquisition Proposal and (iii) in the
case of clause (c), upon entering into a definitive agreement to accept such
Acquisition Proposal.
4. AGREEMENTS WITH WARBURG
Warburg Standstill Agreement. The Company entered into a Standstill Agreement
with Warburg, Pincus Capital Company, L.P., dated November 30, 1988 (the
"Warburg Standstill Agreement"), as described on pages 11-12 of the 1995 Proxy
Statement, a copy of which is filed as Exhibit 2 hereto and is incorporated
herein by reference. Pursuant to the terms of the Warburg Standstill Agreement,
Warburg has the right to nominate three persons (or fewer, depending upon its
equity ownership in the Company) to the Company's Board of Directors. Of the
Directors nominated by Warburg, Mr. John Vogelstein is Vice Chairman and
President, and Mr. Christopher W. Brody is Managing Director of E.M. Warburg,
Pincus & Co., an affiliate of Warburg. The third Director of the Company
nominated by Warburg is Simon D. Strauss, a consultant to the mining industry
and retired Vice Chairman of ASARCO Incorporated, a primary copper producer. In
addition, the Chairman of the Board of Directors of the Company, Mr. Donald J.
Donahue, is also a director of several Counselors Funds, whose investment
manager is an affiliate of E.M. Warburg, Pincus & Co.
The Warburg Standstill Agreement provides, among other things, that Warburg
is only permitted to sell or otherwise transfer its capital stock in connection
with a Business Combination, if the Company has obtained a fairness opinion
from two nationally recognized investment bankers. The Board of Directors of
the Company and Warburg have agreed to waive the requirement that the Company
obtain a fairness opinion from two nationally recognized investment bankers. A
copy of such Agreement is filed as Exhibit 8 hereto, and incorporated herein by
reference.
Tender Agreement. As a condition to entering into the transaction, BHP
required, and Warburg subject to the approval of the Company's Board of
Directors under the Warburg Standstill Agreement, agreed to enter into, the
Tender Agreement, dated as of November 30, 1995, a copy of which is filed as
Exhibit 3 hereto and is incorporated herein by reference. Pursuant to the terms
of the Warburg Standstill Agreement, the Tender Agreement must be approved by a
majority of the Independent Directors (as defined in the Warburg Standstill
Agreement). Such approval was granted on November 30, 1995.
Pursuant to the Tender Agreement, Warburg has agreed that it will validly
tender pursuant to the Offer, and not withdraw, all of its Shares. Warburg has
further agreed pursuant to the Tender Agreement that, during the time the
Tender Agreement is in effect, at any meeting of the stockholders of the
Company, Warburg shall (a) vote the Shares in favor of the Merger; (b) vote the
Shares against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (c) vote
the Shares against any action or agreement (other than the Merger Agreement or
the transactions contemplated thereby) that would impede, interfere with,
delay, postpone or attempt to discourage the Merger or the Offer, including,
but not limited to: (i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company and
its subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company and its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; or (iii) any change in the
Company's management or in the board of directors of the Company, except as
otherwise agreed to in writing by BHP.
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Warburg has further agreed not to (i) sell, transfer, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any of the Shares or (ii)
grant any proxies, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares or (iii) take any action that
would make any representation or warranty of Warburg contained in the Tender
Agreement untrue or incorrect or have the effect of preventing or disabling
Warburg from performing its obligations under the Tender Agreement while such
Agreement is in effect except as contemplated therein.
The Tender Agreement will terminate upon the first to occur of (a) the
Effective Time, (b) the termination of the Merger Agreement in accordance with
its terms, (c) the Board of Directors of the Company having withdrawn its
approval or recommendation of the Offer or the Merger, (d) the Board of
Directors of the Company having modified its approval of the Offer or the
Merger in a manner adverse to BHP, and (e) written notice of termination of
the Tender Agreement by BHP to Warburg.
5. CONFIDENTIALITY AGREEMENT
BHP and the Company entered into a confidentiality agreement, dated October
30, 1995, as amended November 30, 1995 (the "Confidentiality Agreement"), a
copy of which is filed as Exhibit 4 hereto and is incorporated herein by
reference. Pursuant to the Confidentiality Agreement, BHP agreed, among other
things, that it would keep confidential certain information ("Evaluation
Material") furnished to it by the Company and use the Evaluation Material
solely for the purpose of evaluating a business transaction between BHP and
the Company.
The Confidentiality Agreement provides that until October 30, 1996 (the
"Standstill Period"), BHP and its affiliates will not, directly or indirectly,
without the prior consent of the Company's Board of Directors: acquire or
agree, offer, seek or propose to acquire (or request permission to do so),
ownership of any of the Company's assets or businesses or any securities
issued by the Company, or any rights or options to acquire such ownership (an
"Acquisition Transaction"), or seek or propose to influence or control the
Company's management or the Company's policies (or request permission to do
so), or enter into any discussions, negotiations, arrangements or
understanding with any third party with respect to any of the foregoing (or
request permission to do so).
If prior to the expiration or termination of the Standstill Period (i) the
Company enters into a definitive agreement providing for an Acquisition
Transaction with a party other than BHP or its affiliates, (ii) a third party
commences a tender or exchange offer for more than 50% of the Company's common
stock and the Company's Board of Directors recommends that the Company's
common stockholders tender their shares in such tender or exchange offer (any
of the foregoing, an "Alternative Transaction"), the restrictions applicable
during the Standstill Period shall not be applicable with respect to any
Acquisition Transaction proposed by BHP or its affiliates, provided that such
proposed Acquisition Transaction provides for (i) the purchase of, or offer to
purchase, all outstanding shares of common stock of the Company for cash, and
(ii) a purchase price per share in excess of the price proposed to be paid
and/or other value proposed to be received by the Company's common
stockholders in the Alternative Transaction. If prior to the expiration or
termination of the Standstill Period the Merger Agreement shall have been
terminated without the Offer having been consummated, and a third party makes
a proposal relating to an Acquisition Transaction, then the restrictions
applicable during the Standstill Period shall not be applicable with respect
to any Acquisition Transaction proposed by BHP or its affiliates, provided
that such proposed Acquisition Transaction is at least the equivalent of such
third party's proposal.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
The Board of Directors has unanimously determined that the consideration to
be paid for each Share and Preferred Share in the Offer and the Merger is fair
to the stockholders of the Company and that the Offer and the Merger are
otherwise fair to and in the best interests of the Company and its
stockholders, has approved and adopted the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger,
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and recommends that all holders of Shares and Preferred Shares accept the
Offer and tender their Shares and Preferred Shares pursuant to the Offer.
A letter to the Company's stockholders communicating the Board's
recommendation and a press release announcing the Merger Agreement and related
transactions are filed herewith as Exhibits 5 and 6, respectively, and are
incorporated herein by reference.
(b) Background Reasons for the Board's Recommendation.
1. BACKGROUND.
From time to time since 1993, members of the Company's board of directors
had intermittent contacts with senior executives of BHP, none of which
contacts involved or resulted in any specific proposals or substantive
discussions regarding an acquisition transaction. In 1993, the Company and BHP
prepared a joint bid to purchase a one-half interest in the El Abra mining
property, which was being privatized by the government of Chile. The parties
were not successful in their bid. In 1994, the Company and BHP discussed
several possible joint ventures, none of which were pursued.
In June 1995, Mr. Jerry Ellis, the chief executive officer of BHP Minerals,
a subsidiary of BHP, had preliminary discussions with Mr. J. Burgess Winter,
the Company's Chief Executive Officer, President, and a member of the Board of
Directors, to express an interest in BHP acquiring the Company, although no
specific proposal was made. On July 12, 1995, Mr. Donald J. Donahue, the
Chairman of the Company's Board of Directors, Mr. John Vogelstein, a member of
the Company's Board of Directors and Vice Chairman of the Board and President
of E.M. Warburg, Pincus & Co., Inc., the parent of the Company's largest
stockholder, and Mr. Winter met with Mr. Ellis. At that meeting, Mr. Ellis
indicated that BHP was not interested in acquiring the Company at price ranges
that the Company and its largest shareholder indicated would be acceptable.
The parties discontinued their discussions.
In subsequent contacts with representatives of the Company commencing in
August 1995, representatives of CS First Boston, BHP's financial advisor,
indicated that BHP would be interested in resuming discussions relating to an
acquisition of the Company by BHP. In early September 1995, representatives of
CS First Boston contacted Mr. Vogelstein by phone to arrange a meeting.
On September 29, 1995, representatives of CS First Boston indicated to
Messrs. Brody, a member of the Company's Board of Directors and a Managing
Director of E.M. Warburg, Pincus & Co., Inc., Vogelstein and Winter that,
subject to a due diligence review and approval of its board of directors, BHP
would consider making a proposal to acquire the Company. Various transaction
terms were discussed at such time. BHP indicated that no firm proposal could
be made until it had been approved by BHP's board of directors which was
scheduled to meet on November 30 and December 1, 1995 (Australia time).
Messrs. Vogelstein and Winter subsequently met with Messrs. B.T. Loton,
Chairman of BHP, J.B. Prescott, Managing Director and Chief Executive Officer
of BHP and Ellis on October 18, 1995, to discuss a potential transaction.
At the request of management of BHP, from October 29 through 31, 1995,
Messrs. Winters and Vogelstein together with Bradford A. Mills, an Executive
Vice-President of the Company, met in Australia with Mr. John Prescott, Mr.
Jerry Ellis, and other senior officers of BHP to discuss the possibility of an
acquisition of the Company by BHP. As a result of those meetings, BHP
indicated that it was willing to proceed with discussions and conduct due
diligence.
On October 30, 1995, the Company and BHP entered into the Confidentiality
Agreement (see Item 3(b)5 above), pursuant to which BHP agreed to keep
confidential all information provided to it in connection with an evaluation
of a possible transaction with the Company. BHP also agreed that for a period
of one year from the date of the Confidentiality Agreement, except with the
written consent of the Company or in the case of certain competing offers, it
would not seek to acquire beneficial ownership of any of the Company's
securities or to influence the Company's management.
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On November 2, 1995, the Company retained Goldman, Sachs & Co. ("Goldman
Sachs") to advise the Company on the fairness of the consideration to be
received in any potential transaction with BHP.
From November 3, 1995 through November 15, 1995, BHP conducted due diligence
of the business, properties and operations of the Company. As part of the due
diligence examination, the Company provided BHP and its representatives with
non-public financial and legal information, and senior management of the
Company met with BHP and its representatives to provide them with additional
information.
From November 6, 1995 through November 30, 1995, the Company and BHP
discussed the terms of a draft Agreement and Plan of Merger relating to the
proposed transaction.
On November 16, 1995, representatives of CS First Boston met with Messrs.
Vogelstein and Brody, and informed them that BHP, based on its due diligence,
would consider an acquisition at a price not in excess of $28 per Share, and an
equivalent price (on an as-converted basis) for the Preferred Shares. Messrs.
Donahue and Winter then met with Mr. Ellis who confirmed the information
conveyed by CS First Boston.
On November 19, 1995, Mr. Winter called Mr. Prescott to discuss the matter
further and Mr. Prescott confirmed that an offer by BHP would not exceed $28
per Share if an agreement could ultimately be reached.
On November 21, 1995, the Company's Board of Directors held a special
meeting, primarily, to apprise and update the Board of the discussions with
BHP. At the meeting, presentations were made by senior executives of the
Company summarizing the course of discussions with BHP to such date, Company
counsel and Goldman Sachs. At the conclusion of the meeting, the Board of
Directors authorized the senior executives of the Company to continue
discussions with BHP.
From November 24 through November 30, 1995, the Company and BHP continued
negotiation of the terms of the Merger Agreement.
In the afternoon of November 30, 1995, the Company was informed that the
board of directors of BHP on the morning of December 1, 1995 Australian time
(the afternoon of November 30, 1995 New York time) had approved an offer for
all of the outstanding capital stock of the Company at a price, in cash, of
$28.00 per Share, $96.544 per share of Series D Preferred Stock, and 100.646
per share of Series E Preferred Stock. Starting in the late afternoon of
November 30, 1995, the Company's Board of Directors met to consider BHP's
offer. The terms of the proposed transaction and the related Merger Agreement
were presented to and reviewed by the Company's Board of Directors.
Representatives of Goldman Sachs and legal counsel made presentations to the
Board of Directors. Goldman Sachs delivered its opinion as to the fairness of
the cash consideration offered by BHP to the public stockholders of the
Company.
After discussion, the Company's Board of Directors unanimously decided to
proceed with the sale of the Company and to accept BHP's offer for the reasons
described below, and approved the Merger Agreement and the transactions
contemplated thereby and unanimously recommended that holders of Shares and
Preferred Shares accept the Offer and tender their Shares pursuant thereto. The
Board of Directors also consented to Warburg entering into the Tender
Agreement, which was a condition of the BHP offer, and unanimously voted to
waive the restrictions imposed by Section 203 of the Delaware General
Corporation Law in connection with the transactions contemplated by the Merger
Agreement and the disinterested directors approved the Offer and the Merger
pursuant to Section 10-1221 of the Arizona Revised Statutes.
The Company and BHP entered into the Merger Agreement on the night of
November 30, 1995 and issued a press release announcing that they had entered
into the Merger Agreement.
2. REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE BOARD
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders of Shares and Preferred Shares tender their
Shares and Preferred Shares pursuant to the Offer, the Board of Directors
considered a number of factors, including:
1. The financial and other terms and conditions of the Offer, the Merger
and the Merger Agreement.
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2. The presentation of Goldman Sachs at the November 30, 1995 Board of
Directors' meeting and the opinion of Goldman Sachs (the "Opinion") to the
effect that, as of the date of the Merger Agreement, the $28.00 in cash per
Share, the $96.544 in cash per share of Series D Preferred Stock and the
$100.646 in cash per share of Series E Preferred Stock to be received by
each of the holders of Shares and Preferred Shares, respectively, in the
Offer and the Merger is fair to such holders. The full text of the written
opinion of Goldman Sachs, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with the
opinion, is attached hereto as Exhibit 7 and is incorporated herein by
reference. Holders of Shares and Preferred Shares are urged to, and should,
read such Opinion in its entirety.
3. The fact that the structure of the acquisition of the Company by BHP
as provided for in the Merger Agreement involves a cash tender offer for
all outstanding Shares and Preferred Shares to be commenced within five
business days of the Merger Agreement to be followed as promptly as
practicable by a merger for the same consideration, thereby enabling the
Company's stockholders to obtain cash for their Shares and Preferred Shares
at the earliest possible time.
4. The fact that the obligations of BHP, Sub and Purchaser to consummate
the Offer and the Merger pursuant to the terms of the Merger Agreement are
not conditioned upon financing.
5. The fact that Warburg, the beneficial owner of approximately 35% of
the outstanding Shares (approximately 26% of the fully diluted Shares), was
willing, subject to the approval of the Board of Directors pursuant to the
Warburg Standstill Agreement, to enter into the Tender Agreement pursuant
to which Warburg agreed to tender all of its Shares in the Offer and to
vote its Shares in favor of the Merger, and would be treated the same as
all other stockholders in the Offer and the Merger.
6. The historical market price of, and recent trading activity in, the
Shares, the Series D Preferred Stock, and the Series E Preferred Stock,
particularly the fact that the Offer and the Merger will enable the
stockholders of the Company to realize a premium of approximately 31.0%,
30.7% and 28.6% over the closing price of the Shares, the Series D
Preferred Stock, and the Series E Preferred Stock, respectively, on the
last trading day prior to the public announcement on November 30, 1995 of
the Merger Agreement and a premium of approximately 58.2%, 51.1%, and
51.3%, respectively, over the average closing price of the Shares, the
Series D Preferred Stock, and the Series E Preferred Stock, for thirty (30)
days during which such securities traded prior to such announcement;
information with regard to the financial condition, results of operations,
competitive position, business and prospects of the Company, as reflected
in the Company's projections, current economic and market conditions
(including current conditions in the industry in which the Company is
engaged) and the going concern value of the Company; the Board did not
consider the liquidation of the Company as a viable course of action, and,
therefore, no appraisal or liquidation values were sought for purposes of
evaluating the Offer and the Merger.
7. The possible alternatives to the Offer and the Merger, including,
without limitation, continuing to operate the Company as an independent
entity and the risks associated therewith, including, without limitation,
the effect of changing commodity prices. In addition, the Board of
Directors was advised of various contacts the Company had received from
third parties, and of the fact that no offers were received other than from
BHP. After considering these contacts and the other participants in its
industry, the Board of Directors concluded that BHP was the best possible
purchaser for the Company.
8. The fact that the terms of the Merger Agreement and the Tender
Agreement should not unduly discourage other third parties from making bona
fide proposals subsequent to signing the Merger Agreement and, if any such
proposal were made, the Company, in the exercise of its fiduciary duties,
could determine to provide information to and engage in negotiations with
any other third party.
9. The familiarity of the Board of Directors with the business, results
of operations, properties and financial condition of the Company and the
nature of the industry in which it operates.
10. The regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
16
<PAGE>
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed their position and recommendation as being based on the
totality of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated November 21, 1995 (the "Engagement
Letter"), the Company engaged Goldman Sachs to undertake a study to enable it
to render its opinion with respect to the cash consideration to be received
for each Share and Preferred Share in connection with the Merger. Pursuant to
the terms of the Engagement Letter, the Company paid Goldman Sachs $500,000
upon signing the Engagement Letter and has agreed to pay Goldman Sachs
$1,500,000 upon commencement of the Offer and $3,000,000 upon, and subject to,
the consummation of the Merger. The Company has agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorney's fees,
and to indemnify Goldman Sachs against certain liabilities, including certain
liabilities under the federal securities laws.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, except as follows:
(i) The approval of the Tender Agreement as described in Item 3(b).
(ii) The issuance of Shares upon exercise of outstanding options and
warrants.
(iii) The following grants of stock options were made to executive
officers on October 13, 1995:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER OPTIONS GRANTED
----------------- ---------------
<S> <C>
Andrew A. Brodkey........................... 7,500
Kenneth L. Browne........................... 20,000
Marshall H. Campbell........................ 10,000
Francisco E. Durazo......................... 20,000
Marc W. Ingelbinck.......................... 15,000
Bradford A. Mills........................... 50,000
Douglas J. Purdom........................... 35,000
Harry C. Smith.............................. 35,000
J. Burgess Winter........................... 125,000
</TABLE>
(iv) John W. Goth, a director of the Company, acquired 1,000 Shares on
October 31, 1995, at a price of $17 per share.
(v) On November 21, 1995, Marshall H. Campbell was granted options for
5,000 Shares effective as of October 13, 1995.
(vi) On November 28, 1995, Warburg exercised warrants, which were
scheduled to expire on November 30, 1995, for 892,473 Shares, at an
exercise price of $8.50 per Share.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares beneficially owned by them (other than Shares issuable
upon exercise of stock options and Shares that may be donated to charitable
organizations). See Item 3(b)5 above regarding the agreement of Warburg to
tender its Shares in the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or
17
<PAGE>
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Agreement and Plan of Merger, dated as of November 30, 1995, among
The Broken Hill Proprietary Company Limited, BHP Holdings (USA)
Inc., BHP Sub Inc. and Magma Copper Company.
Exhibit 2. 1995 Magma Copper Company Proxy Statement (pp. 8-19).
Exhibit 3. Tender Agreement by and between The Broken Hill Proprietary Company
Limited and Warburg, Pincus Capital Company, L.P., dated as of
November 30, 1995.
Exhibit 4. Confidentiality Agreement, dated October 30, 1995, between The
Broken Hill Proprietary Company Limited and Magma Copper Company,
as amended November 30, 1995.
Exhibit 5. Letter of the Board of Directors of Magma Copper Company addressed
to the stockholders of Magma Copper Company, dated as of December
5, 1995.*
Exhibit 6. Joint Press Release of Magma Copper Company and BHP announcing the
Merger Agreement.
Exhibit 7. Opinion of Goldman Sachs to the Board of Directors of Magma Copper
Company, dated November 30, 1995.*
Exhibit 8. Agreement between Warburg, Pincus Capital Company, L.P. and the
Company, dated as of November 30, 1995.
Exhibit 9. Form of Employment Agreement between the Company and certain
officers.
Exhibit 10. Form of First Amendment to Magma Copper Company Special Executive
Supplemental Benefit Plan.
Exhibit 11. Intentionally omitted.
Exhibit 12. Form of First Amendment to Magma Copper Company 1993 Stock Option
and Stock Award Plan.
Exhibit 13. Form of Second Amendment to Magma Copper Company 1989 Stock Option
and Stock Award Plan.
Exhibit 14. Form of Third Amendment to Magma Copper Company 1987 Stock Option
and Stock Award Plan.
Exhibit 15. Form of First Amendment to Magma Copper Company Chief Executive
Officer Supplemental Retirement Plan.
Exhibit 16. Form of First Amendment to Magma Copper Company Trust Fund for
Executive Benefits.
Exhibit 17. Form of First Amendment to Magma Copper Company 1993 Long Term
Incentive Plan.
Exhibit 18. Form of Fourth Amendment to Magma Copper Company Special Executive
Deferred Compensation Plan.
Exhibit 19. Form of Fifth Amendment to the Magma Copper Company Special
Executive Deferred Compensation Plan.
- --------
* Included in copies mailed to holders of Shares and Preferred Shares.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 5, 1995
Magma Copper Company
By: /s/ J. Burgess Winter
___________________________________
Name: J. Burgess Winter
Title:President and Chief
Executive Officer
19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBITS PAGE NOS.
-------- ----------
<S> <C> <C>
Exhibit 1. Agreement and Plan of Merger, dated as of November 30, 1995,
among The Broken Hill Proprietary Company Limited, BHP
Holdings (USA) Inc., BHP Sub Inc. and Magma Copper Company.
Exhibit 2. 1995 Magma Copper Company Proxy Statement (pp. 8-19).
Exhibit 3. Tender Agreement by and between The Broken Hill Proprietary
Company Limited and Warburg, Pincus Capital Company, L.P.,
dated as of November 30, 1995.
Exhibit 4. Confidentiality Agreement, dated October 30, 1995, between
The Broken Hill Proprietary Company Limited and Magma Copper
Company, as amended November 30, 1995.
Exhibit 5. Letter of the Board of Directors of Magma Copper Company
addressed to the stockholders of Magma Copper Company, dated
as of December 5, 1995.*
Exhibit 6. Joint Press Release of Magma Copper Company and BHP
announcing the Merger Agreement.
Exhibit 7. Opinion of Goldman Sachs to the Board of Directors of Magma
Copper Company, dated November 30, 1995.*
Exhibit 8. Agreement between Warburg, Pincus Capital Company, L.P. and
the Company, dated as of November 30, 1995.
Exhibit 9. Form of Employment Agreement between the Company and certain
officers.
Exhibit 10. Form of First Amendment to Magma Copper Company Special
Executive Supplemental Benefit Plan.
Exhibit 11. Intentionally omitted.
Exhibit 12. Form of First Amendment to Magma Copper Company 1993 Stock
Option and Stock Award Plan.
Exhibit 13. Form of Second Amendment to Magma Copper Company 1989 Stock
Option and Stock Award Plan.
Exhibit 14. Form of Third Amendment to Magma Copper Company 1987 Stock
Option and Stock Award Plan.
Exhibit 15. Form of First Amendment to Magma Copper Company Chief
Executive Officer Supplemental Retirement Plan.
Exhibit 16. Form of First Amendment to Magma Copper Company Trust Fund
for Executive Benefits.
Exhibit 17. Form of First Amendment to Magma Copper Company 1993 Long
Term Incentive Plan.
Exhibit 18. Form of Fourth Amendment to Magma Copper Company Special
Executive Deferred Compensation Plan.
Exhibit 19. Form of Fifth Amendment to the Magma Copper Company Special
Executive Deferred Compensation Plan.
</TABLE>
- --------
* Included in copies mailed to holders of Shares and Preferred Shares.
<PAGE>
EXHIBIT 99.1
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
THE BROKEN HILL PROPRIETARY
COMPANY LIMITED,
BHP HOLDINGS (USA) INC.,
BHP SUB INC.
AND
MAGMA COPPER COMPANY
Dated as of
November 30, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. ARTICLE I
The Offer
1.1 The Offer...................................... 1
1.2 Company Action................................. 3
1.3 Directors...................................... 4
II. ARTICLE II
The Merger
2.1 The Merger..................................... 5
2.2 Effect of the Merger........................... 5
2.3 Consummation of the Merger..................... 6
2.4 Certificate of Incorporation and By-Laws;
Directors and Officers......................... 6
2.5 Conversion of Securities....................... 6
2.6 Stock Options.................................. 7
2.7 Closing of Company Transfer Books.............. 8
2.8 Exchange of Certificates....................... 8
2.9 Funding of Paying Agent........................ 9
2.10 Taking of Necessary Action; Further Action..... 10
2.11 Dissenting Shares.............................. 10
2.12 Merger Without Meeting of Stockholders......... 11
2.13 No Further Ownership Rights in Common or
Preferred Stock................................ 11
III. ARTICLE III
Representations and Warranties of
BHP, Sub and Purchaser
3.1 Organization and Qualification................. 11
3.2 Authority Relative to this Agreement........... 12
3.3 Financing Arrangements......................... 13
3.4 Ownership of Shares and Preferred Shares....... 13
IV. ARTICLE IV
Representations and Warranties of the Company
4.1 Organization and Qualification................. 13
4.2 Subsidiaries................................... 13
4.3 Capitalization................................. 14
4.4 Authority Relative to this Agreement........... 15
4.5 Commission Filings............................. 16
4.6 Litigation..................................... 18
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4.7 Employees and Labor............................ 18
4.8 Taxes and Tax Returns.......................... 19
4.9 ERISA.......................................... 19
4.10 Stockholder Vote Required...................... 20
4.11 Compliance with Laws........................... 20
4.12 Properties; Reserves; Water Rights............. 21
4.13 Environmental Matters.......................... 23
4.14 License Agreements............................. 24
4.15 Insurance...................................... 24
V. ARTICLE V
Conduct of Business Pending the Merger
5.1 Conduct of Business by the Company Pending
the Merger..................................... 25
VI. ARTICLE VI
Additional Agreements
6.1 Action of Stockholders......................... 27
6.2 Proxy Statement................................ 27
6.3 Expenses....................................... 28
6.4 Additional Agreements.......................... 28
6.5 Limitation on Negotiations..................... 29
6.6 Notification of Certain Matters................ 30
6.7 Access to Information.......................... 30
6.8 Stockholder Claims............................. 30
6.9 Treatment of Employee Compensation and
Benefits....................................... 31
6.10 Indemnification Rights......................... 31
6.11 BHP Guarantee.................................. 33
VII. ARTICLE VII
Conditions
7.1 Conditions to Obligations of Each Party to
Effect the Merger.............................. 33
VIII. ARTICLE VIII
Termination, Amendment and Waiver
8.1 Termination.................................... 34
8.2 Amendment...................................... 35
8.3 Fees Upon Termination.......................... 35
8.4 Effect of Termination.......................... 36
8.5 Waiver......................................... 36
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
IX. ARTICLE IX
General Provisions
9.1 Brokers........................................ 37
9.2 Public Statements.............................. 37
9.3 Notices........................................ 37
9.4 Interpretation................................. 38
9.5 Severability................................... 38
9.6 Miscellaneous.................................. 39
9.7 Counterparts................................... 39
9.8 Survival....................................... 39
9.9 Third Party Beneficiaries...................... 39
Annex I
</TABLE>
- 3 -
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 30, 1995 (the
"Agreement"), by and among The Broken Hill Proprietary Company Limited, a
Victoria, Australia corporation ("BHP"), BHP Holdings (USA) Inc., a Delaware
corporation and subsidiary of BHP ("Sub"), BHP Sub Inc., a Delaware corporation
and a subsidiary of Sub ("Purchaser"), and Magma Copper Company, a Delaware
corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the respective Boards of Directors of BHP, Sub, Purchaser and
the Company have approved the acquisition of the Company by Purchaser pursuant
to a tender offer (the "Offer") by Purchaser for (i) all of the outstanding
shares of Common Stock, par value $0.01, of the Company, at a price of $28.00 in
cash per Share (the "Shares"); (ii) all of the outstanding shares of 5 5/8%
Cumulative Convertible Preferred Stock, Series D, par value $0.01, of the
Company, at a price of $96.544 in cash per share (the "Series D Preferred
Shares"), and (iii) all of the outstanding shares of 6% Cumulative Convertible
Preferred Stock, Series E, par value $0.01, of the Company, at a price of
$100.646 in cash per Share (the "Series E Preferred Shares", and together with
the Series D Preferred Shares, the "Preferred Shares") followed by a merger (the
"Merger") of Purchaser with and into the Company, all upon the terms and subject
to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants herein contained, the parties hereby agree
as follows:
ARTICLE I
THE OFFER
1.1 The Offer.
---------
(a) Purchaser shall commence within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended, including the rules and
regulations promulgated thereunder (the "Exchange Act"), the Offer within five
business days (as such term is defined in Rule 14e-1 under the Exchange Act (a
"Business Day")) after the date of this Agreement. The Offer, for all of the
outstanding Shares and Preferred Shares, will be
<PAGE>
subject only to a number of Shares and Preferred Shares being validly tendered
prior to the expiration of the Offer and not withdrawn which would result in
Purchaser's ownership of such number of Shares and Preferred Shares as
represents at least a majority of the outstanding Shares of the Company on a
fully diluted basis assuming conversion of all outstanding options and
securities convertible into Shares including Preferred Shares and Warrants (as
defined in Section 4.3(a)), if any, of the Company (the "Minimum Condition") and
satisfaction or waiver of the further conditions set forth in Annex I, any of
which conditions may be waived in the sole discretion of Purchaser except that
the Minimum Condition may only be waived with the consent of the Board of
Directors of the Company. Assuming all of the conditions to consummation of the
Offer are satisfied, Sub and Purchaser shall consummate the Offer as promptly as
possible.
(b) Upon the terms and subject to the conditions of the Offer,
Purchaser shall purchase all Shares and Preferred Shares which are validly
tendered on or prior to the expiration of the Offer and not timely withdrawn.
Purchaser may, at any time, transfer or assign to one or more corporations,
which are direct or indirect subsidiaries of BHP, the right to purchase all or
any portion of the Shares and Preferred Shares tendered pursuant to the Offer,
but any such transfer or assignment shall not relieve Purchaser of its
obligations under the Offer or prejudice the rights of tendering stockholders to
receive payment for Shares or Preferred Shares properly tendered and accepted
for payment.
(c) The Offer shall remain open (except upon the occurrence of the
events specified in Section 8.1(c)(i), 8.1(a) and 8.1(d)) until January 4, 1996
(the "Expiration Date"), unless Purchaser shall have extended the period of time
for which the Offer is open as may be required by this Agreement, or applicable
law, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by Purchaser, shall expire). On or
prior to the date the Offer is commenced, Purchaser shall file with the
Securities and Exchange Commission (the "Commission") a Tender Offer Statement
on Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer, that shall comply in all material
respects with the provisions of such Schedule and all applicable Federal
securities laws, and shall
- 2 -
<PAGE>
contain (including as an exhibit) or incorporate by reference the Offer (or
portions thereof) and forms of the related letter of transmittal and summary
advertisement (the "Tender Offer Documents"). Purchaser shall not, without the
prior written consent of the Board of Directors of the Company, (i) decrease or
change the form of the consideration payable in the Offer, (ii) reduce the
number of Shares sought pursuant to the Offer, (iii) amend the conditions or
impose additional conditions to the Offer, (iv) amend any term of the Offer or
(v) waive the Minimum Condition. Subject to the last sentence of paragraph (a),
Purchaser (i) may at any time, in its sole discretion, extend the Offer and (ii)
shall extend the Offer upon the occurrence of the Events (as such term is
defined in Annex I) to the extent contemplated by the provisions of Annex I.
1.2 Company Action. The Company hereby consents to the Offer and
--------------
represents that its Board of Directors has determined by a unanimous vote that
the Offer and the Merger are fair to, and in the best interests of, the Company
and its stockholders, has approved the Offer and the Merger, has approved and
adopted this Agreement, and has resolved to recommend acceptance of the Offer
to, and adoption of this Agreement by, the Company's stockholders. The Company
further represents that Goldman, Sachs & Co. has opined to the Board of
Directors of the Company that, as of November 30, 1995, the consideration in
cash to be received by holders of Shares and Preferred Shares pursuant to the
Offer and the Merger is fair to such holders. In addition, the Independent
Directors of the Company, as such term is defined in the Standstill Agreement,
dated November 30, 1988, between Warburg Pincus Capital Company, L.P. ("WP") and
the Company (the "Standstill Agreement"), have approved the transactions
contemplated by the Tender Agreement, dated the date hereof, between WP and BHP
(the "Tender Agreement") in accordance with the terms of the Standstill
Agreement. As soon as practicable after the date hereof, the Company shall file
with the Commission but in no event prior to such date as the Purchaser has
filed the Tender Offer Documents with the Commission and mail to holders of
record and beneficial owners of Shares and Preferred Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9"),
which shall reflect such determination and recommendation. The Company shall
from time to time furnish Purchaser with such additional information, if any,
including updated or additional
- 3 -
<PAGE>
lists of stockholders, mailing labels and lists of securities positions, and
other assistance as the Purchaser may reasonably request in order to be able to
communicate the Offer to the stockholders of the Company .
1.3 Directors. Promptly upon the purchase by Purchaser of such number
---------
of Shares and Preferred Shares as represents at least a majority of the
outstanding Shares (on a fully diluted basis) and from time to time thereafter,
Purchaser shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as will give
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors of the Company equal to the product of
(a) the number of directors on the Board of Directors of the Company (after
-
giving effect to the appointment of such directors) and (b) the percentage that
-
such number of Shares so purchased bears to the number of Shares outstanding,
and the Company shall, upon request by Purchaser, promptly (i) increase the size
of the Board of Directors of the Company to the extent permitted by its Restated
Certificate of Incorporation and By-Laws (and amend the Restated Certificate of
Incorporation and By-Laws, if so required, to increase the size of the Board of
Directors to allow for such additional directors); and/or (ii) take all steps
necessary and appropriate to secure the resignations of such number of directors
as is necessary to enable Purchaser's designees to be elected to the Board of
Directors of the Company (and shall hold a Board meeting for such purpose)
(provided, however, that the Company shall not have fewer than 3 Continuing
- --------- -------
Directors (as such term is defined in the Restated Certificate of Incorporation)
of whom at least two are Independent Directors (as such term is defined in the
Standstill Agreement)); and (iii) shall cause Purchaser's designees to be so
elected. At any time after the execution hereof, at the request of Purchaser,
the Company shall promptly take, at its expense, all action necessary to effect
any such election, including mailing to its stockholders the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in form and substance reasonably satisfactory to Purchaser and its
counsel. Sub and Purchaser shall supply the Company and be solely responsible
for any information included in the filings with the Commission with respect to
themselves and their nominees, officers, directors and affiliates required by
said Section 14(f) and Rule 14f-1. Notwithstanding anything in this Agreement
to the contrary, prior to the Effective Time, in addition to any other approval
of the
- 4 -
<PAGE>
directors required by applicable law or the Restated Certificate of
Incorporation or By-Laws of the Company, the affirmative vote of a majority of
the Continuing Directors shall be required (i) to amend or terminate this
Agreement by the Company, (ii) to waive any of the Company's rights or to
exercise any of its remedies hereunder, (iii) to extend the time for performance
of Purchaser's obligations hereunder or (iv) to take any other action by the
Company in connection with this Agreement required to be taken by the Board of
Directors of the Company, whether or not such Continuing Directors constitute a
quorum.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.3), in
----------
accordance with this Agreement and the General Corporation Law of the State of
Delaware, as amended (the "Delaware Law"), Purchaser shall be merged with and
into the Company, the separate existence of Purchaser (except as may be
continued by operation of law) shall cease, and the Company shall continue as
the surviving corporation. The Company, in its capacity as the corporation
surviving the Merger, sometimes is referred to herein as the "Surviving
Corporation."
2.2 Effect of the Merger. The Surviving Corporation shall possess all
--------------------
the rights, privileges, powers and franchises, of a public as well as a private
nature, and be subject to all the restrictions, disabilities and duties, of each
of Purchaser and the Company (collectively, the "Constituent Corporations"); the
Surviving Corporation shall be vested with the rights, privileges, powers and
franchises, all properties and assets and all debts due on whatever account, and
all other things in action or belonging to, and all and every other interest of,
each of the Constituent Corporations; and all debts, liabilities and duties of
each of the Constituent Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it, all with the
effect set forth in Section 259 of the Delaware Law.
2.3 Consummation of the Merger. As soon as is practicable after the
--------------------------
satisfaction or waiver of the conditions set forth in Article VII, and in no
event later
- 5 -
<PAGE>
than five business days after such satisfaction or waiver, the parties to this
Agreement will cause a Certificate of Merger to be filed with the Secretary of
State of the State of Delaware, in such form as required by, and executed in
accordance with, the relevant provisions of the Delaware Law, including, if
applicable, the procedures permitted by Section 253 of the Delaware Law (in
which case references herein to the "Certificate of Merger" shall refer instead
to the "Certificate of Ownership and Merger"). The Merger shall be effective at
such time as the Certificate of Merger is duly filed with the Secretary of State
of the State of Delaware or at such later time as specified in the Certificate
of Merger (the "Effective Time").
2.4 Certificate of Incorporation and By-Laws; Directors and Officers.
----------------------------------------------------------------
The Restated Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the Surviving Corporation immediately after the
Effective Time. The By-Laws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving Corporation immediately
after the Effective Time and the directors of the Company shall submit their
resignations at the Effective Time. The directors of Purchaser holding office
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation immediately after the Effective Time. The officers of the Company,
other than the Chairman of the Board, holding office immediately prior to the
Effective Time shall be the officers (holding the same offices as they held with
the Company) of the Surviving Corporation immediately after the Effective Time.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of Purchaser, the Company or the
holder of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be cancelled pursuant to Section 2.5(c) and
other than Shares with respect to which the provisions of Section 2.11 are
applicable) shall automatically be cancelled and extinguished and be converted
into and become solely a right to receive $28.00 in cash (adjusted for stock
splits or other similar events) without interest (the "Common Stock
Consideration").
- 6 -
<PAGE>
(b) Each Preferred Share issued and outstanding immediately prior to
the Effective Time (other than Preferred Shares to be cancelled pursuant to
Section 2.5(c) and other than Preferred Shares as to which the provisions of
Section 2.11 are applicable) shall automatically be cancelled and extinguished
and be converted into and become solely a right to receive cash in an amount
equal to (x) the number of Shares into which such Preferred Share would have
been convertible immediately prior to the Effective Time multiplied by (y)
$28.00 in cash (adjusted for stock splits or other similar events) without
interest (the "Preferred Stock Consideration"). As used herein, the term
"Merger Consideration" shall mean either Common Stock Consideration or Preferred
Stock Consideration or both, as the context may require.
(c) Each Share and Preferred Share issued and outstanding immediately
prior to the Effective Time and held in the treasury of the Company or owned by
Purchaser shall automatically be cancelled and no payment shall be made with
respect thereto. For purposes of this Section 2.5(c), Shares held under the
Company's 1987 Stock Option Plan Trust Agreement shall not be deemed to be held
in the treasury of the Company.
(d) Each share of capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted and changed into one
validly issued, fully paid and nonassessable share of such capital stock of the
Surviving Corporation.
2.6 Stock Options. Each option (an "Option") to purchase Shares issued
-------------
by the Company which is outstanding at the Effective Time shall be cancelled by
virtue of the Merger, without consideration except as provided in this Section
2.6, and shall cease to exist. Each holder of an Option, whether or not
immediately exercisable, shall be entitled to receive, for each Share issuable
on exercise of such Option, an amount in cash equal to the excess of (x) the
Common Stock Consideration over (y) the per Share exercise price of the Option
as in effect immediately prior to the Effective Time. The consideration due
under this Section 2.6 shall be payable without interest after (a) verification
by the Paying Agent of the ownership and terms of the particular Option by
reference to the Company's records, and (b) delivery in the manner provided in
Section 2.8 of a written instrument duly executed by the owner of the applicable
Option, in a form provided by the Paying
- 7 -
<PAGE>
Agent and setting forth (i) the aggregate number of Options owned by that person
and their respective issue dates and exercise prices; (ii) a representation by
the person that he or she is the owner of all Options described pursuant to
clause (i), and that none of those Options has expired or ceased to be
exercisable; and (iii) a confirmation of and consent to the cancellation of all
of the Options described pursuant to clause (i). Each holder of an Option who is
a participant in the Company's Special Executive Deferred Compensation Plan may
elect before the Offer commences to surrender any Option that is not immediately
exercisable at the time of the holder's election and receive, for each Share
that would have been issuable on exercise of such Option, a credit in the
Special Executive Deferred Compensation Plan equal to the excess of (x) the
Common Stock Consideration over (y) the per Share exercise price of the Option
as in effect at the time of the election. Such credit shall be funded pursuant
to the change of control provisions of the Special Executive Deferred
Compensation Plan.
2.7 Closing of Company Transfer Books. At the Effective Time, the stock
---------------------------------
transfer books of the Company shall be closed with respect to Shares and
Preferred Shares issued and outstanding immediately prior to the Effective Time
and no further transfer of such Shares and Preferred Shares shall thereafter be
made on such stock transfer books. If, after the Effective Time, valid
certificates previously representing such Shares and Preferred Shares are
presented to the Surviving Corporation or the Paying Agent (as defined in
Section 2.8), they shall be exchanged as provided in Section 2.8.
2.8 Exchange of Certificates. Prior to the Effective Time, Purchaser
------------------------
shall designate a bank or trust company to act as agent (the "Paying Agent") for
the holders of Shares and Preferred Shares to receive the funds necessary to
effect the exchange for cash of certificates which, immediately prior to the
Effective Time, represented Shares or Preferred Shares entitled to payment
pursuant to Section 2.5(a) or 2.5(b). As soon as practicable after the
Effective Time, the Paying Agent shall mail a transmittal form (the "Letter of
Transmittal") to each holder of record of certificates theretofore representing
such Shares or Preferred Shares advising such holder of the procedure for
surrendering to the Paying Agent such certificates. If a check for the Merger
Consideration is to be issued in the name of
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<PAGE>
a person other than the person in whose name the certificates for Shares or
Preferred Shares surrendered for exchange are registered on the books of the
Company, it shall be a condition of the exchange that the person requesting such
exchange shall pay to the Paying Agent all transfer or other taxes required by
reason of the issuance of such check in the name of a person other than the
registered owner of the certificates surrendered, or shall establish to the
satisfaction of the Paying Agent that such taxes have been paid or are not
applicable. Notwithstanding the foregoing, neither the Paying Agent nor any
party hereto shall be liable to a holder of certificates theretofore
representing Shares or Preferred Shares for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar laws. Upon the
surrender and exchange of a certificate theretofore representing Shares or
Preferred Shares, the holder shall be paid by check, without interest thereon,
the Merger Consideration to which he or she is entitled hereunder, less only
such amount required to be withheld under applicable backup withholding federal
income tax regulations, and such certificate shall forthwith be cancelled. The
Company shall take all steps necessary and appropriate to promptly effect the
conversion of the Preferred Shares upon surrender by the holders thereof to the
Company for conversion. Until so surrendered and exchanged, each such
certificate shall represent solely the right to receive the Merger Consideration
into which the Shares or Preferred Shares it theretofore represented shall have
been converted pursuant to Sections 2.5(a) and (b), without interest, and the
Surviving Corporation shall not be required to pay the holder thereof the Merger
Consideration to which such holder otherwise would be entitled; provided that
--------
customary and appropriate certifications and indemnities allowing for
payment against lost or destroyed certificates shall be permitted. If any
certificates representing any Shares or Preferred Shares shall not have been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which any payment in respect thereof would otherwise
escheat to or become the property of any governmental unit or agency), the
payment in respect of such certificates shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto .
2.9 Funding of Paying Agent. Purchaser shall transmit by wire, or other
-----------------------
acceptable means, to the Paying Agent prior to the Effective Time funds required
for
- 9 -
<PAGE>
the exchange of all Shares and Preferred Shares and cancellation of all Options
in accordance with this Agreement. The Paying Agent shall agree to hold such
funds in trust and deliver such funds (in the form of checks of the Paying
Agent) in accordance with this Section and Section 2.8. Any portion of such
funds which has not been paid to holders of the Shares, Preferred Shares or
Options pursuant to Section 2.8 within six months after the Effective Time shall
promptly be paid to the party which provided such funds, and thereafter holders
of certificates representing the right to receive the cash into which Shares,
Preferred Shares or Options formerly represented by such certificates shall have
been converted pursuant to Section 2.5(a), 2.5(b) or 2.6 who have not
theretofore complied with Section 2.8 shall look solely to the Surviving
Corporation or the Paying Agent for payment of the amount of cash to which they
are entitled pursuant to this Agreement.
2.10 Taking of Necessary Action; Further Action. Sub, Purchaser and the
------------------------------------------
Company shall use all reasonable efforts to take all such actions as may be
necessary or appropriate in order to effectuate the Offer and the Merger as
promptly as possible. If, at any time after the Effective Time, any further
actions are necessary or desirable to carry out the purposes of this Agreement
or to vest the Surviving Corporation with full right, title and possession to
all assets, property, rights, privileges, immunities, powers and franchises of
either or both of the Constituent Corporations, the officers and directors of
the Surviving Corporation are fully authorized in the name of either or both of
the Constituent Corporations or otherwise to take, and shall take, all such
actions.
2.11 Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares and Preferred Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by stockholders who
(i) have not voted such Shares in favor of the Merger and (ii) have delivered
timely a written demand for appraisal of such Shares in the manner provided in
Section 262 of the Delaware Law shall not be cancelled and converted into the
right to receive the Merger Consideration described in Section 2.5(a) or 2.5(b),
unless and until such holder shall have failed to perfect, or effectively shall
have withdrawn or lost, such holder's right to appraisal and payment under the
Delaware Law. If such holder shall have so failed to perfect, or effectively
shall have withdrawn or lost such right, such holder's Shares or Preferred
Shares
- 10 -
<PAGE>
shall thereupon be deemed to have been cancelled and converted as described in
Sections 2.5(a) and 2.5(b), at the Effective Time, and each Share and Preferred
Share shall represent solely the right to receive the appropriate Merger
Consideration. From and after the Effective Time, no stockholder who has
demanded appraisal rights as provided in Section 262(d) of the Delaware Law
shall be entitled to vote his or her Shares for any purpose or to receive
payment of dividends or other distributions with respect to his or her Shares or
Preferred Shares (except dividends and other distributions payable to
stockholders of record at a date which is prior to the Effective Time). The
Company will give Purchaser prompt notice of all written demands received by the
Company for appraisal of Shares or Preferred Shares.
2.12 Merger Without Meeting of Stockholders. Notwithstanding the
--------------------------------------
foregoing in this Article II, in the event that Purchaser shall acquire at least
90 percent of the shares of each class of stock of the Company the parties
hereto agree to take all necessary and appropriate action, to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without a meeting of stockholders of the Company in accordance with Section 253
of Delaware Law.
2.13 No Further Ownership Rights in Common or Preferred Stock. From and
--------------------------------------------------------
after the Effective Time, the holders of Shares or Preferred Shares which were
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares or Preferred Shares except as otherwise
provided in this Agreement or by applicable law. All cash paid upon the
surrender of Certificates in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to the Shares or
Preferred Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BHP,
SUB AND PURCHASER
BHP, Sub and Purchaser hereby represent and warrant to the Company as
follows:
3.1 Organization and Qualification. BHP has been duly incorporated and
------------------------------
is validly existing as a corporation and in good standing under the laws of
Victoria, Australia and has the requisite corporate
- 11 -
<PAGE>
power to carry on its business as now conducted. Each of Sub and Purchaser has
been duly incorporated and is validly existing as a corporation and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to carry on its respective business as now conducted.
3.2 Authority Relative to this Agreement. Each of BHP, Sub and
------------------------------------
Purchaser has the requisite corporate power and authority to enter into this
Agreement and to carry out its respective obligations hereunder. The execution
and delivery of this Agreement by BHP, Sub and Purchaser and the consummation by
BHP, Sub and Purchaser of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of BHP, Sub and Purchaser, and no other
corporate proceedings on the part of BHP, Sub or Purchaser are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by BHP, Sub and Purchaser and
constitutes a valid and binding obligation of each such company, enforceable in
accordance with its terms, except to the extent that enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the enforcement of creditors rights
generally or by equitable principles. None of BHP, Sub or Purchaser is subject
to or obligated under any provision of (a) its respective Certificate of
Incorporation (or, in the case of BHP, its Memorandum of Association) or By-Laws
(or, in the case of BHP, its Articles of Association), (b) any contract, (c) any
license, franchise or permit or (d) any law, regulation, order, judgment or
decree, which would be breached or violated by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, other than any such breaches or violations which will not,
individually or in the aggregate, have a material adverse effect on the ability
of BHP, Sub and Purchaser to consummate the transactions contemplated by this
Agreement. Other than in connection with or in compliance with the provisions
of the Delaware Law, Arizona Law (as defined in Section 4.4), the Exchange Act,
the securities or blue-sky laws of the various states of the United States and
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (the "H-S-
R Act"), no authorization, consent or approval of or filing with, any public
body, court or authority is necessary on the part of BHP, Sub or Purchaser for
the consummation by BHP, Sub and Purchaser of the transactions contemplated by
this Agreement, except for such authorizations, consents, approvals and filings
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<PAGE>
as to which the failure to obtain or make would not, individually or in the
aggregate, have a material adverse effect on the ability of BHP, Sub or
Purchaser to perform their respective obligations hereunder.
3.3 Financing Arrangements. Purchaser shall have funds available to it
----------------------
on the Expiration Date sufficient to purchase the Shares (including Shares
issuable upon exercise of the Options) and Preferred Shares in accordance with
the terms of this Agreement.
3.4 Ownership of Shares and Preferred Shares. As of the date hereof,
----------------------------------------
none of BHP, Sub, Purchaser or any of their subsidiaries owns (beneficially or
otherwise) any Shares or Preferred Shares (except for Shares or Preferred Shares
that may be held in any of their pension or employee benefit plans).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to BHP, Sub and Purchaser
that:
4.1 Organization and Qualification. The Company has been duly
------------------------------
incorporated and is validly existing as a corporation and in good standing under
the laws of the State of Delaware and has full corporate power and authority to
own its properties and conduct its business as presently owned and conducted.
The Company is duly qualified as a foreign corporation and in good standing in
each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary except where the
failure to be so qualified, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the business,
property, financial condition or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). The copies of the
Restated Certificate of Incorporation and By-Laws of the Company previously
delivered to Purchaser are true, correct and complete as of the date hereof.
4.2 Subsidiaries. The Company has listed all subsidiaries required to
------------
be so listed on Exhibit 21 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994. The Company has listed all of its material
subsidiaries (the "Material Subsidiaries")
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<PAGE>
on Schedule 4.2 and each such subsidiary has been duly incorporated and is
validly existing as a corporation and is in good standing in its respective
jurisdictions and has full corporate power and authority to own its properties
and conduct its businesses as presently owned and conducted. Each Material
Subsidiary is duly qualified as a foreign corporation and in good standing in
each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary except where the
failure to be so qualified, would not reasonably be expected to have a Material
Adverse Effect. The copies of the Certificate of Incorporation and By-Laws of
each Material Subsidiary previously delivered to Purchaser are true, correct and
complete as of the date hereof.
4.3 Capitalization.
--------------
(a) As of November 28, 1995, the authorized equity capitalization of
the Company consists of 100,000,000 Shares, par value $.01 per share, of which
46,420,534 are outstanding, and 50,000,000 Preferred Shares, par value $.01 per
share, of which 4,000,000 are outstanding (2,000,000 shares of 5 5/8% Series D
and 2,000,000 shares of 6% Series E). Each Series D Preferred Share is
convertible at any time at the option of the holder into Shares at the rate of
3.448 Shares per Series D Preferred Share. Each Series E Preferred Share is
convertible at any time at the option of the holder into Shares at the rate of
3.5945 Shares per Series E Preferred Share. All of the outstanding shares of
the Company's capital stock are validly issued, fully paid and nonassessable.
The aggregate number of outstanding awards of Shares that has been issued
pursuant to the Company's 1987, 1989 and 1993 Stock Option and Stock Award Plans
as of November 30, 1995 is 3,453,844. As of November 30, 1995, the Company has
granted stock awards totalling 54,124 under the 1989 Stock Option Plan and 1992
Restricted Stock Plan for Non-Employee Directors. As of November 28, 1995,
there were also outstanding warrants to acquire 1,263,794 Shares at an exercise
price of $8.50 per share, all of which warrants expired on November 30, 1995
(the "Warrants"). Effective as of December 31, 1995, non-employee directors of
the Company who have deferred retainers under the 1989 Stock Option Plan for
Non-Employee Directors will be issued options pursuant to such plan, and on
January 2, 1996, each Non-Employee director will receive a grant of 1,000 shares
of restricted stock pursuant to the 1992 Restricted Stock Plan for Non-Employee
Directors.
- 14 -
<PAGE>
(b) Except as described in paragraph (a) above or in the Company's
Restated Certificate of Incorporation or the Stock Purchase Agreement, dated as
of November 20, 1988, between WP and the Company, there are no options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating the Company or any of its subsidiaries to issue or sell
any shares of capital stock of the Company or of any of its subsidiaries or
securities or obligations of any kind convertible into or exchangeable for any
shares of capital stock of the Company or any of its subsidiaries. The holders
of the outstanding Shares and Preferred Shares are not entitled to any
preemptive or other similar rights, except as set forth above. Upon
consummation of the Merger in accordance with the terms of this Agreement,
Purchaser will own the entire equity interest in the Company, and there will be
no options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating the Company or any of its subsidiaries to
issue or sell any shares of capital stock of the Company or any of its
subsidiaries other than such rights, options, warrants, conversion privileges or
other agreements, arrangements or commitments, that are the result of actions
taken or caused to be taken by or on behalf of Purchaser.
4.4 Authority Relative to this Agreement. The Company has the requisite
------------------------------------
corporate power and authority to enter into this Agreement and, subject to
adoption of this Agreement by its stockholders as set forth in Section 6.1, to
perform its obligations hereunder. Assuming the accuracy of Purchaser's
representation as to the ownership of Shares and Preferred Shares, the execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated by this Agreement have been (i) duly
authorized by the Board of Directors of the Company prior to Sub or Purchaser
becoming an "Interested Stockholder" as defined in Section 203 of the Delaware
Law; (ii) approved by two-thirds of the "Continuing Directors" of the Company as
such term is defined in Article VI of the Company's Restated Certificate of
Incorporation; and (iii) approved by a Committee of "Disinterested Directors",
as such term is defined in, and in accordance with, Section 10-1221 of the
Arizona Revised Statutes ("Arizona Law") and, except for adoption of this
Agreement by its stockholders as set forth in Section 6.1, no other corporate
proceedings on the part of the Company are necessary to authorize or consummate
this Agreement and the transactions contemplated hereby. The Board of Directors
of the Company has approved Sub and Purchaser
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<PAGE>
and or any other direct or indirect wholly-owned subsidiary of BHP to which BHP
may assign its rights hereunder becoming "Interested Stockholders" as defined in
Section 203 of the Delaware Law pursuant to the terms of this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors rights' generally or
by equitable principles. Except as set forth on Schedule 4.4, neither the
Company nor any of its subsidiaries is subject to or obligated under any
provision of (a) its certificate or articles of incorporation or by-laws, (b)
any contract, (c) any license, franchise or permit, or (d) any law, regulation,
order, judgment or decree, which would be breached or violated or in respect of
which a right of termination or acceleration or any encumbrance on any of its or
any of its subsidiaries' assets could be created by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, other than any such breaches, violations, rights or
encumbrances which will not, and would not reasonably be expected to
individually or in the aggregate, have a Material Adverse Effect. Other than in
connection with or in compliance with the provisions of the Delaware Law,
Arizona Law, the Exchange Act, the securities or blue-sky laws of the various
states of the United States and the H-S-R Act, and except as set forth in
Schedule 4.4(b), no authorization (other than such Authorizations that are the
subject of Section 4.11), consent or approval of, or filing with, any public
body, court or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement.
4.5 Commission Filings. The Company has made available to Purchaser
------------------
copies of the Company's (i) Annual Reports on Form 10-K for the fiscal years
ended December 31, 1993 and 1994, (ii) Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30, and September 30, 1995, (iii) proxy statements
relating to the Company's meetings of stockholders (whether annual or special)
during the years 1993 through 1995, inclusive, and (iv) filings under the
Securities Act of 1933, as amended (the "Securities Act"), since January 1,
1993, in each case as filed with the Commission. Except as set forth in
Schedule 4.5, since January 1, 1993, the Company has filed all reports,
registration statements
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<PAGE>
and other documents required to be filed under the Exchange Act and the rules
and regulations thereunder, and all such reports, registration statements and
other documents complied, in all material respects, with the requirements of the
Exchange Act, such compliance to be determined, to the extent applicable, in
accordance with the standards applied to the Company Reports in the following
two sentences. As of their respective dates, the Company's Annual Report on Form
10-K for 1994, the Company's Quarterly Reports on Form 10-Q in 1995, the
Company's Current Report on Form 8-K with respect to events which occurred in
1995 and the Company's 1995 Proxy Statement (together, the "Company Reports")
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. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company (including any related
notes and schedules) included in the reports referred to in clauses (i) and (ii)
of the first sentence of this paragraph have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of the unaudited consolidated interim financial
statements, to normal year-end adjustments and any other adjustments described
therein, and the fact that the interim financial statements were prepared in
accordance with the rules and regulations of the Commission and, therefore,
certain information required by GAAP may have been omitted. Except as set forth
in Schedule 4.5, or in the Company Reports since December 31, 1994, (i) there
has not been a Material Adverse Effect, (ii) no events have occurred other than
events that affect the general economy or the Company's industry generally which
have had or which reasonably would be expected to have a Material Adverse
Effect, and (iii) except as permitted by this Agreement, there has been (1) no
direct or indirect redemption, purchase or other acquisition of any shares of
the Company's capital stock by the Company or any subsidiary, (2) no
declaration, setting aside or payment of any dividend or other distribution by
the Company in respect of the Company's Common Stock, (3) no issuance of any
shares of capital
- 17 -
<PAGE>
stock of the Company (except in connection with the exercise of Warrants or
Options, grants of restricted stock or conversion of Preferred Shares, each in
accordance with its respective terms), (4) except as permitted by Section 5.1 or
with respect to any grants under the stock option and stock award plans referred
to in Section 4.3, no granting to any person of any option to purchase or other
right to acquire shares of capital stock of the Company, (5) no stock split or
other reclassification of the Company's capital stock, and (6) no change in the
accounting principles as reflected in the first footnote of the audited
financial statements of the Company for the fiscal year ending December 31,
1994.
4.6 Litigation. Schedule 4.6 lists all pending litigation as of
----------
November 30, 1995 to which the Company or any subsidiary is a party which would
reasonably be expected to result in liability in excess of $1,000,000 other than
such matters disclosed in the Company Reports. Except as set forth in Schedule
4.6 or as disclosed in the Company Reports, there are no claims, actions,
proceedings, or investigations pending or, to the knowledge of the Company,
threatened in writing against the Company or any of its subsidiaries or any of
their officers or directors (in their capacity as such) before any court or
governmental or regulatory authority or body which would reasonably be expected
to result in a Material Adverse Effect and neither the Company nor any of its
subsidiaries or any of their officers or directors (in their capacity as such)
are subject to any writs, injunctions or decrees which would reasonably be
expected to result in a Material Adverse Effect.
4.7 Employees and Labor.
-------------------
(a) Except as disclosed in the Company Reports, there is no pending
or, to the knowledge of the Company or any subsidiary, threatened, dispute
between the Company or any subsidiary and their present or past employees other
than such disputes as do not or would not reasonably be expected to result in a
Material Adverse Effect.
(b) Except as disclosed in the Company Reports or set forth in
Schedule 4.7, there are no employment, consulting or severance agreements or
formal written policies between the Company or any of its subsidiaries on the
one hand, and any director, officer or other employee of the Company, on the
other hand, which obligate the Company to pay to any director, officer or
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<PAGE>
employee more than $100,000 per annum or $500,000 in the aggregate and which
require more than six months notice for termination.
4.8 Taxes and Tax Returns. The Company and each of its subsidiaries
---------------------
have timely filed all tax returns, declarations and information statements that
it is required to file and has timely paid all taxes shown thereon except to the
extent that such taxes are being contested in good faith. The Company's
consolidated liability for taxes is adequately provided for by reserves. As
used in this Agreement, the term "taxes" includes all taxes of any nature
whatsoever and however denominated, including, without limitation, income,
franchise, sales, gross receipts, occupation, use, severance, real and personal
property, employment, excise, stamp, impost, governmental fees, environmental,
transfer, duties and all other charges, as well as penalties and interest
thereon, imposed by any government or instrumentality, whether federal, state,
local, foreign or other.
4.9 ERISA.
-----
(a) Each "employee benefit plan", as this term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), under which the Company or any of its subsidiaries has any present or
future obligations or liability on behalf of its employees or former employees
or their dependents or beneficiaries, other than a "multiemployer plan" as this
term is defined in Section 3(37) of ERISA ("Multiemployer Plan") (the "Plans"),
complies with and has been administered substantially in accordance with all
applicable requirements of ERISA and the Code, except as set forth on Schedule
4.7, and no "reportable event", as defined in section 4043 of ERISA, has
occurred with respect to any Plan for which the 30-day advance notice to the
Pension Benefit Guaranty Corporation (the "PBGC") has not been waived, or with
respect to which the PBGC has not administratively waived the imposition of
penalties for failure to report. There have been no nonexempt "prohibited
transactions", as defined in Section 4975 of the Code or Section 406 of ERISA,
which have resulted, or would reasonably be expected to result in the imposition
of a material excise tax or penalty, or material liability of the Company. No
termination has occurred with respect to any Plan or any "multiemployer plan" as
defined in Section 3(37) of ERISA under which the Company or any of its
subsidiaries has any present or future obligations or liability on
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<PAGE>
behalf of present or former employees or their dependents or beneficiaries under
circumstances which present a material risk of liability to the Company which
would reasonably be expected to result in a Material Adverse Effect.
(b) All material contributions, premiums or other payments due from
the Company or a subsidiary to (or under) any Plan and any Multiemployer Plan
have been fully paid or adequately provided for on the books and financial
statements of the Company and its subsidiaries. All accruals relating to the
Plans (including, where appropriate, proportional accruals for partial periods)
have been made in accordance with prior practices. No Plan subject to Section
412 of the Code has any accumulated funding deficiency, as defined in Section
412(a) of the Code. No lien described in section 412 of the Code has attached
to the property of the Company or a subsidiary.
4.10 Stockholder Vote Required. Under the Delaware Law and the
-------------------------
Company's Restated Certificate of Incorporation and By-Laws, the Company's
stockholders are required to adopt this Agreement in accordance with the terms
of this Agreement by the affirmative vote of the holders of a majority of the
outstanding Shares at a meeting called for such purpose, unless the conditions
of Section 253 of the Delaware Law are met for actions without a vote of
shareholders.
4.11 Compliance with Laws. Except as set forth in Schedule 4.6, the
--------------------
Company and its subsidiaries are in compliance in all material respects with all
laws, regulations, rules, orders, policies, guidelines and other requirements of
all governmental authorities applicable to their businesses except where the
failure to do so would not individually or in the aggregate be reasonably be
expected to have a Material Adverse Effect. The Company and its subsidiaries
each hold or have filed in a timely manner applications or renewals for all
permits, licenses, certificates, grants or other authorizations of foreign,
federal, state and local governmental agencies (being collectively referred to
herein as "Authorizations") required for the conduct of its business as now
conducted, and are in compliance with all provisions and conditions thereof,
except for those Authorizations or any such noncompliance which individually or
in the aggregate would not reasonably be expected to have a material adverse
effect on the value of the relevant Principal Property (as such term is defined
in Section
- 20 -
<PAGE>
4.12). Such Authorizations constitute all Authorizations required to permit the
Company and its subsidiaries to operate the businesses of the Principal
Properties or conduct its business in all material respects in the manner so
conducted from and after the Effective Time. To the knowledge of the Company,
there is no reasonable ground to believe that (i) any of the foregoing
Authorizations will not, in the ordinary course, be renewable upon their
expiration; and (ii) any Authorization required for the Planned Developments and
the Planned Expansions (as such terms are defined in Section 4.12) will not, in
the ordinary course, be obtained. Anything in this Section 4.11 notwithstanding,
it is understood and agreed that the foregoing shall not be deemed inaccurate by
reason of the ordinary expiration of Authorizations, the renewal of which is
expected to be obtained in the ordinary course without material expense or
material interruption of existing operations.
4.12 Properties; Reserves; Water Rights.
----------------------------------
(a) For purposes of this Agreement (1) "Operating Properties" means
the San Manuel smelter refinery and rod mill real property, the real property
managed by the San Manuel Mining Division, the real property managed by the
Pinto Valley Mining Division, the real property managed by the Superior Mining
Division and the real property managed by Magma Tintaya S.A., all as referred to
in the Company Reports; (2) "Development Properties" means the real property of
the Robinson Mining Limited Partnership and the real property of the Florence
Project, both as referred to in the Company Reports; (3) "Principal Properties"
means all of the properties listed in clauses (1) and (2) above; (4) "Planned
Developments" means the planned development and operation of the Development
Properties, as described in the Company Reports; (5) "Planned Expansions" means
the planned expansion and operation of Kalamazoo, Pinto Valley 7 & 8 Slice,
Miami Expansion and Tintaya, all as described in the Company Reports; and (6)
each reference to real property includes the improvements thereon and also
includes all rights to minerals thereon.
(b) The Company Reports contain a materially accurate description of
the Company's Principal Properties and its ore reserves and mineralized rock.
Subject to the assumptions described in the Company Reports, the ore reserves
and mineralized rock were estimated in all material respects in accordance with
Guide 7 promulgated by the Commission.
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<PAGE>
(c) Schedule 4.12 sets forth the general location and size of each of
the Principal Properties. Except as set forth in Schedule 4.12, the Company and
its subsidiaries, as applicable, hold rights to or interests in each of the
Principal Properties, either in fee simple, under valid, subsisting and
enforceable leases, or through patented or unpatented mining claims, contracts
or concessions (or, where applicable, applications for renewals thereof), as the
case may be, together with any easements, rights-of-way or other surface access
rights, necessary (i) for the current operation of each of the Operating
Properties, (ii) for each of the Planned Developments and (iii) for the Planned
Expansions, except for any rights or interests the absence of which would not be
reasonably expected to result in a material adverse effect on the value of the
applicable property. Except as set forth in Schedule 4.12, the rights of or
interests to each of the Principal Properties provide the holder with the right
to extract copper-bearing and related minerals therefrom and such rights or
interests are either unlimited in duration, or in the case of leases, contracts
or concessions, have a duration (including renewals or extensions thereof held
of right) of not less than fifteen years from the date hereof (except (i) in the
case of unpatented mining claims in the United States and (ii) foreign mining
and related concessions in Peru, both of which are of an indefinite duration;
provided that requisite fees are paid and work requirements are met). Except as
- --------
set forth in Schedule 4.12, each Principal Property is held free and clear of
(i) all royalties or other payments to third parties with respect to production,
and (ii) all liens and encumbrances, except for royalties, liens and
encumbrances which do not materially detract from the value of such property or
materially interfere with the current operation of such property, with the
Planned Developments or with the Planned Expansions.
(d) Except as disclosed in the Company Reports or set forth in
Schedule 4.12, the Company and its subsidiaries possess all water rights
necessary to support the current operation of each of the Operating Properties
and to support the Planned Developments and the Planned Expansions, except for
any such rights the absence of which would not be reasonably expected to result
in a material adverse effect on the applicable property, development or
expansion.
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<PAGE>
4.13 Environmental Matters.
---------------------
(a) The Company and its subsidiaries are in compliance with all
applicable Environmental Laws, except as otherwise disclosed in the Company
Reports and except for noncompliance, which individually or in the aggregate,
would not reasonably be expected to result in a Material Adverse Effect.
(b) Except as disclosed in the Company Reports or as set forth in
Schedule 4.13, to the knowledge of the Company, during the period of ownership
or operation by the Company and its subsidiaries or any predecessors thereof of
any of their respective current or previously owned, operated or leased
properties, there have been no Releases of Hazardous Material in, on, under or
affecting such properties or any surrounding site and neither the Company nor
any of its subsidiaries has disposed of any Hazardous Material or any substance
in a manner that has led, or would reasonably be anticipated to lead, to a
Release except as otherwise disclosed in the Company Reports and except in each
case for those which individually or in the aggregate would not reasonably be
expected to result in a Material Adverse Effect, and except for Releases made in
compliance with Environmental Laws. Except as disclosed in the Company Reports
or in Schedule 4.13, neither the Company nor any of its subsidiaries or any
predecessors thereof has received any notice that it is a "potentially
responsible party" under any Environmental Law, except for any notice the basis
of which has been determined and the Company's liability, if any, has been paid
or provided for in the financial statements included as part of the Company
Reports.
(c) For purposes of this Agreement:
(1) "Environmental Law" means any applicable law regulating or
prohibiting Releases into any part of the environment, or pertaining to the
protection of natural resources, the environment and public and employee health
and safety including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") (42 U.S.C. (S) 9601 et
--
seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.),
- --- -- ---
the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the
-- ---
Clean Water Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S)
-- ---
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 7401 et seq.),
-- --- -- ---
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.,
- ---
- 23 -
<PAGE>
the Oil Pollution Act (33 U.S.C. (S) 2701 et seq.), the Safe Drinking
-- ---
Water Act (42 U.S.C. (S) 300 (et seq.), the Federal Insecticide, Fungicide, and
-- ---
Rodenticide Act (7 U.S.C. (S) 136 et seq.), and the Occupational Safety and
-- ---
Health Act (29 U.S.C. (S) 651 et seq.) ("OSHA") and the regulations promulgated
-- ---
pursuant thereto, and any such applicable state or local statutes, and the
regulations and guidelines promulgated pursuant thereto, as such laws have been
amended or supplemented through the Effective Time;
(2) "Hazardous Material" means any substance, pollutant, material or
waste which is regulated by Environmental Law, including, without limitation,
coal tar, asbestos, polychlorinated biphenyls, petroleum, and any material or
substance which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "hazardous air pollutant," "extremely hazardous
substance" or "restricted hazardous waste," "contaminant," "pollutant," "toxic
waste" or "toxic substance" under any provision of Environmental Law; and
(3) "Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration in or into the indoor or outdoor environment (whether on site or off
site), or in, into or out of any property owned, operated or leased by the
applicable party or its Subsidiaries or predecessors thereof.
4.14 License Agreements. Except as disclosed in the Company Reports or
------------------
as set forth in Schedule 4.14, neither the Company nor any subsidiary is bound
by any licensing or similar agreement which (i) provides for the use by the
Company or its subsidiary of any technology or related proprietary information
relating to mining, mineral processing or conversion into copper products of a
third party, (ii) provides for the use by a third party of any material
technology or related proprietary information of the Company or any of its
subsidiaries, or (iii) materially restricts the scope of operations conducted by
the Company or any subsidiary or affiliate.
4.15 Insurance. Schedule 4.15 lists all material insurance policies the
---------
Company and its subsidiaries maintain with respect to their business and/or
assets. All such insurance policies are in full force and effect
- 24 -
<PAGE>
and, to the Company's knowledge, are not currently terminable, and the
consummation of the transactions contemplated by this Agreement would not be
expected to give rise to a right of termination, on the part of the insurance
carriers, other than those policies the absence or termination of which would
not reasonably be expected to have a Material Adverse Effect. In the judgment of
the Company, such policies, with respect to their amounts and types of coverage,
are adequate to insure against risks to which the Company and its subsidiaries
are normally exposed, or to which they reasonably could be expected to be
exposed, in the operation of their business.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The Company
-----------------------------------------------------
covenants and agrees that, prior to the Effective Time, unless Purchaser shall
otherwise agree in writing or as otherwise expressly contemplated or permitted
by this Agreement (including Schedule 5.1):
(a) the businesses and affairs of the Company and its subsidiaries
shall be conducted only in the ordinary course of business and consistent with
past practice;
(b) except as set forth in Schedule 5.1 and except in connection with
the adoption by the Company of a shareholder rights plan that would not be
applicable to, or adversely affect the transactions contemplated hereby among
the parties to this Agreement, neither the Company nor any of its subsidiaries
shall: (i) issue (except pursuant to (i) employee and non-employee director
stock options outstanding on the date hereof (ii) upon the conversion of the
Preferred Shares or (iii) upon the exercise of Warrants, each of (i), (ii) and
(iii) in accordance with its terms), sell, pledge, dispose of or encumber (or
permit any of its subsidiaries to issue, sell, pledge, dispose of or encumber):
(A) any additional shares of, or any options, warrants, conversion privileges or
rights of any kind to acquire any shares of, any capital stock of the Company or
any of its subsidiaries, or (B) any material assets of the Company or any of its
subsidiaries except in the ordinary course of business; (ii) amend or propose to
amend the certificate or articles of incorporation or bylaws or
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<PAGE>
similar governing instruments of the Company or any of its subsidiaries; (iii)
split, combine or reclassify any outstanding Shares, or declare, set aside or
pay any dividend or other distribution, payable in cash, stock, property or
otherwise with respect to the Shares and Preferred Shares (other than regular
quarterly dividends on the Preferred Shares); (iv) redeem, purchase or acquire,
or offer to acquire (or permit any of its subsidiaries to redeem, purchase or
acquire or offer to acquire) any Shares or other securities of the Company
(other than Warrants); or (v) enter into or modify any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 5.1(b);
(c) neither the Company nor any of its subsidiaries shall (i) acquire
(by merger, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division or material
assets thereof for aggregate consideration in excess of $10,000,000; (ii) incur
any indebtedness for borrowed money or issue any debt securities except the
borrowing of working capital in the ordinary course of business and consistent
with past practice; or (iii) enter into or materially modify any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(d) except as set forth in Schedule 5.1, neither the Company nor any
of its subsidiaries shall enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers, directors or employees;
(e) except as set forth in Schedule 5.1, neither the Company nor any
of its subsidiaries shall adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any officer, director or employee, other than (i)
in the ordinary course of business consistent with past practice for the benefit
or welfare of any employee, (ii) for the purpose of accelerating the vesting of
restricted stock that was granted on or before November 25, 1995 or (iii) to the
extent required by law;
(f) the Company shall use reasonable efforts (i) to cause its current
insurance (or reinsurance) policies not to be cancelled or terminated; and
- 26 -
<PAGE>
(ii) to not permit any of the coverage thereunder to lapse, in any such case
unless prior to or promptly after such termination, cancellation or lapse,
replacement policies underwritten by insurance and reinsurance companies of
nationally recognized standing and with Best ratings no less favorable than
those of the insurance company providing the coverage which is being replaced
are obtained;
(g) the Company (i) shall use reasonable efforts, and cause each of
its subsidiaries to use reasonable efforts, to keep intact their respective
business organizations and good will, keep available the services of their
officers and employees as a group and maintain satisfactory relationships with
suppliers and customers and others having business relationships with them.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Action of Stockholders. If required by law to approve the Merger,
----------------------
the Company shall take all action necessary in accordance with the Delaware Law
and its Restated Certificate of Incorporation and By-Laws to convene a meeting
of its stockholders promptly after the Expiration Date to consider and vote upon
this Agreement. If a meeting of the Company's stockholders is to be called, the
Company shall, if and to the extent requested by Purchaser, use all reasonable
efforts to solicit from stockholders of the Company proxies in favor of the
adoption of this Agreement and shall take all other action reasonably necessary,
or which otherwise may be reasonably requested by Purchaser, to secure a vote of
stockholders in favor of adoption of this Agreement, subject to the exercise of
fiduciary duties by the Board of Directors under applicable law. At any such
meeting, Purchaser shall vote or cause to be voted all of the Shares then owned
by Purchaser or its subsidiaries in favor of adoption of this Agreement and the
Company shall vote or cause to be voted all Shares with respect to which proxies
in the form distributed by the Company have been given, and not voted against
the adoption of this Agreement, in favor of adoption of this Agreement.
6.2 Proxy Statement. If necessary, the Company shall file with the
---------------
Commission under the Exchange Act, and shall use all reasonable efforts to have
processed
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<PAGE>
to completion by the Commission, in each case at the earliest practicable date,
a proxy statement or information statement, as Purchaser shall designate (the
"Proxy Statement"), with respect to the adoption by the Company's stockholders
of this Agreement in form and substance reasonably satisfactory to Purchaser and
its counsel. The information provided by Purchaser and the Company,
respectively, for use in the Proxy Statement, the Schedule 14D-9 and the
Schedule 14D-1 shall be true and correct in all material respects and shall not
omit to state any material fact necessary in order to make such information and
the Proxy Statement, the Schedule 14D-1 and the Schedule 14D-9 not misleading as
of the date of the Proxy Statement, the Schedule 14D-1 and the Schedule 14D-9,
as appropriate. The Proxy Statement shall, subject to the exercise of fiduciary
duties by the Board of Directors under applicable law, contain the determination
and recommendation of the Board of Directors of the Company referred to in
Section 1.2. If no meeting of stockholders is required to approve the adoption
of this Agreement, the Company shall, promptly after the Expiration Date, take
all actions required in connection with the consummation of the Merger pursuant
to Section 253 of the Delaware Law.
6.3 Expenses. All costs and expenses incurred in connection with the
--------
Offer, this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses, except as set forth in Section 8.3.
6.4 Additional Agreements. Subject to the conditions herein provided,
---------------------
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by the Offer and this Agreement,
including, without limitation, cooperating with Sub and Purchaser, using
reasonable efforts to obtain all necessary waivers, consents and approvals and
effecting all necessary registrations and filings, including, without
limitation, submissions of information requested by governmental authorities.
6.5 Limitation on Negotiations.
--------------------------
(a) From the date hereof until the termination hereof, the Company and
its subsidiaries will not,
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<PAGE>
directly or indirectly, make, solicit, initiate or encourage submission of
proposals or offers from any persons (including any of its officers or
employees) relating to an Acquisition Proposal. As used herein, the term
"Acquisition Proposal" means any proposal or offer involving a liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or purchase
of all or substantially all of the assets of, or equity interest in, the Company
or other similar transaction or business combination involving the Company or
its subsidiaries.
(b) Subject to the fiduciary duty of the Board of Directors, the
Company shall:
(i) immediately cease and cause to be terminated all discussions or
negotiations with third parties with respect to any Acquisition Proposal, if
any, existing on the date hereof; and
(ii) promptly notify Purchaser after receipt of any bona fide
Acquisition Proposal or any inquiry from any person relating to an Acquisition
Proposal and promptly provide Purchaser with a reasonable summary of the
financial and other material terms of such Acquisition Proposal.
(c) To the extent that the Board of Directors of the Company shall
conclude, acting in good faith, after receiving advice from outside counsel or
its financial advisor, that the following action is necessary or appropriate in
order for the Board of Directors to act in a manner which is consistent with its
fiduciary duties under applicable law, the Company may:
(i) furnish or cause to be furnished information concerning the
Company and its businesses, properties or assets to a third party;
(ii) engage in discussions or negotiations with a third party
concerning an Acquisition Proposal initiated by such third party;
(iii) following receipt of an Acquisition Proposal, take and disclose
to its stockholders a position contemplated by Rule 14e-2(a) under the Exchange
Act or otherwise make disclosure to the Company's stockholders; and
- 29 -
<PAGE>
(iv) following receipt of an Acquisition Proposal, (1) through its
the Board of Directors, withdraw, modify or amend its recommendation referred to
in Section 1.2, and/or (2) enter into an agreement providing for the
consummation of such Acquisition Proposal.
(d) The Company will direct its financial and other advisors and
representatives to comply with each of the covenants contained in this Section
6.5.
6.6 Notification of Certain Matters. Each party shall give prompt
-------------------------------
notice to the others of (i) the occurrence or failure to occur of any event,
which occurrence or failure would cause or may cause any representation or
warranty on its part contained in this Agreement to be untrue or inaccurate in
any material respect; and (ii) any failure of such party, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
6.7 Access to Information. From the date hereof to the Effective Time,
---------------------
the Company shall, and shall cause its subsidiaries, officers, directors,
employees and agents to, afford the officers, employees and agents of Purchaser
reasonable access at all reasonable times to its officers, employees, agents,
premises, books and records, and properties (including Principal Properties) and
shall furnish Purchaser all financial, operating, personal, compensation, tax
and other data and information, Purchaser, through its officers, employees or
agents, may reasonably request.
6.8 Stockholder Claims. The Company shall not settle or compromise any
------------------
claim brought by any present, former or purported holder of any securities of
the Company in connection with the Offer or the Merger prior to the Effective
Time, without the prior written consent of Purchaser, which consent may not be
unreasonably withheld, and shall notify Purchaser promptly upon receipt of all
written demands for appraisal rights. None of the parties to this Agreement
shall take any action to deprive any employee or director of the Company of the
benefits of (i) the consideration payable with respect to Options in accordance
with Section 2.6 or (ii) restricted stock grants under the Company's 1992
Restricted Stock Plan For Non-Employee Directors.
6.9 Treatment of Employee Compensation and Benefits. The Company and
-----------------------------------------------
Purchaser agree that the
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<PAGE>
employer-provided benefits for nonunion employees under the Company's employee
benefit plans listed on Schedule 6.9 as in effect as of the Effective Time
(other than any feature of any such plan that relates to the Shares or the
Preferred Shares) shall not be reduced after the Effective Time (except to the
extent consistent with the terms of this Agreement and except to the extent
necessary to comply with applicable law) at least until the second anniversary
of the Effective Time. The Company's cash-based Long-Term Incentive Plan will
continue for one additional three-year cycle beginning January 1, 1996, with
performance measures appropriate to the business plan of the Surviving
Corporation. Purchaser affirms that its intent is to provide during the two-year
period following the Effective Time overall compensation and benefits for
persons serving on the Company's Executive Committee as of the date of this
Agreement which are competitive with those provided by the Company's
competitors.
6.10 Indemnification Rights.
----------------------
(a) From and after the Effective Time, to the extent not covered by
the insurance set forth in the next succeeding sentence, Purchaser shall
indemnify, defend and hold harmless the officers, directors and employees of the
Company or any of its subsidiaries against all losses, expenses, claims, damages
or liabilities arising out of claims brought or made by third parties,
including, without limitation, derivative claims, in connection with the
transactions contemplated by this Agreement to the fullest extent permitted or
required under applicable law and shall advance expenses prior to the final
disposition of such claims and liabilities to which this sentence applies.
Purchaser agrees that all rights to indemnification now existing in favor of the
directors, officers or employees of the Company or any of its subsidiaries
(including, without limitation, any person who was or becomes a director,
officer or employee prior to the Effective Time (the "Indemnified Parties"))
under the Delaware Law or as provided in the Company's Restated Certificate of
Incorporation or by By-Laws with respect to matters occurring on or prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect for a period of not less than six years after the Effective Time (or, in
the case of claims or other matters occurring on or prior to the expiration of
such six year period which have not been resolved prior to the expiration of
such six year period, until such matters are finally resolved) and Purchaser
shall honor, and shall
- 31 -
<PAGE>
cause the Company to honor, all such rights. Purchaser shall cause to be
maintained in effect for not less than six years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company (provided that Purchaser may substitute therefor policies of at
--------
least the same coverage containing terms and conditions which are no less
advantageous) with respect to matters occurring on or prior to the Effective
Time; provided that in no event shall Purchaser or the Company be required to
--------
expend annually more than 150% of the amount that the Company spent for these
purposes in the last fiscal year to maintain or procure insurance coverage
pursuant hereto; and provided further that if Purchaser or the Company are
-------- -------
unable to obtain the insurance called for by this section Purchaser or the
Company will obtain as much comparable insurance as is available for such amount
per year.
(b) Without limiting the foregoing, in the event any claim, action,
suit, proceeding or investigation to which the provisions of this Section 6.10
are applicable is brought against any Indemnified Party (whether arising before
or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time shall be subject to the approval
of the Surviving Corporation (such approval to not be unreasonably withheld);
(ii) after the Effective Time, the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective
Time, the Surviving Corporation will use reasonable efforts to assist in the
vigorous defense of any such matter, provided that the Surviving Corporation
shall not be liable for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 6.10, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Surviving Corporation (but the failure so to notify the Surviving
Corporation shall not relieve it from any liability which it may have under this
Section 6.10 except to the extent such failure materially prejudices the
Surviving Corporation). The Surviving Corporation shall be liable for the fees
and expenses hereunder with respect to only one law firm, in addition to local
counsel in each applicable jurisdiction, to represent the Indemnified Parties as
a group with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict
- 32 -
<PAGE>
between the positions of any two or more Indemnified Parties that would preclude
or render inadvisable joint or multiple representation of such parties.
6.11 BHP Guarantee. BHP unconditionally and irrevocably guarantees to
-------------
the Company the due, prompt and faithful performance of, and compliance with,
all agreements and obligations of Purchaser and Sub in this Agreement.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) the Offer shall have been consummated in accordance with its
terms; provided, however, that this condition shall be deemed to be satisfied if
-------- -------
Purchaser fails to accept for payment and pay for Shares and Preferred Shares
pursuant to the Offer other than as a result of a failure of a condition
thereof;
(b) the waiting period applicable to the consummation of the Merger
under the H-S-R Act shall have expired or been terminated;
(c) there shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which is in effect and has the
effect of making the acquisition of Shares illegal or otherwise prohibits
consummation of the Merger; and
(d) there shall not be in effect any preliminary or final injunction
or temporary restraining order or other order or decree issued by any foreign or
United States federal or state court or foreign or United States federal or
administrative agency or authority, enjoining, restraining or otherwise
prohibiting the Offer, the Merger or the acquisition by Purchaser of Shares and
Preferred Shares.
- 33 -
<PAGE>
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether prior to or after approval by the stockholders of
the Company:
(a) by written mutual consent of Purchaser and the Company;
(b) by either Purchaser or the Company:
(i) if the Offer shall not have been consummated by May 31,
1996; or
(ii) at any time after June 30, 1996, if the conditions set forth in
Section 7.1 shall not have been satisfied or waived; or
(c) by Purchaser:
(i) if (1) the Board of Directors of the Company shall have failed to
recommend, or shall have withdrawn, its approval or recommendation of the Offer
or the Merger or shall have resolved to do any of the foregoing; or (2) if the
Company shall have entered into a definitive agreement to accept an Acquisition
Proposal;
(ii) if the Board of Directors of the Company shall have modified its
approval of the Offer or the Merger in a manner adverse to Purchaser and the
Minimum Condition shall not have been met on the Expiration Date;
(iii) if as a result of the failure of any conditions set forth in
Annex I hereto the Offer shall have terminated or expired without Purchaser or a
subsidiary of BHP having purchased any Shares thereunder; or
(d) by the Company, if the Company withdraws its recommendation of
the Offer or the Merger pursuant to in Section 6.5(c)(iv)(1), or takes the
actions described in Section 6.5(c)(iv)(2), and such action is taken pursuant
to, and in compliance with, such provision;
- 34 -
<PAGE>
Notwithstanding the above, neither the Company nor Purchaser shall be permitted
to terminate this Agreement if the event which gave rise to such termination
right is a result of or arose in connection with any action or inaction of the
party seeking to terminate taken or not taken in breach of the terms hereof.
8.2 Amendment. Subject to applicable law, this Agreement may be amended
---------
by an instrument signed by each of the parties hereto before or after approval
of the Merger by the stockholders of the Company, if required; provided,
--------
however, that after approval of the Merger by the stockholders of the Company,
- -------
no amendment may be made which decreases the amount of the Merger Consideration
or effects any change which would materially and adversely affect the
stockholders of the Company without the further approval of the stockholders of
the Company.
8.3 Fees Upon Termination. The Company agrees that if this Agreement is
---------------------
terminated pursuant to:
(a) Section 8.1(b)(ii) and at the time of such termination any
person, entity or group (as defined in Section 13(d)(3) of the Exchange Act)
(other than Sub or Purchaser) shall have become the beneficial owner of more
than 20% of the outstanding Shares (with appropriate adjustments for
reclassifications of capital stock, stock dividends, stock splits, reverse stock
splits and similar events) and such person, entity or group (or any subsidiary
of such person, entity or group) thereafter shall enter into a definitive
agreement with the Company to accept an Acquisition Proposal at any time on or
prior to the date which is six months after the termination of this Agreement
and such transaction is thereafter consummated;
(b) Sections 8.1(c)(i) or Section 8.1(d);
(c) Section 8.1(c)(ii) and at the time of termination of this
Agreement, the Tender Agreement shall have expired in accordance with Section 2
thereof and the Company shall enter into a definitive agreement to accept an
Acquisition Proposal at any time on or prior to the date which is six months
after the termination of this Agreement; or
(d) Section 8.1(c)(iii) and such failure was the result of any action
taken by or on behalf of the Company giving rise to an Event specified in
paragraph (a), (b), (c), (d), (f), (g) or (i) of Annex I and such action was in
breach of the Company's obligations
- 35 -
<PAGE>
hereunder, and with respect to an Event specified in paragraph (g), if such
action was taken by the Company for the purpose of causing Purchaser to
terminate this Agreement;
then the Company shall pay to Purchaser the sum of $40 million. Such payment
shall be made as promptly as practicable but in no event later than (i) in the
case of paragraphs (b) and (d) of this Section, two business days following
termination of this Agreement, (ii) in the case of paragraph (a) of this
Section, upon consummation of such Acquisition Proposal, and (iii) in the case
of paragraph (c) of this Section, upon entering into a definitive agreement to
accept such Acquisition Proposal. Each such payment shall be made by wire
transfer of immediately available funds to an account designated by Purchaser
without set-off or deduction.
8.4 Effect of Termination.
---------------------
(a) The provisions of Sections 6.3 (expenses), 6.7 (return of
information upon termination), 6.10 (indemnification) and 8.3 (termination fees)
shall survive the termination of this Agreement.
(b) The rights of termination provided for in Section 8.1 shall not
be an exclusive remedy hereunder but shall be in addition to any other legal or
equitable remedies that may be available to any non-defaulting party hereto
arising out of any default hereunder by any other party hereto; provided,
--------
however, that in the event that the amount set forth in Section 8.3 shall have
- -------
been paid to Purchaser, this Agreement shall forthwith become void and there
shall be no liability on the part of either the Company or its respective
officers or directors, except for a willful and intentional breach of any
representation, warranty, covenant or agreement contained herein.
8.5 Waiver. At any time prior to the Effective Time, any party hereto
------
may (i) extend the time for the performance of any of the obligations or other
acts of any other party hereto or (ii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations, in
each case only to the extent such obligations, agreements and conditions are
intended for its benefit.
- 36 -
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.1 Brokers. The Company represents and warrants that no broker, finder
-------
or investment banker is entitled to any brokerage, finder's or other fee or
commission, or to the reimbursement of any of its expenses, in connection with
the Offer or the Merger or any similar transaction based upon arrangements made
by or on behalf of the Company, except for the arrangements between the Company
and Goldman, Sachs & Co.
9.2 Public Statements. Except as required by applicable law or stock
-----------------
exchange regulation, none of BHP, Sub or Purchaser, on the one hand, or the
Company, on the other hand, shall make any public announcement or statement with
respect to the Offer, the Merger or this Agreement without the approval of the
Company or Purchaser, respectively, which approval shall not be unreasonably
withheld. Moreover, the parties hereto agree to consult with each other prior
to issuing each public announcement or statement with respect to the Offer, the
Merger or this Agreement.
9.3 Notices. All notices and other communications hereunder shall be
-------
given by telephone and immediately confirmed in writing and shall be deemed
given if delivered personally or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to BHP, Sub or Purchaser:
The Broken Hill Proprietary
Company Limited
BHP Tower
600 Bourke Street
Melbourne, Victoria
3000, Australia
Attention: Company Secretary
With copies to:
Arnold & Porter
399 Park Avenue
New York, New York 10022
Attention: Joseph Handros, Esq.
- 37 -
<PAGE>
(b) if to the Company:
Magma Copper Company
7400 N. Oracle Road
Suite 200
Tucson, Arizona 85704
Attention: Chairman of the Board
with copies to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4677
Attention: Jack H. Nusbaum, Esq.
9.4 Interpretation. When a reference is made in this Agreement to a
--------------
subsidiary of BHP or the Company, the word "subsidiary" means any "majority-
owned subsidiary" (as defined in Rule 12b-2 promulgated under the Exchange Act)
of BHP or the Company, as the case may be; provided, however, that the Company
-------- -------
shall in no event and at no time be considered a subsidiary of Purchaser for
purposes of this Agreement. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
9.5 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction 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 and the parties shall negotiate
in good faith to modify the Agreement to preserve, to the extent legally
permitted, each party's anticipated benefits and obligations under this
Agreement.
9.6 Miscellaneous. This Agreement and the Confidentiality Agreement
-------------
constitute the entire agreement, and supersede all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement (i) is not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Section
9.9; and (ii) shall not be assigned by operation of law or otherwise, except
that BHP, Sub and Purchaser
- 38 -
<PAGE>
may assign all or any portion of their rights under this Agreement to any of
their subsidiaries (provided, however, that in the event of any such assignment,
-------- -------
BHP shall cause such assignee to execute and become a party to this agreement
and such assignee shall be vested with all the rights and obligations assigned
to it by the assignor as if it were named in this Agreement), but no such
assignment shall relieve BHP, Sub or Purchaser, as applicable, of their
obligations hereunder, and except that this Agreement may be assigned by
operation of law to any corporation with or into which Purchaser may be merged;
(d) shall be governed in all respects, including validity, interpretation and
-
effect, by the internal laws of the State of Delaware, without giving effect to
the principles of conflict of laws thereof; and (e) the parties hereto expressly
consent to the personal jurisdiction of the courts of the United States of
America and of the courts of the State of Delaware, in each case sitting in the
State of Delaware.
9.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall constitute an original, but together shall be
construed as one document.
9.8 Survival. The representations, warranties, covenants and agreements
--------
of the parties set forth herein shall terminate as of the Effective Time,
except as provided in Sections 6.9 and 6.10.
9.9 Third Party Beneficiaries. The parties entitled to the employee
-------------------------
benefits pursuant to the terms of Section 6.9 and indemnification pursuant to
the terms of Section 6.10 are expressly made third party beneficiaries solely of
Section 6.9 and Section 6.10, respectively, of this Agreement.
- 39 -
<PAGE>
IN WITNESS WHEREOF, BHP, Sub, Purchaser and the Company have caused this
Agreement to be executed on the date first written above by their respective
officers thereunder duly authorized.
THE BROKEN HILL PROPRIETARY
COMPANY LIMITED
By: /s/ Graeme W. McGregor
______________________
Name: Graeme W. McGregor
Title: Executive General Manager
BHP HOLDINGS (USA) INC.
By: /s/ T. R. Dankmeyer
_____________________
Name: T. R. Dankmeyer
Title: Vice President
BHP SUB INC.
By: /s/ T. R. Dankmeyer
_____________________
Name: T. R. Dankmeyer
Title: Vice President
MAGMA COPPER COMPANY
By: /s/ Donald J. Donahue
_____________________
Name: Donald J. Donahue
Title: Chairman of the Board
- 40 -
<PAGE>
Annex I
-------
CONDITIONS TO THE OFFER
Purchaser shall not be required to continue the Offer or to accept for
payment, purchase or pay for any Shares or Preferred Shares tendered, may
postpone the acceptance for payment, purchase of, and/or payment for, Shares or
Preferred Shares, may amend or terminate the Offer, and may extend the Offer
beyond January 4, 1996 (the "Initial Expiration Date") in which event the
expiration date (the "Expiration Date") shall mean the latest time and date
which the Offer as so extended by Purchaser, shall expire), whether or not any
Shares or Preferred Shares have theretofore been purchased or paid for, (i) if a
number of Shares and Preferred Shares which would result in Purchaser's
ownership of at least a majority of the outstanding Shares (including Shares
into which such Preferred Shares are converted) of the Company on a fully
diluted basis shall not have been validly tendered and not withdrawn, or (ii)
if, at any time on or after December 5, 1995 and prior to the time of payment
for any such Shares or Preferred Shares (whether or not theretofore accepted for
payment pursuant to the Offer), any of the following events (each, an "Event")
shall have occurred, (an Event shall be deemed to have occurred notwithstanding,
where applicable, the provision for a cure period) (each of paragraphs (a)
through (j) providing a separate and independent condition to Purchaser's
obligations pursuant to the Offer), provided that if the Purchaser does not
--------
accept for payment, purchase or pay for any Shares or Preferred Shares tendered
due to the occurrence of any Event specified in paragraph (a), (b), (d), (e),
(f) or (g), then Purchaser shall be required to extend the Offer for the cure
period specified in such paragraph; provided, however, that Purchaser may
--------- -------
terminate the Offer at any time if any of the other conditions hereunder shall
have occurred (including during the period of any such extension) and may waive
any Event at any time (including during the period of any such extension):
(a) there shall be in effect any preliminary or final injunction or
temporary restraining order or other order or decree issued by any foreign or
United States federal or state court or foreign or United States federal or
administrative agency or authority, enjoining, restraining or otherwise
prohibiting the Offer, the Merger or the acquisition by Sub or Purchaser of
Shares and Preferred Shares, and such order or decree either shall be incapable
of being cured by, or shall not be cured by May 31, 1996;
<PAGE>
(b) an action or a proceeding shall have been commenced by any
governmental agency under federal or state antitrust laws or any other
applicable law before any court or any governmental or other administrative or
regulatory authority or agency, domestic or foreign, or there shall be an
imminent threat which, would reasonably be expected to result in the foregoing,
or any of the Authorizations listed in Section 3.2 or 4.4 shall have been
conditioned in such a manner, that would reasonably be expected to (i)
materially restrict or prohibit consummation of the Offer or the Merger or any
other merger or business combination between the Company, Sub and Purchaser,
(ii) impose material limitations on the ability of Sub or Purchaser effectively
to acquire or hold or to exercise full rights of ownership of the Shares and
Preferred Shares acquired by it, including, but not limited to, the right to
vote the Shares purchased by it on all matters properly presented to the
stockholders of the Company, or (iii) impose material limitations on the ability
of either Purchaser or the Company to continue effectively to conduct all or any
material portion of its respective business as heretofore conducted or to
continue to own or operate effectively all or any material portion of its
respective assets as heretofore owned or operated, and such action or proceeding
either shall be incapable of being cured by, or shall not be cured by, May 31,
1996;
(c) there shall have been any law, statute, rule or regulation,
domestic or foreign, enacted, promulgated or proposed that, directly or
indirectly, would reasonably be expected to result in any of the consequences
referred to in paragraph (b) above;
(d) a material adverse change in the business, property, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole shall have occurred, and such change shall either be incapable of being
cured or shall not be cured within ten days of the Initial Expiration Date or,
in the event such change is discovered during any extension of the Offer, within
ten days after the discovery of such change;
(e) there shall have occurred (i) any general suspension of trading
in securities on the New York Stock Exchange, (ii) a declaration of a banking
moratorium or any suspension of payments by United States or Australian
authorities on the extension of credit by lending institutions, or (iii) a
commencement of a war, armed hostilities or other international or national
- 2 -
<PAGE>
calamity directly or indirectly involving the United States, Australia or Peru
which would reasonably be expected to have a material adverse effect on the
business, property, financial condition or results of operations of the Company
and its subsidiaries taken as a whole, and any such event shall continue to have
such material adverse effect on May 31, 1996;
(f) any representation or warranty of the Company in the Agreement
and Plan of Merger shall at any time prove to have been incorrect in any
material respect at the time made, and shall either be incapable of being cured
or shall not be cured within ten days of the Initial Expiration Date or, in the
event such breach is discovered during any extension of the Offer, ten days
after discovery of such breach;
(g) the Company shall fail to perform or comply in any material
respect with any covenant or agreement to be performed or complied with by the
Company under the Agreement and Plan of Merger and such failure is unremedied
ten days after the Initial Expiration Date or, in the event such failure is
discovered during any extension of the Offer, ten days after discovery of such
nonperformance or noncompliance;
(h) the Company and Purchaser shall have agreed to terminate the
Offer or the Agreement and Plan of Merger;
(i) the Board of Directors of the Company or the Company, as the case
may be, shall have (i) publicly (including by amendment of the Schedule 14D-9)
withdrawn its recommendation to stockholders of acceptance of the Offer and
adoption of the Agreement and Plan of Merger, or shall have resolved to do so;
or (ii) entered into an agreement with a third party providing for the
acquisition or purchase of all or substantially all of the assets of, or equity
interest in, the Company by such third party; and
(j) the Offer shall not have been consummated by May 31, 1996.
The foregoing conditions are for the sole benefit of Sub and Purchaser
and may be asserted by Sub and Purchaser regardless of the circumstances giving
rise to such condition or may be waived by Sub or Purchaser in whole at any time
or in part from time to time in its reasonable discretion. The failure by Sub or
Purchaser at any time to exercise any of the foregoing rights shall not be
- 3 -
<PAGE>
deemed a waiver of any such right and each such right shall be deemed an ongoing
right and may be asserted at any time and from time to time.
- 4 -
<PAGE>
Exhibit 99.2
EXECUTIVE COMPENSATION
The table below summarizes annual and long-term compensation for services to
the Company during the years ended December 31, 1994, 1993, and 1992 to those
persons who were at December 31, 1994 (i) the Chief Executive Officer and (ii)
the other four most highly compensated executive officers of the Company. These
persons are referred to in this Proxy Statement as the "Named Executive
Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1) LONG-TERM COMPENSATION
-------------------- -------------------------------------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING LTIP COMPENSA-
NAME AND PRINCIPAL AWARDS(2) OPTIONS(3) PAYOUTS TION(5)
POSITION YEAR SALARY($) BONUS($) ($) (#) (4)($) ($)
- ------------------ ---- --------- -------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
WINTER, JB 1994 $462,516 $550,000 $631,842 162,400 $222,917 $17,907
President and Chief 1993 412,500 350,000 -- 24,200 185,973 19,078
Executive Officer 1992 375,000 495,000 -- 52,700 165,280 20,250
CHAMPAGNE, JF 1994 237,000 184,680 287,209 78,380 -- 10,620
Vice President 1993 216,000 127,000 -- 10,900 -- 9,990
1992 200,004 170,392 -- 23,000 -- 10,031
MILLS, BA 1994 190,008 200,000 191,473 48,590 -- 10,200
Vice President 1993 170,004 88,000 -- 8,000 -- 6,750
1992 150,000 113,400 -- 9,500 -- 4,500
SMITH, HC 1994 193,956 150,000 191,473 48,590 -- 10,313
Vice President 1993 175,008 83,000 -- 8,000 -- 8,665
1992 155,004 110,484 -- 9,500 -- 4,299
PURDOM, DJ 1994 190,216 150,000 191,473 48,590 -- 10,200
Vice President and 1993 170,004 88,000 -- 8,000 -- 9,472
Chief Financial Officer 1992 130,008 100,104 -- 10,500 -- 7,800
- -------------------
</TABLE>
(1) Salary and Bonus include cash compensation earned and received by the
Named Executive Officers in the year indicated and amounts deferred
under the Employee Savings Plan of Magma Copper Company and
Participating Subsidiary Companies (the "Employee Savings Plan")
and/or the Special Executive Deferred Compensation Plan (the "Deferred
Compensation Plan").
(2) The Named Executives were issued restricted stock grants on November
16, 1994. Grants of 36,365 shares to Mr. Winter and 11,020 shares to
each of Messrs. Mills, Smith, and Purdom were made under the Magma
Copper Company 1989 Stock Option and Stock Award Plan (the "1989
Plan"), and a grant of 16,530 shares was made to Mr. Champagne under
the Magma Copper Company 1987 Stock Option and Stock Award Plan (the
"1987 Plan"). The restricted stock awards vest as follows: 20% of
the original award on December 31, 1995, 20% of the original award on
December 31, 1996, and 60% of the original award on December 31, 1997.
The value of these awards is based on the closing price of the
Company's Common Stock on November 16, 1994 on the New York Stock
Exchange -- Composite Transactions. At December 31, 1994, aggregate
restricted shareholding in shares (and dollars) were 36,365 ($600,023)
for Mr. Winter, 16,530 ($272,745) for Mr. Champagne, and 11,020
($181,830) for each of Messrs. Mills, Smith, and Purdom. Dividends
are not currently paid on restricted stock.
(3) Options were awarded pursuant to the Magma Copper Company 1993 Stock Option
and Stock Award Plan (the "1993 Plan") during 1993 and 1994, and from the
1989 Plan in 1992.
(4) Mr. Winter received a long-term incentive bonus pursuant to the CEO
Employment Agreement (as discussed on pages 14 and 15). No other Named
Executive Officer was eligible for or received a long-term incentive bonus.
(5) Amounts for 1994 include a Company matching contribution in the Employee
Savings Plan for Messrs. Winter, Champagne, Mills, Smith, and Purdom of
$4,500, $3,510, $4,500, $4,500, and $4,500 respectively.
-8-
<PAGE>
Amounts also include a Company matching contribution in the Deferred
Compensation Plan for Messrs. Winter, Champagne, Mills, Smith, and Purdom
of $13,407, $7,110, $5,700, $5,813, and $5,700 respectively.
OPTION GRANTS
The table shown below contains information on grants of stock options
during 1994 to the Named Executive Officers. No stock appreciation rights were
granted during 1994.
OPTION GRANTS IN FISCAL YEAR 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERM(3)
SECURITIES % OF TOTAL STOCK --------------------------------------
UNDERLYING OPTIONS PRICE ON
OPTIONS GRANTED TO EXERCISE DATE OF
GRANTED(1) EMPLOYEES PRICE(2) GRANT EXPIRATION
NAME (#) IN 1994 ($/SH) ($/SH) DATE 0% 5% 10%
- ---------- ---------- --------- -------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winter, JB 45,000 4.88 $12.28 $16.375 05/19/04 $184,275 $ 647,692 $1,358,664
117,400 12.74 $13.03 $17.375 11/16/04 $510,103 $1,792,938 $3,761,059
------- ----- -------- ---------- ----------
162,400 17.61 $694,378 $2,440,630 $5,119,723
Champagne, JF 25,000 2.71 $12.28 $16.375 05/19/04 $102,375 $ 359,829 $ 754,813
53,380 5.79 $13.03 $17.375 11/16/04 $231,936 $ 815,222 $1,710,096
------- ----- -------- ---------- ----------
78,380 8.50 $334,311 $1,175,050 $2,464,910
Mills, BA 13,000 1.41 $12.28 $16.375 05/19/04 $ 53,235 $ 187,111 $ 392,503
35,590 3.86 $13.03 $17.375 11/16/04 $154,639 $ 543,532 $1,140,171
------- ----- -------- ---------- ----------
48,590 5.27 $207,874 $ 730,643 $1,532,674
Smith, HC 13,000 1.41 $12.28 $16.375 05/19/04 $ 53,235 $ 187,111 $ 392,503
35,590 3.86 $13.03 $17.375 11/16/04 $154,639 $ 543,532 $1,140,171
------- ----- -------- ---------- ----------
48,590 5.27 $207,874 $ 730,643 $1,532,674
Purdom, DJ 13,000 1.41 $12.28 $16.375 05/19/04 $ 53,235 $ 187,111 $ 392,503
35,590 3.86 $13.03 $17.375 11/16/04 $154,639 $ 543,532 $1,140,171
------- ----- -------- ---------- ----------
48,590 5.27 $207,874 $ 730,643 $1,532,674
- ----------------------
</TABLE>
(1) Options granted at an exercise price of $12.28 were granted on May 19,
1994, and options granted at an exercise price of $13.03 were granted on
November 16, 1994. All options were granted under the 1993 Plan. The
options granted on May 19, 1994 become exercisable as follows: 33% on May
19, 1995, 33% on May 19, 1996, and 34% on May 19, 1997. The options granted
on November 16, 1994 become exercisable as follows: (i) 34% on November 16,
1995, (ii) 33% on November 16, 1996, and (iii) 33% on November 16, 1997. To
the extent not already exercisable, the options may become immediately
exercisable at the discretion of the 1993 Plan Committee upon (i) the
dissolution or liquidation of the Company or a merger or consolidation in
which the Company is not the surviving entity, (ii) the sale of all or
substantially all of the assets of the Company, or (iii) the occurrence of
a change in control of the Company (as discussed under "Other Change in
Control Arrangements" on pages 16-18).
(2) The exercise price was set at 75% of closing price on the respective grant
dates (May 19, 1994 and November 16, 1994).
(3) Reflects the value of the stock options on the date of grant assuming (i)
for the 0% column, no appreciation in the Company's stock price from the
date of grant over the term of the option, (ii) for the 5% column, a five
-9-
<PAGE>
percent annual rate of appreciation in the Company's stock price compounded
annually over the term of the option, and (iii) for the 10% column, a ten
percent annual rate of appreciation in the Company's stock price compounded
annually over the term of the option, in each case without any discounting
to present value. The actual gains, if any, on stock option exercises are
dependent upon the future performance of the Company's common stock.
Accordingly, the amounts reflected in this table may not necessarily be
indicative of the actual results obtained.
AGGREGATED OPTION EXERCISES IN 1994 AND
1994 YEAR-END OPTION VALUES
Shown below is information with respect to all exercised and unexercised
options to purchase the Company's Common Stock granted to the Named Executive
Officers through the end of fiscal year 1994. All options were granted under
the 1989 Plan or the 1993 Plan. No stock appreciation rights have been granted
under the 1989 Plan or the 1993 Plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END AT FISCAL YEAR-END(2)
SHARES VALUE (#) ($)
ACQUIRED ON REALIZED(1) ------------------------- -------------------------
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------- ------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Winter, JB 0 316,075/220,763 $3,458,167/1,120,336
Champagne, JF 46,526 $510,965.35 25,090/110,664 $ 259,617/ 596,207
Mills, BA 0 54,085/ 72,005 $ 526,287/ 408,625
Smith, HC 5,000 $ 65,000.00 49,085/ 72,005 $ 583,787/ 408,625
Purdom, DJ 0 39,755/ 67,335 $ 416,439/ 353,663
- ---------------------
</TABLE>
(1) Based upon the market value when exercised minus the exercise price.
(2) Based upon the closing price ($16.50) of the Company's Common Stock on
December 31, 1994, as reported on the New York Stock Exchange -- Composite
Transactions. Options are in-the-money if the fair market value of the
underlying securities exceeds the exercise price of the options.
LONG-TERM INCENTIVE PLAN
Shown below is information with respect to long-term incentive awards for
the Named Executive Officers.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1994(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED
NUMBER OF PERFORMANCE PLANS(2)
SHARES, OR OTHER PERIOD -------------------------------
UNITS OR UNTIL MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
NAME OTHER RIGHTS (#) ($) ($) ($)
- ------------- ---------------- -------------------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Winter, JB (2) 88,720 3 years $69,624 $464,162 $928,323
Champagne, JF 40,630 3 years $31,650 $211,002 $422,004
Mills, BA 27,428 3 years $21,144 $140,960 $281,919
Smith, HC 27,822 3 years $21,562 $143,748 $287,496
Purdom, DJ 27,428 3 years $21,144 $140,960 $281,919
- ---------------------
</TABLE>
(1) The Company had no long-term incentive plan in 1992 or prior years.
The Long-Term Incentive Plan (the "Long-Term Plan") was initiated in
1993 in order to make a part of the compensation for certain key
executives dependent on the achievement of long-term performance
targets designed to increase shareholder value. The Long-Term Plan
consists of three-year
-10-
<PAGE>
cycles. The first cycle began January 1, 1993 and ends on December 31,
1995. The second cycle begins January 1, 1996 and ends on December 31,
1998. Fourteen key executives currently participate in the Long-Term
Plan. Executives are awarded target performance shares based upon a
percentage of salary (ranging from 40%-70% annually) divided by the
average share price of the Company's Common Stock in the year
preceding the first-year of the cycle. Performance share awards can
range from zero to two times the target award. The performance shares
are earned annually and are adjusted annually based upon the
achievement of pre-set performance targets. These performance targets
include cash cost per pound, pounds produced, and cash flow return on
investment measures. Awards vest at the end of the three-year cycle
and are paid in cash or shares of Common Stock (based upon the average
share price in the final cycle year). Targets and participants for the
second three-year cycle will be determined in 1996.
(2) Mr. Winter is also eligible to receive a non-stock price based long-
term bonus pursuant to the CEO Employment Agreement (as discussed on
pages 14 and 15). Amounts awarded under the CEO Employment Agreement
will offset any bonus awarded under the Long-Term Plan. Mr. Winter's
long-term bonus pursuant to the CEO Employment Agreement is measured
over a three-year period with a new cycle commencing each year. The
amount of the bonus is determined by the Board of Directors based upon
attainment of earnings per share goals, improvement in the market
price of the Company's Common Stock, and such other performance-
related factors as the Board of Directors shall consider. Mr. Winter's
bonus under the CEO Employment Agreement may not exceed 50% of his
average base salary over the three-year performance period. The
maximum amount assumes no salary increase in 1995 and 1996 and the
attainment of all performance factors considered by the Board of
Directors. In 1994, the Board of Directors made its determination of
Mr. Winter's bonus in part based upon a subjective evaluation by the
Compensation Committee of Mr. Winter's contribution toward earnings
per share goals, and otherwise based upon the factors utilized under
the Long-Term Plan described on pages 21 and 22. Each budgeted target
objective under the Long-Term Plan was exceeded for 1994.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Sundt,
Donahue, Cool, Goth, Rollins, Strauss, and Vogelstein. Except for Mr. Donahue,
who is the Chairman of the Board of the Company, none of the members of the
Compensation Committee is or has been an officer or employee of the Company or
any of its subsidiaries. Pursuant to a Standstill Agreement dated November 30,
1988 between Warburg, Pincus Capital Company, L.P. ("Warburg, Pincus") and the
Company (the "Standstill Agreement"), Warburg, Pincus designated, and the Board
nominated, Messrs. Strauss, Vogelstein, and Brody for election of the Company's
Board of Directors, each of whom has been elected for the Board of Directors.
Messrs. Strauss and Vogelstein currently serve on the Company's Compensation
Committee.
As part of the recapitalization (the "1988 Recaptialization") of the
Company, on November 30, 1988, Warburg, Pincus initially acquired an equity
investment in the Company of 930,000 shares of Series B Cumulative Convertible
Exchangeable Preferred Stock ("Series B Preferred Stock") and warrants to
purchase 1,000,000 shares of Class B Common Stock at an exercise price of $8.50
per share (the "Warburg Warrants") for $93 million. Warburg, Pincus immediately
resold 100,000 shares of the Series B Preferred Stock and 107,527 warrants to
other institutional investors. (The Company also issued 4,100,000 Public
Warrants in December 1986 (the "Public Warrants")). In December 1992, the
Company offered to exchange 15.446825 shares of its Common Stock for each share
of the Series B Preferred Stock outstanding. Warburg, Pincus' Series B
Preferred Stock was converted to 12,820,865 shares of Common Stock as a result
of its acceptance of that offer.
Prior to October 1992, the Company's Common Stock was divided into two
classes: Class B Common Stock and Class A Common Stock. The Class B Common
Stock carried 4 votes per share and was subject to a transfer restriction under
which shares transferred to a holder of more than 10% of the Company's voting
stock were automatically converted to one-vote Class A Common Stock. The Class
A Common Stock carried a veto power over further issuances of Class B Common
Stock, including issuances necessary to satisfy existing legal obligations
relating to the Series B Preferred Stock and outstanding warrants and options,
and in certain circumstances the Class A Common Stock possessed special voting
rights in elections of directors.
-11-
<PAGE>
On December 21, 1991, through several open market purchases, Warburg,
Pincus acquired 4,176,600 shares of the Company's Class B Common Stock for
approximately $21 million in cash. As Warburg, Pincus controlled over 10% of
the total voting power of the Company's capital stock at the time of these
acquisitions, these shares were immediately converted to shares of Class A
Common Stock.
In October 1992, the Company's stockholders amended the Company's
Certificate of Incorporation in order to eliminate the dual class Common Stock
and to streamline and simplify the Company's balance sheet. In connection with
this amendment, all outstanding shares of Class B Common Stock and Class A
Common Stock were converted into shares of a new, single class of Common Stock.
The new class of Common Stock possesses one vote on all matters properly coming
before the stockholders, including elections of the Board of Directors, is not
subject to any transfer restrictions, and possesses no veto power over the
issuance of any class of stock.
As of February 15, 1995, Warburg, Pincus owned 16,007,143 shares of Common
Stock, representing approximately 34.7% of the Company's Common Stock
outstanding, and 892,473 Warburg Warrants. Assuming full exercise of the
Warburg Warrants held by Warburg, Pincus and assuming no exercise of any other
Company warrants, Warburg, Pincus would own 36.0% of the Company's outstanding
Common Stock. Assuming full exercise of the Warburg Warrants held by Warburg,
Pincus and full exercise of all other Company warrants, Warburg, Pincus would
own 33.7% of the Company's outstanding Common Stock. Additionally, in
connection with its initial investment in the Company, and subject to
limitations described below, Warburg, Pincus and its affiliates were granted the
right, until August 31, 1998, for as long as they own at least 1,500,000 shares
of the Company's Common Stock, to subscribe for their respective pro rata
portion of any additional shares of Common Stock (or securities convertible,
exchangeable, or exercisable into Common Stock) issued by the Company for cash.
Warburg, Pincus and its affiliates have waived these rights in respect of the
outstanding Public Warrants.
Under the Standstill Agreement, which expires in 1998, the Company granted
Warburg, Pincus the right to nominate up to three Magma directors, the exact
number to be determined from time to time, based upon Warburg, Pincus and
certain of its affiliates' percentage ownership of the Company's equity
securities. The number of directors nominated by Warburg, Pincus are to be
divided as evenly as possible among the Company's three director classes.
Warburg, Pincus has also agreed to vote its Company shares, and to cause certain
of its affiliates to vote their Company shares, in favor of the election of two
management directors and at least six independent directors. The Standstill
Agreement also provides that Warburg, Pincus and certain of its affiliates may
not acquire more than 45% of the voting power of the Company's fully-diluted
common equity (based on a calculation defined in the Standstill Agreement)
without the approval of a majority (but not less than two) of the Company's
independent directors, and that Warburg, Pincus and certain affiliates may not
transfer any of the Company's voting securities except (i) in connection with
certain extraordinary transactions including a sale of the Company endorsed by a
majority (but not less than two) of its independent directors and subject to
certain other restrictions, (ii) by means of a distribution to its partners in
compliance with or pursuant to an exemption from the registration requirements
of the Securities Act of 1933, as amended (the "Act"), (iii) in compliance with
Rule 144 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or (iv) through a public offering designed to achieve a widespread
distribution. As of February 15, 1995, Warburg, Pincus controlled 32.4% of the
Company's total voting power, as calculated under the Standstill Agreement.
Certain transferees of Warburg, Pincus have agreed with the Company not to
acquire additional Magma voting securities (other than in the ordinary course of
business as a broker-dealer and market-maker) and to abide by the voting and
transfer restrictions equivalent to those applicable to Warburg, Pincus. The
shares that may be held by these transferees from time to time reduce the
maximum permitted voting power of Warburg, Pincus so long as they are owned by
such transferees or any of their respective affiliates.
In 1990, the Company entered into an agreement with Warburg, Pincus
Counsellors, Inc., an affiliate of Warburg, Pincus, to manage approximately 10%
of the fixed assets in the Company's pension fund. For these services, Warburg,
Pincus Counsellors, Inc. received a fee of approximately $162,179 for fiscal
year 1994. The Board of Directors has determined that the fee for such services
is competitive with comparable managers.
In 1992, the Company entered into an Agreement with Warburg, Pincus
Conunsellors, Inc., to manage an investment portfolio consisting of
approximately 25% of the Company's cash and short-term investments. For these
services Warburg, Pincus Counsellors, Inc. received a fee of approximately
$160,000 for fiscal year 1994. The Board of Directors has determined that the
fee for such services is competitive with comparable managers.
-12-
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the return of the Company's
Common Stock against the cumulative return of the S & P Metals Index and the S &
P 500 for the period of five-fiscal years commencing January 1990 and ending
December 1994. The comparison assumes $100 was invested on December 31, 1989 in
the Company's Common Stock and in each of the foregoing indices, and assumes
reinvestment of dividends. Each of the lines reflects the dollar value of the
respective indice during such five-year time period.
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCK RETURN
1990 THROUGH 1994
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Magma Copper Company 100.0 90.2 114.6 261.0 258,5 322.0
S & P 500 100.0 96.9 126.3 135.9 149.5 151.6
S & P Metals Index(1) 100.0 94.9 107.1 114.9 128.0 149.4
- -----------------------
</TABLE>
(1) Includes: Asarco Inc., Cyprus Amax Minerals Co., Inco Ltd., and
Phelps Dodge Corp.
RETIREMENT PLANS
On November 16, 1994, the Company amended its Magma Copper Company Special
Executive Supplemental Benefit Plan (the "Supplemental Plan") to become the
basic retirement plan for selected executives, including the Named Executive
Officers. The following table shows the estimated annual retirement benefits
payable on a straight life annuity basis to participating employees, based on
average earnings and years of service at retirement.
SUPPLEMENTAL PLAN TABLE
<TABLE>
<CAPTION>
HIGHEST FIVE
YEAR AVERAGE
COMPENSATION
DURING THE
LAST 10 YEARS OF SERVICE AT RETIREMENT
YEARS OF ------------------------------------------------
EMPLOYMENT 15 20 25 30 35
- ------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 11,181 $ 14,908 $ 18,635 $ 22,362 $ 26,089
75,000 17,744 23,658 29,573 35,487 41,402
100,000 30,000 40,000 50,000 60,000 70,000
125,000 37,500 50,000 62,500 75,000 87,500
150,000 45,000 60,000 75,000 90,000 105,000
175,000 52,000 70,000 87,500 105,000 122,500
200,000 60,000 80,000 100,000 120,000 140,000
225,000 67,500 90,000 112,500 135,000 157,500
250,000 75,000 100,000 125,000 150,000 175,000
275,000 82,500 110,000 137,500 165,000 192,500
300,000 90,000 120,000 150,000 180,000 210,000
400,000 120,000 160,000 200,000 240,000 280,000
450,000 135,000 180,000 225,000 270,000 315,000
500,000 150,000 200,000 250,000 300,000 350,000
600,000 180,000 240,000 300,000 360,000 420,000
700,000 210,000 280,000 350,000 420,000 490,000
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
800,000 240,000 320,000 400,000 480,000 560,000
900,000 270,000 360,000 450,000 540,000 630,000
1,000,000 300,000 400,000 500,000 600,000 700,000
- ----------------------
</TABLE>
Compensation considered for purposes of determining retirement benefits
under the Supplemental Plan includes salary and bonus compensation disclosed as
annual compensation in the Summary Compensation Table on pg. 6, but not
restricted stock, stock options or SARs, long-term incentive plan payout
compensation, or amounts listed in such table as "All Other Compensation."
As of December 31, 1994, the estimated years of credited service pursuant
to the Supplemental Plan were 6 for J. B. Winter, 6 for J. F. Champagne, 20 for
H.C. Smith, 5 for B.A. Mills, and 5 for D.J. Purdom.
Amounts payable under the Supplemental Plan are reduced by amounts
receivable under the Company's regular retirement benefit plan, the Retirement
Plan for Salaried Employees of Magma Copper Company, under the Magma Copper
Company Excess Benefit Plan, under the Magma Copper Company Supplemental Benefit
Plan, and under the CEO Retirement Plan described on pages 14 and 15.
Each participant in the Supplemental Plan is entitled to receive on his or
her normal retirement date (age 65) an annual benefit in an amount equal to the
product of the participant's years of credited service multiplied by 2% of the
participant's Final Average Compensation. "Final Average Compensation" is
defined as the highest five years average salary during the last ten years of
employment. Participants become vested in the benefits under the Supplemental
Plan after attaining age 45 and after being credited with ten or more years of
service. The Supplemental Plan allows participants who retire between the ages
of 55 and 62, inclusive, to receive an actuarially reduced benefit. No
reduction in benefits under the Supplemental Plan is made for social security
benefits.
COMPENSATION OF DIRECTORS
During fiscal year 1994, the directors, other than Mr. Donahue and Mr.
Winter, received an annual retainer of $16,000 if the director was not the
chairman of a committee or $18,000 if the director was the chairman of a
committee. Other than Mr. Winter, all directors receive an additional fee of
$650 for each regular and special Board meeting attended. Directors, other than
Mr. Donahue and Mr. Winter, who serve on committees of the Board also receive
$650 for each committee meeting attended. During 1994, Mr. Donahue received
$12,500 per month for his services as Chairman of the Board of Directors of the
Company. Effective January 1, 1995, Mr. Donahue began receiving $6,250 per
month for his services as Chairman of the Board of Directors of the Company,
plus the retainer and meeting fees described above. Pursuant to the CEO
Employment Agreement, Mr. Winter does not receive any additional compensation
for his services as a director of the Company. (See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" on pages 14 and
15). Directors are reimbursed for reasonable expenses incurred in attending
Board and committee meetings.
Directors of the Company who are not employees of the Company or any
subsidiary and who receive and retain (as opposed to transferring to their
respective employers) a regular annual retainer ("Eligible Directors") may elect
to receive stock options in lieu of or as partial payment of their annual
retainer by participating in the Magma Copper Company 1989 Stock Option Plan for
Non-Employee Directors (the "1989 Director Plan"). Elections to participate in
the 1989 Director Plan for any given plan year (commencing each January 1) must
be made by filing an irrevocable election with the Company at least five days
prior to the first day of the fourth quarter immediately preceding the plan year
to which the election relates. The election filed with the Company must
indicate the amount of the retainer (which may be all or any 25% increment of
the retainer) that the electing director desires to receive in options rather
than cash. Currently, seven of the Company's nonemployee directors are eligible
to participate in the 1989 Director Plan. Four directors elected to participate
for the 1994 plan year, and five have elected to participate for the 1995 plan
year. Options are granted quarterly to each eligible member who has elected to
participate for the respective plan year. The exercise price of a 1989 Director
Plan option is equal to 50% of the fair market value of the Common Stock at the
date of grant. The number of shares subject to the options granted to a
participant each quarter is equal to 25% of the amount of the annual retainer
elected by the participant to be applied towards options in lieu of compensation
for that plan year divided by the difference between the fair market value of
-14-
<PAGE>
the Company's Common Stock determined at the date of grant and the exercise
price of the option.
Options granted under the 1989 Director Plan may be exercised at any time
during the period beginning on the date specified in the option agreement
pursuant to which the options are granted (which date will be at least six
months from the date of grant) and ending 20 years after the date of grant.
Generally, if a participant ceases to be a director on account of retirement or
for any other reason except death or total and permanent disability, such
director's options will expire on the earlier of (i) the fifth anniversary of
the date that the director ceased to be a member of the Board or (ii) the
expiration date specified in the option agreement. If a director dies or
becomes permanently and totally disabled during such five-year period, such
director's options will expire on the fifth anniversary of death or total and
permanent disability unless by their terms they expire earlier. If a director
dies or becomes permanently disabled while actively serving as a director, such
director's options will expire on (i) the fifth anniversary of the date of death
or total and permanent disability or (ii) the expiration date specified in the
option agreement.
The following table sets forth the Common Stock options received by Company
directors in lieu of the elected portion of their respective annual retainers
pursuant to the 1989 Director Plan for fiscal year 1994. As of December 31,
1994, no options had been exercised. The individuals listed below are the only
directors who have participated in the 1989 Director Plan for fiscal year 1994.
<TABLE>
<CAPTION>
NUMBER OF AVERAGE EXERCISE FAIR MARKET
DIRECTOR SHARES(1) PRICE(2) VALUE(3)
- ---------- --------- ---------------- -----------
<S> <C> <C> <C>
JR Kennedy 2,040 $7.891 $16.50
TW Rollins 510 $7.891 $16.50
HB Sargent 1,149 $7.891 $16.50
HW Sundt 1,460 $7.891 $16.50
- ------------------
</TABLE>
(1) For Messrs. Kennedy, Rollins, Sargent, and Sundt, the number of options
received represent 100%, 25%, 50%, and 50% of their respective annual
retainers.
(2) The average exercise price is based upon shares granted on March 31, June
30, September 30, and December 31, 1994 with an exercise price of $7.063,
$7.563, $8.688, and $8.250 respectively. On March 31, 1994, Messrs.
Kennedy, Rollins, Sargent, and Sundt received 566, 142, 319, and 319
options, respectively. On June 30, 1994, Messrs. Kennedy, Rollins,
Sargent, and Sundt received 529, 132, 298, and 298 options, respectively.
On September 30, 1994, Messrs. Kennedy, Rollins, Sargent, and Sundt
received 460, 115, 259, and 259 options, respectively. On December 31,
1994, Messrs. Kennedy, Rollins, Sargent, and Sundt received 485, 121, 273,
and 273 options, respectively.
(3) The Fair Market Value equals the closing price of one share of the
Company's common stock at December 31, 1994, as reported on the New York
Stock Exchange -- Composite Transactions.
Under the Magma Copper Company 1992 Restricted Stock Plan for Non-Employee
Directors (the "1992 Directors Plan"), each Eligible Director serving as a
director on January 1 of any year receives an automatic grant of 1000 shares of
Common Stock at the beginning of each calendar year (except for 1992, for which
year grants were issued on May 14, 1992, the date the Plan was approved by the
Company's Shareholders). Such stock is nontransferable for a period of six
months, and may be subject to other restrictions.
As of March 1, 1995, each of Messrs. Cool, Donahue, Goth, Kennedy, Rollins,
Sargent, Strauss, and Sundt have participated in the 1992 Directors Plan, and,
pursuant to such plan, each of such persons has received aggregate grants of
4,000 shares of the Company's Common Stock. With respect to the shares granted
to each of such directors, 1,000 were granted when the Company's closing stock
price on the New York Stock Exchange was $11.25; 1,000 when such price was
$14.25; 1,000 when such price was $13.00; and 1,000 when such price was $16.50.
-15-
<PAGE>
EMPLOYMENT CONTRACTS AND
TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENT OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
In 1988, the Company executed a five-year Employment Agreement (which has
been amended to provide one-year extensions annually to 1997) (the "CEO
Employment Agreement") with J. Burgess Winter, its President and Chief Executive
Officer, providing for a one-time cash bonus of $100,000 and a grant of 18,900
shares of stock, plus a base salary of $260,000 per year. Pursuant to the CEO
Employment Agreement, Mr. Winter is eligible to receive bonus payments based
upon the Company's attainment of certain earnings goals. In 1994, Mr. Winter's
base salary was increased to $550,000 per year and he received a bonus of
$550,000 under the Company's Incentive Compensation Plan, which offsets any
short-term bonus he would have received under the CEO Employment Agreement for
services rendered during 1993. During 1994, Mr. Winter also received a long-term
bonus of $222,917, and the restricted stock and option grants discussed on pages
6 and 7, respectively. Under the Magma Copper Company Chief Executive Officer
Supplemental Retirement Plan (the "CEO Retirement Plan"), Mr. Winter will
receive from the CEO Retirement Plan, and from all other retirement benefit
plans established by the Company, a total benefit equal to 60% of his average
compensation during the highest compensated three calendar years occurring in
the last five calendar years of his employment. If Mr. Winter leaves the Company
before the occurrence of the earlier of a change in control or his attainment of
age 62, no benefit is payable. The CEO Employment Agreement further provides for
disability, life insurance, and other fringe benefits, as well as pension
benefits that are offset by the CEO Retirement Plan. The CEO Employment
Agreement automatically terminates upon the death or long-term disability of Mr.
Winter, and may be terminated by the Company for cause or by Mr. Winter at any
time upon 120 days' written notice. The CEO Employment Agreement also contains a
non-compete covenant which restricts Mr. Winter from engaging in certain
competitive activities for two years following the termination of his employment
with the Company.
On November 11, 1993, the Board of Directors authorized the execution of a
separate Retention and Severance Agreement with Mr. Winter (the "Retention and
Severance Agreement") to provide certain benefits in the event of a change in
control of the Company. This agreement became effective on December 22, 1993.
A "change in control" under this Agreement includes: (i) a merger or
consolidation with any person other than Warburg, Pincus in which the Company's
shareholders prior to the change in control do not retain 65% or more of the
voting power of the merged or consolidated company, (ii) the acquisition of 35%
or more of the voting power of the Company's Common Stock, by a party other than
Warburg, Pincus, which results in Warburg, Pincus' percentage ownership to be
less than 10% greater than any other owner of the Company's Common Stock, (iii)
a change in identity of the majority of the members of the Board within any 24
month period, (iv) a sale of all or substantially all of the assets of the
Company, (v) a transfer of all or substantially all of the Company's assets to a
partnership or joint venture in which the Company's interest is less than 50%,
and (vi) a complete liquidation of the Company.
The benefits that are provided under the Retention and Severance Agreement
in the event of a change in control include: (i) lost value compensation in the
event that Mr. Winter is unable to freely exercise stock options or sell or
exchange Common Stock acquired pursuant to restricted stock grants under the
1987 Plan, the 1989 Plan, or the 1993 Plan, or (ii) in the event that certain
defined termination events occur following a change in control: (a) an
extension, for a period of two years, of life, health, and disability benefits,
(b) a pension supplement equal to the amount Mr. Winter would have received had
his pension benefits under the Company's regular retirement plan been increased
on the basis of two additional years of service, (c) a lump-sum payment equal to
three times the sum of Mr. Winter's base salary and his target annual incentive
compensation bonus, and (d) payment by the Company of any excise taxes imposed
pursuant to Section 4999 of the Internal Revenue Code. Certain of these
benefits are not payable under the Retention and Severance Agreement to the
extent that they are provided for under other Company benefit plans.
Additionally, the Retention and Severance Agreement provides Mr. Winter
with retention benefits encouraging him to stay with the Company should a change
in control occur. These retention benefits include: (i) the extension of the
term of the CEO Employment Agreement by two years during which Mr. Winter would
continue to receive compensation at a rate comparable to his rate of
compensation on the date of the change in control, (ii) payment of bonuses on
the first and second anniversaries of the date of the change in control equal to
-16-
<PAGE>
75% of the sum of his annual base salary and target annual incentive
compensation bonus, and (iii) payment by the Company of any excise taxes imposed
pursuant to Section 4999 of the Internal Revenue Code. As of March 1, 1995, no
change in control event has occurred under the Retention and Severance
Agreement. The Retention and Severance Agreement has an initial three-year term,
and is automatically renewed for one-year extensions unless proper notice is
given by the Company that the agreement will not be extended.
OTHER EMPLOYMENT AGREEMENTS
On November 11, 1993, the Board of Directors authorized the execution of
employment agreements (the "Employment Agreements") with certain executives of
the Company to replace employment agreements expiring on December 21, 1993.
These Employment Agreements became effective December 22, 1993. All of the
Named Executive Officers, except Mr. Winter, have entered into such agreements
with the Company. Mr. Winter's comparable agreement, the Retention and
Severance Agreement, is discussed above. The Employment Agreements provide for
certain benefits to these executives upon the occurrence of a "change in
control" of the Company. A "change in control" under the Employment Agreements
is defined to include: (i) a merger or consolidation with any other
corporation, other than Warburg, Pincus, in which the Company's shareholders
prior to the change in control do not retain 65% or more of the voting power of
the merged or consolidated company, (ii) the acquisition of 35% or more of the
voting power of the Company's Common Stock by a party other than the Warburg,
Pincus which results in Warburg, Pincus' percentage ownership to be less than
10% greater than any other owner of the Company's Common Stock, (iii) a change
in identity of the majority of the members of the Board within any 24 month
period, (iv) a sale of all or substantially all of the assets of the Company,
(v) a transfer of all or substantially all of the Company's assets to a
partnership or joint venture in which the Company's interest is less than 50%,
and (vi) a complete liquidation of the Company.
The benefits that are provided in the event of a change in control include:
(i) lost value compensation in the event that an executive is unable to freely
exercise stock options or is unable to freely sell or exchange Common Stock
acquired pursuant to restricted stock grants under the 1987 Plan, the 1989 Plan,
or the 1993 Plan, or (ii) in the event that certain defined termination events
occur following the change in control: (a) an extension, for a period of two
years, of life, health, and disability benefits, (b) a pension supplement equal
to the amount that the executive would have received had the executive's pension
benefits under the Company's regular retirement plan been increased on the basis
of two additional years of service, (c) a lump sum payment equal to two times
the sum of the executive's base salary and the executive's target annual
incentive compensation bonus, and (d) payment by the Company of any excise taxes
imposed pursuant to Section 4999 of the Internal Revenue Code. Certain of these
benefits are not payable under the Employment Agreements to the extent that they
are provided under other Company benefit plans.
Further, the Employment Agreements provide executives with retention
benefits should a change in control of the Company occur. The retention
benefits are designed to encourage the executives to remain with the Company
following such a change in control, and include: (i) the extension of the term
of the Employment Agreements by two years during which each executive would
continue to receive compensation at a rate comparable to his or her respective
rate of compensation on the date of the change in control, (ii) payment of
bonuses on the first and second anniversaries of the date of the change in
control equal to 75% of the sum of the annual base salary and target annual
incentive compensation bonus of the executive, and (iii) payment by the Company
of any excise taxes imposed pursuant to Section 4999 of the Internal Revenue
Code. As of March 1, 1995, no change in control event has occurred. These
Employment Agreements have an initial three-year term, and provide for automatic
one-year extensions, unless proper notice is given by the Company that the
Employment Agreements will not be extended.
OTHER CHANGE IN CONTROL ARRANGEMENTS
The Named Executive Officers have received awards of stock options under
the 1989 Plan and the 1993 Plan and restricted stock under the 1987 Plan and the
1989 Plan.
Under the 1989 Plan, upon the dissolution or liquidation of the Company or
a merger or consolidation in which the Company is not the surviving or resulting
corporation, or upon the sale of all or substantially all of the assets of the
-17-
<PAGE>
Company, the Compensation Committee (the "Committee") may determine that: (i)
all outstanding options and stock appreciation rights shall be fully vested and
exercisable, (ii) some or all restrictions on restricted stock shall lapse
immediately, unless provision is made for the continuance of the 1989 Plan and
the assumption of the liability for outstanding restricted stock awards, or
(iii) there shall be the substitution of new incentive awards by the successor
corporation or an affiliate thereof, with appropriate adjustments as to the
number and kind of stock and prices.
The 1989 Plan provides that in the event of a "change in control" of the
Company, the Committee may accelerate the exercise date and/or the vesting
schedules of any or all outstanding stock options, cancel restrictions on
restricted stock, and pay cash in exchange for the cancellation of outstanding
stock options. A "change in control" is deemed to have occurred under the 1989
Plan if: (i) any person becomes the beneficial owner of 25% or more of the
combined voting power of the Company's securities, (ii) any person makes a
filing under Section 13(d) of the Exchange Act with respect to the Company,
(iii) a change occurs which is required to be reported in response to Item 6(e)
of Schedule 14A under the Exchange Act, (iv) over any 12 month period, the
members of the Board of Directors of the Company at the beginning of such period
cease to constitute at least a majority of the Board of Directors, (v) the
Company's stockholders approve a merger or consolidation of the Company with
another corporation where the Company is not the surviving corporation, or (vi)
the stockholders of the Company approve a complete liquidation of the Company or
a sale or disposition of all or substantially all of the Company's assets.
Restricted stock and stock option agreements issued to Mr. Winter and the
Named Executive Officers who received stock and option grants under the 1989
Plan prior to November 7, 1991, provide that a change in control occurs if any
person becomes the beneficial owner of 35% or more of the voting power of the
Company's outstanding securities or an event described in clause (iii) or (iv)
of the preceding paragraph occurs. As a result of accumulations of Common Stock
by Warburg, Pincus, a change in control occurred in 1991 under these agreements.
As a result of the change in control, all stock options issued to such
executives prior to November 7, 1991, have become fully vested. Stock option
agreements entered into after November 7, 1991, provide for an automatic
acceleration of exercisability upon the occurrence of a 50% change in control.
A 50% change in control under such agreements includes the acquisition of 50% or
more of the voting power of the Company's securities or a sale of all or
substantially all of the Company's assets in a transaction in which the Company
does not maintain at least a majority interest in the acquiring entity. Upon
the occurrence of a 50% change in control, stock options issued to such
executives after November 7, 1991, will vest, to the extent not already vested,
25% as of the date of the change in control, 50% as of the first anniversary of
the change in control, and 25% as of the second anniversary of the change in
control (if the executive is then employed by the Company). If the executive is
discharged (other than for cause) or otherwise resigns upon the occurrence of
certain termination events at any time after a 50% change in control, the stock
options then held by the executive will expire six months after the date of
termination.
Restricted stock awards granted under the 1987 Plan prior to November 7,
1991, contain change in control provisions similar to those contained in the
restricted stock agreements issued under the 1989 Plan prior to November 7,
1991. Therefore, all such restricted stock will become fully vested in the
event of a "termination event", such as involuntary termination or voluntary
termination after significant demotion or pay reduction. Restricted stock
awards granted to executives under the 1987 Plan after November 7, 1991, provide
that upon the occurrence of a 50% change in control together with the occurrence
of a "termination event", all such restricted stock grants will vest immediately
as of the date of such executive's termination. As of March 1, 1995, no stock
options granted under the 1987 Plan were held by the Named Executive Officers.
In the event of a change in control of the Company under the 1993 Plan, the
Committee may accelerate the exercise dates of any or all outstanding stock
options and the vesting dates of any restricted stock, and may grant stock
appreciation rights to holders of stock options. A "change in control" shall be
deemed to have occurred under the 1993 Plan if: (i) a change occurs which is
required to be reported in response to Item 6(e) of Schedule 14A under the
Exchange Act, (ii) any person, other than Warburg, Pincus, becomes the owner of
35% or more of the combined voting power of the Company's securities, (iii)
there is a change in the identity of the majority of the members of the Board
over a 12-month period, (iv) there is a sale of all or substantially all of the
Company's assets, (v) there is a transfer of all or substantially all of the
Company's assets to a partnership or joint venture where the Company's interest
is 50% or less, or (vi) there is a resolution passed by the Board declaring a
-18-
<PAGE>
change in control due to the acquisition of outstanding securities by Warburg,
Pincus, resulting in such partnership's ownership of 50% or more of the voting
power of the Company's stock.
Under the Supplemental Plan, if a participant is terminated other than for
good reason, as defined in the Supplemental Plan, within one year following a
50% change in control, then, notwithstanding any other provisions of the
Supplemental Plan, the Company must distribute to such participant in a lump sum
(or through acquisition of an annuity contract) an amount actuarially equivalent
to the value of the benefits that the participant would have been entitled to
under the Supplemental Plan upon achievement of his or her normal retirement
age.
Deferred amounts under the Company's Deferred Compensation Plan are payable
upon a participant's termination following a change in control of the Company.
A "change in control", as defined under the Deferred Compensation Plan, includes
the acquisition by a person or group of beneficial ownership of 35% or more of
the voting power of the Company's outstanding securities. As a result of the
1991 acquisitions of the Company's Common Stock by Warburg, Pincus, the change
in control provision of the Deferred Compensation Plan was triggered.
Accordingly, employees participating in such plan will be entitled to receive
deferred compensation upon termination of their employment with the Company.
Further, the Deferred Compensation Plan may not be amended without participant
consent except for certain specified reasons, including amendments necessary to
ensure that the Deferred Compensation Plan is in compliance with applicable law.
The Company's Long-Term Plan provides for vesting in a least 100% of the
cycle's target award prorated for years of participation as of the date of a
change in control. A "change in control" shall be deemed to have occurred under
the Long-Term Plan: (i) if any person, other than Warburg, Pincus, acquires 50%
or more of the combined voting power of the Company, (ii) upon a change in the
identity of a majority of the members of the Board within any 12-month period,
(iii) upon the sale of all or substantially all of the Company's assets, (iv)
upon the transfer of all or substantially all of the Company's assets to a
partnership or joint venture in which the Company's interest is 50% or less, or
(v) if Warburg, Pincus acquires 50% or more of the combined voting power of the
Company and a majority of the members of the Board serving immediately prior to
such event pass a resolution acknowledging that a change in control has
occurred.
Under the CEO Retirement Plan, in the event of a change in control followed
by involuntary termination not due to cause or by voluntary separation following
a substantial pay reduction or demotion, the participant is entitled to a normal
retirement benefit, regardless of attained age. A "change in control" for such
purpose includes an acquisition of 50% or more of the Company's voting
securities, and similar events.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee"), comprised primarily
of independent members of the Company's Board of Directors, closely oversees
executive compensation programs at the Company. The Committee believes that
these programs should coordinate executive actions with well-defined strategic
goals. Accordingly, the Company's compensation programs are designed to:
. create an on-going focus by management on key internal performance
measures that drive shareholder value;
. make a significant portion of pay dependent upon the attainment of
specified goals in order to better link compensation with performance;
. attract, develop, and retain high-quality executives with competitive
compensation opportunities;
. provide a strong financial incentive for meeting and exceeding
performance goals; and
. create a balance between short-term performance measures and long-term
strategic direction and decisions through long-term incentives linked
to share value.
The discussion that follows describes the performance results that
influenced the Committee's compensation decisions and the various components of
the compensation programs.
-19-
<PAGE>
EXHIBIT 99.3
<PAGE>
TENDER AGREEMENT
----------------
TENDER AGREEMENT (this "Agreement"), dated November 30, 1995, by and
between The Broken Hill Proprietary Company Limited, a Victoria, Australia
corporation ("Parent"), and Warburg Pincus Capital Company, L.P., a Delaware
limited partnership ("Seller").
RECITALS
--------
Concurrently herewith, Parent, certain subsidiaries of Parent and
Magma Copper Company (the "Company"), a Delaware corporation, are entering into
an Agreement and Plan of Merger of even date herewith (the "Merger Agreement";
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement), pursuant to which Sub will make a tender offer (the
"Offer") for all outstanding shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company, at a price of $28 per share (the "Offer
Price"), net to the seller in cash, to be followed by a merger (the "Merger") of
Sub with and into the Company.
As of the date hereof, Seller beneficially owns shares of Common Stock
(such shares, together with any shares of Common Stock acquired after the date
hereof and prior to the termination hereof, whether upon the exercise of
options, conversion of convertible securities or otherwise, collectively,
referred to herein as the "Shares").
As a condition to its willingness to enter into the Merger Agreement
and Sub's willingness to make the Offer, Parent has required that Seller agree,
and Seller has agreed, to tender in the Offer all of the Shares owned by Seller
on the terms and conditions provided for herein.
AGREEMENT
---------
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Agreement to Tender and Vote.
----------------------------
1.1 Tender. Seller hereby agrees to validly tender pursuant to the
------
Offer, and not withdraw, all of the Shares.
<PAGE>
1.2 Voting. Seller hereby agrees that, during the time this
------
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, Seller shall (a) vote the Shares in favor of the Merger; (b)
vote the Shares against any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (c) vote
the Shares against any action or agreement (other than the Merger Agreement or
the transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company and its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company and its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; or (iii) any change in the
Company's management or in the board of directors of the Company (the "Board"),
except as otherwise agreed to in writing by Parent.
2. Expiration. This Agreement and Seller's obligation to tender and
----------
vote the Shares as provided hereto shall terminate on the Expiration Date. As
used herein, the term "Expiration Date" means the first to occur of (a) the
Effective Time, (b) termination of the Merger Agreement in accordance with its
terms, (c) the Board of Directors of the Company having withdrawn its approval
or recommendation of the Offer or the Merger, (d) the Board of Directors of the
Company having modified its approval of the Offer or the Merger in a manner
adverse to Parent, and (e) written notice of termination of this Agreement by
Parent to Seller.
3. Representations and Warranties.
------------------------------
3.1 Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to Seller as follows:
(a) Due Authorization. This Agreement has been duly authorized by
-----------------
all necessary corporate action on the part of Parent, has been duly
executed and delivered on behalf of Parent by a duly authorized officer of
Parent, and is valid, binding and enforceable against Parent in accordance
with its terms except to the extent that enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
-2-
<PAGE>
other similar laws relating to or affecting the enforcement of creditors'
rights generally or by equitable principles. The execution, delivery and
performance of this Agreement by Parent and the consummation by it of the
transactions contemplated hereunder do not require the consent, waiver,
approval, license or authorization of or any filing with any person or
domestic public authority and will not violate, result in a breach of or
the acceleration of any obligation under, or constitute a default under,
any provision of Parent's charter or by-laws, or any indenture, mortgage,
lease, agreement, contract, instrument, order, judgment, ordinance,
regulation or decree specifically applicable to Parent, the effect of which
could impair the ability of Parent to perform its obligations under this
Agreement. Parent is a corporation duly organized, validly existing and in
good standing under the laws of Victoria, Australia and has the full
corporate power and authority to execute, deliver and perform this
Agreement.
(b) Distribution. Parent is acquiring the Shares for its own account
------------
for investment only and not with a view to the distribution or resale of
the Shares so acquired. Any sale, transfer or other disposition of the
Shares by Parent will be made in compliance with all applicable provisions
of the 1933 Act, and the rules and regulations thereunder.
3.2 Representations and Warranties of Seller. Seller hereby
----------------------------------------
represents and warrants to Parent as follows:
(a) Due Authorization. This Agreement has been duly authorized by
-----------------
all necessary partnership action on the part of Seller, has been duly
executed and delivered by a duly authorized officer of Seller, and is
valid, binding and enforceable against Seller in accordance with its terms,
except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the enforcement of creditors' rights
generally or by equitable principles. The execution, delivery and
performance of this Agreement by Seller and the consummation by it of the
transactions contemplated hereunder do not require the consent, waiver,
approval, license or authorization of or any filing (other than in
compliance with the 1933 Act, the Exchange Act, the Hart-Scott-Rodino Act,
the rules of the New York Stock Exchange, or securities or blue sky laws),
with any person or domestic public authority and
-3-
<PAGE>
will not violate, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of Seller's
restriction set forth in the Certificate of Limited Partnership or
Agreement of Limited Partnership, or any indenture, mortgage, lease,
agreement, contract, instrument, order, judgment, ordinance, regulation or
decree specifically applicable to Seller, the effect of which would be
material and adverse to the ability of Seller to consummate the
transactions contemplated in this Agreement. Seller is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the full partnership power and
authority to execute, deliver and perform this Agreement.
(b) Consent of Independent Directors. Prior to the execution and
--------------------------------
delivery of this Agreement, Seller has obtained written approval of the
Company, in accordance with the terms of the Standstill Agreement dated
November 30, 1988 between Seller and the Company (the "Standstill
Agreement"), of the transactions contemplated in this Agreement, including
the approval of a majority (but not less than two) of the Independent
Directors of the Company (as such term as defined in the Standstill
Agreement) to tender and vote all of the Shares as contemplated by this
Agreement.
(c) Shares. Seller beneficially owns all of the Shares, and has
------
good and marketable title thereto, free and clear of all claims, liens,
encumbrances, security interests and charges of any nature whatsoever
(together, "Liens") other than the restrictions on transfer set forth in
the Standstill Agreement. Upon the tender of the Shares pursuant to the
Offer, Seller shall transfer to the Parent good and valid title to the
Shares free and clear of all Liens.
4. Certain Covenants of Seller. Except in accordance with the terms
---------------------------
of this Agreement, Seller hereby covenants and agrees as follows:
4.1 No Solicitation. Seller shall not, directly or indirectly,
---------------
solicit any proposal by any person or entity (other than Parent or any affiliate
of Parent) which constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal. Seller will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
-4-
<PAGE>
4.2 Restriction on Transfer, Proxies and Non-Interference. Seller
-----------------------------------------------------
hereby agrees, while this Agreement is in effect, and except as contemplated
hereby, not to (i) sell, transfer, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Shares or (ii) grant any proxies, deposit any Shares
into a voting trust or enter into a voting agreement with respect to any Shares
or (iii) take any action that would make any representation or warranty of
Seller contained herein untrue or incorrect or have the effect of preventing or
disabling Seller from performing his obligations under this Agreement.
4.3 Fiduciary Duties. Notwithstanding anything in this Agreement to
----------------
the contrary, the covenants and agreements set forth herein shall not prevent
any of the Seller's designees serving on the Company's Board of Directors from
taking any action, subject to the applicable provisions of the Merger Agreement,
while acting in such designee's capacity as a director of the Company.
5. Further Assurances. From time to time, at the other party's
------------------
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
6. Miscellaneous.
-------------
6.1 Entire Agreement; Assignment. This Agreement (i) constitutes the
----------------------------
entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (ii) shall not
be assigned by operation of law or otherwise, provided that Parent may assign
its rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
6.2 Amendments. This Agreement may not be modified, amended, altered
----------
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
-5-
<PAGE>
6.3 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Seller:
Warburg Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: John L. Vogelstein
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
If to Parent:
The Broken Hill Proprietary
Company Limited
BHP Tower
600 Bourke Street
Melbourne, Victoria
3000, Australia
Attention: Corporate Secretary
copy to:
Arnold & Porter
399 Park Avenue
New York, New York 10022
Attention: Joseph Handros, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
-6-
<PAGE>
6.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
6.5 Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
6.6 Counterparts. This Agreement may be executed in two
------------
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.7 Descriptive Headings. The descriptive headings used herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
6.8 Severability. Whenever possible, each provision or portion of
------------
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
-7-
<PAGE>
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be
duly executed as of the day and year first above written.
THE BROKEN HILL PROPRIETARY
COMPANY LIMITED
By: /s/ Graeme W. McGregor
---------------------------
Name: Graeme W. McGregor
Title: Executive General
Manager
WARBURG PINCUS CAPITAL
COMPANY, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ John L. Vogelstein
----------------------------
Name: John L. Vogelstein
Title: General Partner
-8-
<PAGE>
EXHIBIT 99.4
<PAGE>
MAGMA COPPER COMPANY
7400 North Oracle Road
Suite 200
Tucson, Arizona 85704
October 30, 1995
The Broken Hill Proprietary
Company Limited
BHP Tower-Rourke Place
600 Rourke Street
Melbourne, Victoria 3000
Australia
Attention: Mr. J.K. Ellis
Dear Sirs:
You have requested information concerning Magma Copper Company (the
"Company") in connection with a possible transaction with the Company or its
shareholders. You will treat confidentially any information furnished to you by
or on behalf of the Company (the "Evaluation Material"; provided, however, that
the term "Evaluation Material" does not include, and your confidentiality
obligations hereunder do not apply to, (i) information which was or becomes
generally available on a non-confidential basis or (ii) has been independently
acquired or developed by you without violating any of your obligations under
this agreement).
The Evaluation Material will be used solely for the purpose of evaluating
possible transactions with the Company; provided, however, that you may disclose
any Evaluation Material to your directors, officers, employees, agents,
advisors, potential financing sources or affiliates who need to know such
information for such purpose (it being understood that they shall be informed by
you of the confidential nature of such information and that by receiving such
information they are agreeing to be bound by this agreement).
In the event that you are requested in any proceeding to disclose any
Evaluation Material, you will give the Company prompt notice of such request so
that the Company may seek an appropriate protective order. If in the absence of
a protective order you are nonetheless compelled to disclose Evaluation
Material, you may disclose such information without liability hereunder;
provided, however, that you give the Company written notice of the information
to be disclosed as far in advance of its disclosure as is practicable and, upon
the Company's request
<PAGE>
The Broken Hill Proprietary October 30, 1995
Company Limited
Page 2
and at the Company's expense, use your reasonable best efforts to obtain
assurances that confidential treatment will be accorded to such information.
You hereby acknowledge that you are aware of the restrictions imposed by
the United States securities laws on any person who has received from an issuer
material, non-public information from purchasing or selling securities of such
issuer or from communicating such information to any other person under
circumstances in which it is reasonably forseeable that such person is likely to
purchase or sell such securities in reliance upon such information.
For a period of one year from the date hereof (the "Standstill Period") you
and you affiliates (as defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) will not (and you and they will not
assist or, encourage others to), directly or indirectly, without the prior
consent of the Company's Broad of Directors:
(a) acquire or agree, offer, seek or propose to acquire (or request
permission to do so), ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of any of the
Company's assets or businesses or any securities by the Company, or any
rights or options to acquire such ownership (including from a third party),
or
(b) seek or propose to influence or control the Company's management
or the Company's policies (or request permission to do so), or
(c) enter into any discussions, negotiations, arrangements or
understanding with any third party with respect to any of the foregoing
(or request permission to do so).
If at any time during such period to the knowledge of any of your senior
officers you are approached by any third party (other than unsolicited
presentation by financial advisors seeking business and not retained by you)
concerning your or their participation in a transaction involving the Company's
assets or businesses or securities issued by the Company, you will promptly
inform the Company of the nature of such contact and the parties thereto.
Notwithstanding the foregoing, the terms of the first sentence of this paragraph
shall not be applicable to the purchase and sale of any securities of the
Company by managers of any of your pension or other related employee benefit
plans who have not received any of the Evaluation Material and who are acting as
passive investors in the Company and shall not be applicable to ordinary
brokerage or trading transactions by your financial advisors acting as a
securities dealer or purchases by or for an institutional investor solely for
investment purposes aggregating
<PAGE>
The Broken Hill Proprietary October 30, 1995
Company Limited
Page 3
less than 5% of the Company's outstanding voting securities or 10% of any issue
of the Company's outstanding nonvoting securities.
Notwithstanding the provisions of the foregoing paragraph, but without
limiting your other obligations under this agreement:
(a) The Standstill Period shall terminate if on or prior to November 30,
1995 the Company shall solicit or initiate the submission of any proposal or
offer from any person (other than you or any of your affiliates) or encourage
any person (other than you or any of your affiliates) to make any proposal or
offer (which term shall not include the furnishing of any information to any
person who makes an unsolicited proposal or offer) for an Acquisition
Transaction (as defined below). As used herein, the term "Acquisition
Transaction" shall mean the purchase of a majority of the Company's capital
stock or all or substantially all of the assets of the Company, whether by
purchase, merger, consolidation or similar transaction.
(b) If prior to the expiration or termination of the Standstill Period (i)
the Company enters into a definitive agreement providing for an Acquisition
Transaction with a party other than you or your affiliates or (ii) a third
party commences a tender or exchange offer for more than 50% of the Company's
common stock and the Company's Board of Directors recommends that the
Company's common stockholders tender their shares in such tender or exchange
offer (any of the foregoing, an "Alternative Transaction"), the foregoing
paragraph shall not be applicable with respect to any Acquisition Transaction
proposed by you or your affiliates, provided that such proposed Acquisition
Transaction provides for (i) the purchase of, or offer to purchase, all
outstanding shares of common stock of the Company for cash, and (ii) a
purchase price per share in excess of the price proposed to be paid and/or
other value proposed to be received by the Company's common stockholders in
the Alternative Transaction.
Neither the Company nor you will, without the consent of the other, make
any disclosure concerning the subject matter of the prior paragraphs, including
that you are having or have had discussions with the Company, except as
expressly provided in this agreement; provided that both the Company and you
may make such disclosure if such disclosure is required in order to comply with
law or stock exchange regulation.
For one year from the date hereof, (i) neither the Company nor you will
initiate contact (except for those contacts made in the ordinary course of
business) with any officer or employee of the other party regarding the other
party's business,
<PAGE>
The Broken Hill Proprietary October 30, 1995
Company Limited
Page 4
operations, prospectus or finances, except with the prior consent of the other
party and (ii) neither the Company nor you will directly solicit for hire any
person known to the other party to be employed by the other party in an
executive capacity.
Upon the Company's request you will either redeliver to the Company all
copies of the Evaluation Material or, with the consent of the Company, destroy
all memoranda, notes and other writings prepared by you or your directors,
officers, employees, agents or affiliates based on the Evaluation Material. You
understand that neither the Company nor any of its representatives or advisors
makes any representation or warranty as to the accuracy or completeness of any
Evaluation Material which may be furnished to you. You agree that neither the
Company nor its representatives or advisors shall have any liability to you or
any of your representatives resulting from the use of the Evaluation Material.
You agree that money damages would not be a sufficient remedy for any
breach of this agreement by you or your directors, officers, employees, agents
or affiliates, and that in addition to all other remedies the Company shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy for any such breach, and you further agree to waive and to use your best
efforts to cause your directors, officers, employees, agents or affiliates to
waive, any requirements for the securing or posting of any bond in connection
with such remedy.
This agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to its conflict of laws
principles or rules.
During such time as the parties to this letter agreement are conducting
negotiations relating to a possible transaction between the Company and you, the
Company shall use reasonable efforts, consistent with the need to maintain
confidentiality, to respond to your reasonable requests for due diligence
information, which would not, among other things, result in unreasonable
disruption of the Company's business. It is expressly understood that this
letter does not constitute an agreement with respect to an Acquisition
Transaction or other transaction, and does not obligate you or the Company to
enter into any further discussions or agreement, and that the parties hereto may
terminate negotiations at any time.
<PAGE>
The Broken Hill Proprietary October 30, 1995
Company Limited
Page 5
If you are in agreement with the foregoing, please so indicate by signing
and returning one copy of this agreement which will constitute an agreement
between you and the Company with respect to the matters set forth herein.
Very truly yours,
MAGMA COPPER COMPANY
By: /s/ Donald J. Donahue
-------------------------------
Name: Donald J. Donahue
Title: Chairman of the Board
of Directors
Confirmed and Agreed to:
THE BROKEN HILL PROPRIETARY
COMPANY LIMITED
By: /s/ Jeremy K. Ellis
----------------------
Name: Jeremy K. Ellis
Title: General Executive Manager
<PAGE>
November 30, 1995
The Broken Hill Proprietary
Company Limited
BHP Tower-Bourke Place
600 Bourke Street
Melbourne, Victoria 3000
Australia
Attention: Mr. J.K. Ellis
Dear Sirs:
Reference is made to the (i) Letter, dated October 30, 1995, (as amended
hereby, the "Confidentiality Agreement") between Magma Copper Company and The
Broken Hill Proprietary Company Limited ("BHP"), and (ii) Agreement and Plan of
Merger, dated as of November 30, 1995, among the Company, BHP and certain of its
subsidiaries (the "Merger Agreement"). Capitalized terms used herein without
definition have the meanings attributed to them in the Confidentiality
Agreement.
The sixth paragraph of the Confidentiality Agreement is hereby amended to
add the following clause (c):
"(c) If prior to the expiration or termination of the
Standstill Period, the Agreement and Plan of Merger,
dated as of November 30, 1995, among the Company,
BHP and certain of its subsidiaries (the "Merger
Agreement") shall have been terminated without an
Offer having been consummated, and a third party
makes a proposal relating to an Acquisition
Transaction, then notwithstanding clause (b) above,
the foregoing paragraph relating to the Standstill
Period shall not be applicable with respect to any
Acquisition Transaction proposed by you or your
affiliates, provided such Acquisition Transaction is
--------
at least the equivalent of such third party's proposal.
Capitalized terms used in this paragraph (c) and not
otherwise defined in this Confidentiality Agreement
shall have the meanings attributed to them in the
Merger Agreement."
<PAGE>
The Broken Hill Proprietary
Company Limited
November 30, 1995
Page 2
This amendment shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to its conflict of laws
principles or rules.
If you are in agreement with the foregoing, please so indicate by signing
and returning one copy of this amendment which will constitute an agreement
between you and the Company with respect to the matters set forth herein.
Very truly yours,
Magma Copper Company
By /s/ Donald J. Donahue
-----------------------
Name: Donald J. Donahue
Title: Chairman of the Board
of Directors
Confirmed and
Agreed to:
The Broken Hill Proprietary
Company Limited
By: /s/ Graeme McGregor
----------------------
Name: Graeme McGregor
Title: Executive General Manager
<PAGE>
Exhibit 99.5
MAGMA COPPER COMPANY
7400 NORTH ORACLE ROAD, SUITE 200
TUCSON, ARIZONA 85704
December 5, 1995
Dear Stockholder:
I am pleased to inform you that on November 30, 1995, Magma Copper Company
(the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with The Broken Hill Proprietary Company Limited, a Victoria,
Australia corporation ("BHP"), BHP Holdings (USA) Inc., a Delaware corporation
and an indirect subsidiary of BHP ("Sub"), and BHP Sub Inc., a Delaware
corporation and a subsidiary of Sub ("Purchaser"). Pursuant to the Merger
Agreement, Purchaser is today commencing a tender offer (the "Offer") to
purchase (i) all outstanding shares of common stock par value $0.01 per share,
of the Company (the "Shares"), at a price of $28.00 per Share net to the
seller in cash; (ii) all of the outstanding shares of 5 5/8% Cumulative
Convertible Preferred Stock, Series D, par value $0.01 per share, of the
Company, at a price of $96.544 per share net to the seller in cash; and (iii)
all of the outstanding shares of 6% Cumulative Convertible Preferred Stock,
Series E, par value $0.01 per share (together with the Series D Preferred
Stock, the "Preferred Shares") of the Company at a price of $100.646 per share
net to the seller in cash. The Merger Agreement provides that each Share or
Preferred Share not acquired by Purchaser pursuant to the Offer will be
exchanged for the same consideration payable pursuant to the Offer in cash
upon the merger (the "Merger") of Purchaser into the Company, which will occur
as soon as practicable following the consummation of the Offer.
Your Board of Directors has unanimously approved the Merger Agreement, the
Offer and the Merger and determined that the Offer and the Merger are fair to,
and in the best interests of, the Company and its stockholders. Accordingly,
the Board of Directors recommends that stockholders accept the Offer and
tender their Shares and Preferred Shares.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including, among other things, the opinion of Goldman, Sachs &
Co. ("Goldman Sachs"), the Company's financial advisor, that the cash
consideration per share to be received by the stockholders in the Offer and
the Merger is fair to the stockholders. The full text of the written opinion
of Goldman Sachs is attached hereto and stockholders are urged to read such
opinion in its entirety.
Additional information with respect to the transaction is contained in the
enclosed Schedule 14D-9, including a copy of the full text of the opinion of
Goldman Sachs. Also enclosed is the Purchaser's Offer to Purchase and related
materials, including a Letter of Transmittal to be used for tendering your
Shares and Preferred Shares. These documents set forth the terms and
conditions of the Offer and provide instructions as to how to tender your
Shares and Preferred Shares. We urge you to read the enclosed material and
consider this information carefully.
Sincerely,
J. Burgess Winter
President and Chief Executive
Officer
<PAGE>
EXHIBIT 99.6
<PAGE>
[LOGO OF BHP] [LOGO OF MAGMA]
News Release
BHP & MAGMA ANNOUNCE PLANS TO MERGE
-----------------------------------
Melbourne, Australia and Tucson, Arizona--November 30, 1995--The Broken Hill
Proprietary Company Limited (BHP) and the Magma Copper Company (Magma) announced
today that they have signed a definitive agreement for the acquisition by a BHP
subsidiary of all the outstanding stock of Magma.
Under the agreement, BHP will commence, on or before December 5, 1995, a US$28
per share cash tender offer for all the outstanding shares of Common Stock of
Magma. BHP will also tender for all outstanding shares of Series D and Series E
Convertible Preferred Stock of Magma at a per share price which, on an
as-converted-basis, equates to $28 per share of Common Stock. Following the
expiration of the tender offer, BHP will acquire, through a merger, all shares
not purchased in the tender offer at the same price. This would result in a
share purchase of US$1.8 billion (A$2.5 billion) and a total investment of about
US$2.4 billion (A$3.2 billion), including assumption of Magma's debt. CS First
Boston is acting as Dealer Manager in the tender offer.
The Board of Directors of Magma has unanimously approved the tender offer and
the merger as being fair to and in the best interests of Magma and its
shareholders and has recommended that all shareholders accept the offer. The
Board of Directors has received a written opinion from its financial advisors
Goldman, Sachs & Co. to the effect that the consideration proposed to be paid in
the transaction is fair to Magma's shareholders. The offer will be conditioned
upon, among other things, the tender of a number of shares which represents a
majority of the outstanding shares of Common Stock on a fully diluted basis. The
offer will not be subject to a financing contingency. Magma's major shareholder,
Warburg Pincus Capital Company, L.P., which holds 26% of Magma's shares on a
fully diluted basis has agreed to tender its
-1-
<PAGE>
shares to the offer in accordance with the recommendation of Magma's Board of
Directors.
Upon completion of the merger, Magma will be combined with BHP's existing copper
businesses and a new BHP Copper Group will be established and led by Magma's
President & CEO, Mr. J. Burgess Winter. The new Copper Group will produce about
900,000 tonnes in 1996.
The proposed acquisition is part of BHP's strategy for continuing its growth.
BHP currently has no copper production in the United States. Its existing copper
assets including Escondida in Chile and Ok Tedi in Papua New Guinea will be
complemented by Magma's Arizona and Nevada mines in the United States and the
Tintaya mine in Peru. The BHP Copper Group will be strengthened through Magma's
ownership of the largest copper smelter in the US, value added processing
operations, and access to Magma's management and technical skills.
BHP has interests in several undeveloped copper resources, including oxide
reserves at Escondida, a large sulfide deposit at nearby Zaldivar in Chile and a
high potential prospect known as Agua Rica in Argentina. The development of
these resources will be enhanced with the acquisition of Magma because of its
established smelting capacity and demonstrated technical capabilities in
smelting, leaching, refining and solvent extraction/electro winning (SX-EW) of
copper metal.
The merger will accelerate BHP's move into the processing of copper metal in
line with its earlier decision to develop a copper cathode plant at Coloso in
Northern Chile, using innovative technology to extract copper metal from
Escondida concentrates.
The Managing Director of BHP, Mr. John Prescott and the President & CEO of
Magma, Mr. J. Burgess Winter, in a joint statement, said: "The creation of the
new BHP Copper Group has the unanimous support of the BHP and Magma Boards and
is a very positive and exciting development for the industry and each company's
shareholders".
The CEO of BHP Minerals, Jerry Ellis added: "The merged business will be an
outstanding, international copper company. It has several new projects underway
that point to rapid growth in the near term, along with management and technical
skills and the financial and mineral resources to provide a springboard for
significant future expansion in a growing copper market."
-2-
<PAGE>
"The two organizations have complementary assets, including world class mining
and processing capabilities and high quality management skills.
"The joining together of these operations will strengthen the BHP Group and at
the same time enhance the company's position in the copper business".
Following the acquisition more than 5,000 Magma employees will join BHP's 48,000
employees world wide.
The Broken Hill Proprietary Company Limited is Australia's largest industrial
and natural resources company, with approximately 52,000 employees based in more
than 50 countries. BHP was incorporated in 1885 to mine the lead/zinc/silver
discovery at Broken Hill in New South Wales, Australia. Its headquarters are in
Melbourne, Australia, and its shares are traded on the stock exchanges of
Melbourne, Sydney, New York, London, Tokyo, Wellington, Frankfurt and
Switzerland. BHP is comprised of three main business groups: Minerals, Steel and
Petroleum. Its global assets are worth more than US$22 billion, with annual
sales exceeding US$13 billion.
Magma Copper Company, one of the largest primary copper producers in the United
States, produces high-quality copper cathode and rod for sale to customers
worldwide. Magma has operations in San Manuel, Miami, and Superior, Arizona;
Ely, Nevada and southern Peru. Magma Metals Company, a division of Magma Copper
Company, operates Magma's smelting and refining complex located in San Manuel,
and conducts the Company's commercial activities. Corporate headquarters are in
Tucson, Arizona.
For further information contact:
Media Inquiries: Tony Wells, Melbourne (613) 9609-2723 (bh)
015 333 087 (mobile)
Michael Spencer (613) 9609-3137 (bh)
0418 352 154 (mobile)
Jay Rhodes, BHP San Francisco (415) 774-2449 (bh)
(415) 567-3600 (ah)
Investor Inquiries: Ric Thiele, Melbourne (613) 9609-3885 (bh)
(613) 9574-9460 (ah)
-3-
<PAGE>
Pierre Hirsch:
San Francisco (415) 774-2030 (bh)
(510) 284-7555 (ah)
New York (on 1st Dec 1995) (212) 373-0216
or (212) 373-0200
Magma Robbie Stephen (520) 575-5710 (bh)
Sandy Cole (520) 575-4758 (bh)
BHP London Gillespie Robertson (44) 171 334 0803
-4-
<PAGE>
EXHIBIT 99.7
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel 212-902-1000
PERSONAL AND CONFIDENTIAL
November 30, 1995
Board of Directors
Magma Copper Company
7400 North Oracle Road
Suite 200
Tucson, AZ 85704
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the "Common
Shares"), the outstanding shares of 5 5/8% Cumulative Convertible Preferred
Stock, Series D, par value $0.01 per share (the "Series D Preferred Shares"),
and the outstanding shares of 6% Cumulative Convertible Preferred Stock, Series
E, par value $0.01 per share (the "Series E Preferred Shares", and together with
the Series D Preferred Shares, the "Preferred Shares"), of Magma Copper Company
(the "Company") of the Consideration (as defined below) proposed to be paid in
the Tender Offer (as defined below) and the Merger (as defined below) pursuant
to the Agreement and Plan of Merger dated as of November 30, 1995 among The
Broken Hill Proprietary Company Limited ("BHP"), BHP Holdings (USA) Inc., a
subsidiary of BHP, BHP Sub Inc., a subsidiary of BHP Holdings (USA) Inc. (the
"Purchaser"), and the Company (the "Agreement"). The Agreement provides for a
tender offer for all of the Common Shares and the Preferred Shares (the "Tender
Offer") pursuant to which the Purchaser will pay $28.00 in cash for each Common
Share accepted, $96.544 in cash per Series D Preferred Share and $100.646 in
cash per Series E Preferred Share, for each Preferred Share accepted. The
Agreement further provides that following completion of the Tender Offer, the
Purchaser will be merged with and into the Company (the "Merger") and each
outstanding Common Share and each outstanding Preferred Share (other than shares
owned by the Company, BHP Holdings (USA) Inc., BHP or the Purchaser) will be
<PAGE>
Magma Copper Company
November 30, 1995
Page Two
converted into the right to receive the same consideration paid for such shares
pursuant to the Tender Offer. We understand that the per share consideration to
be paid to the holders of Preferred Shares is an amount equal to the number of
Common Shares into which such Preferred Share is convertible multiplied by
$28.00 (the "Common Share Equivalent Amount"). The $28.00 per Common Share and
the Common Share Equivalent Amount to be paid to the holders thereof pursuant to
the Agreement are each referred to herein as the "Consideration".
Goldman, Sachs & Co., as part of its investment banking business, is continually
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 estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including acting as managing underwriter of a public offering
of 8.70% senior subordinated notes in May 1995 and acting as Dealer Managers for
the offer to purchase listed common stock warrants in May 1995. We also have
provided certain investment banking services to BHP from time to time, including
acting as co-managing underwriter of a public offering of guaranteed notes in
October 1993, and may provide investment banking services to BHP in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1994; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q; certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects.
In addition, we have reviewed the reported price and trading activity for the
Common Shares, compared certain financial and stock market information for the
Company with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the copper mining industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. You have informed us that the conversion price for
the Series D Preferred Shares is $14.50 and that the conversion price for the
Series E Preferred Shares is $13.91. Based on an offer price of $28.00 in cash
per Common Share to be paid in the Tender Offer and Merger, we have assumed for
purposes of our opinion that the Preferred Shares are common stock equivalents.
In addition, we have not made an independent evaluation or appraisal of the
assets and liabilities of the Company or any of its subsidiaries and we have not
been furnished with any such evaluation or appraisal.
<PAGE>
Magma Copper Company
November 30, 1995
Page Three
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
Consideration in cash to be received by the holders of Common Shares and
Preferred Shares in the Tender Offer and the Merger is fair to such holders.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 99.8
MAGMA COPPER COMPANY
November 30, 1995
Warburg Pincus Capital Company, L.P.
66 Lexington Avenue
New York, New York 10017
Attention: General Counsel
- ---------
Re: Tender Agreement
----------------
Dear Sir or Madam:
Reference is made to that certain Standstill Agreement (the
"Agreement"), dated as of November 30, 1988 between you ("Warburg") and Magma
Copper Company (the "Company"). This letter sets forth our understanding with
respect to the following matters:
1. The Company and Warburg waive the requirement set forth in the
Agreement that the Company obtain a fairness opinion from two nationally
recognized investment bankers in connection with a Business Combination (as
defined in the Agreement).
2. The Company waives the restrictions set forth in the Standstill
Agreement to the extent necessary to permit Warburg to enter into and perform
the Tender Agreement (the "Tender Agreement"), dated as of December 1, 1995 by
and between Warburg and The Broken Hill Proprietary Company Limited, a Victoria,
Australia corporation ("Offeror"), whereby Warburg has agreed (a) to validly
tender all of its shares of capital stock of the Company pursuant to a tender
offer by Offeror for the capital stock of the Company at a price of $28 per
share of common stock or common stock equivalent and (b) to vote in favor of a
merger of Sub with and into the Company.
<PAGE>
This Letter Agreement is expressly conditioned upon receipt by the
Company of a duly executed counterpart of this letter.
Very truly yours,
MAGMA COPPER COMPANY
By: /s/ J. Burgess Winter
-----------------------------
Name: J. Burgess Winter
Title: President and Chief
Executive Officer
Accepted and Agreed to this
30th day of November, 1995
WARBURG PINCUS CAPITAL
COMPANY, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ John Vogelstein
-----------------------
Name: John Vogelstein
Title:
<PAGE>
EXHIBIT 99.9
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 21st day of
November, 1995 (with such date being subsequently referred to as "the date
hereof" in this Employment Agreement) by and between MAGMA COPPER COMPANY, a
Delaware corporation (the "Company") and ______________ (the "Executive").
ARTICLE ONE
- -----------
RETENTION OF KEY EXECUTIVES
1.1 Retention Objectives of the Company. MAGMA COPPER COMPANY,
-----------------------------------
described in Section 2.1 as the "Company," considers it essential to the
continuing operation of the Company and the best interest of its shareholders to
assure the continuous dedication of key management personnel. It is recognized
in the context of public ownership that a Change in Control, defined in Section
2.1, of the Company may be sought and that such circumstances could prove
distracting to key executives and detrimental to the ongoing management and
administration of the Company. Such distraction is not in the best interest of
the shareholders of the Company. Accordingly, the Board has determined to
discourage the inevitable distraction of the Executive in the face of
potentially disturbing circumstances inherent in any situation involving a
Change in Control of the Company. This Employment Agreement is intended to
secure and encourage the ongoing retention of the Executive by providing
specific retention benefits upon a Change in Control, and separation benefits in
the event that the Executive's employment is altered as hereinafter described,
coincident with or subsequent to a Change in Control, and which are competitive
with those of other corporations. This Employment Agreement is to be
interpreted in a manner consistent with this objective. In order to induce the
Executive to remain in the employ of the Company, and in consideration of the
Executive's agreement set forth in Sections 3.3 and 4.1, the Company agrees to
pay the benefits set forth in this Employment Agreement, under the circumstances
described herein.
1.2. Relationship to Any Other Employment Agreement. In general, it
----------------------------------------------
is the intent of the Company and the Executive that the terms of this Employment
Agreement shall supersede and substitute for the provisions of any employment
understanding between the Company and the Executive relating to any items of
compensation during the contract term in the event of a Change in Control of the
Company. However, the benefits provided under this Employment Agreement shall
not be construed to supersede or substitute for any post-contract term benefits,
if any, provided for in any such employment representations and arrangements.
<PAGE>
ARTICLE TWO
- -----------
DEFINITIONS AND CONSTRUCTION
2.1. Definitions.
-----------
(a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
(b) "Average Base Compensation" shall mean the Executive's annual
base salary compensation, including any portion that may be deferred by action
of the Executive, including any bonus or incentive bonus under the Company's
Annual Incentive Compensation Plan, at the rate in effect immediately prior to
the Termination Event or the Executive's Termination Date, whichever rate is
higher.
(c) "Base Compensation" shall mean the Executive's annual base salary
compensation (including any portion that may be deferred by action of the
Executive, but excluding any bonus or incentive bonus under any bonus or
incentive program of the Company) at the rate in effect immediately prior to the
Termination Event or the Executive's Termination Date, whichever rate is higher.
(d) "Beneficial Owner" shall have the same meaning as that term is
given in Rule 13d-3 under the Act.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Change in Control" shall mean a change in ownership or
managerial control of the stock, assets or business of the Company resulting
from one (1) or more of the following circumstances:
(i) On or after the date hereof, the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than sixty-five percent (65%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; provided however,
that a merger or consolidation effected to implement a recapitalization of the
Company (or a similar transaction), in which no Person other that Warburg,
Pincus Capital Company, L.P., acquires thirty-five percent (35%) or more of the
Company's then outstanding voting securities shall not constitute a Change in
Control;
-2-
<PAGE>
(ii) On or after the date hereof, a change in ownership of the
Company through a action or series of transactions, such that any Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of securities of the
combined voting power of the Company's then outstanding securities; provided
that, for such purposes, any acquisition by the Company shall be disregarded;
and provided further that, in the event of such a change in ownership, if
Warburg, Pincus Capital Company, L.P., as of the date of such change of
ownership and at all times thereafter, remains the Beneficial Owner of a
percentage interest in the Company equal to at least ten percent (10%) more than
any other Beneficial Owner of the combined voting power of the Company's then
outstanding securities, no Change in Control shall be deemed to have occurred
unless (A) the majority of the Board serving immediately prior to such Change in
Control shall deem a Change in Control to have occurred, or (B) Warburg, Pincus
Capital Company, L.P., shall thereafter cease to be the Beneficial Owner of a
percentage ownership interest in the Company equal to at least ten percent (10%)
or more than any other Beneficial Owner of the combined voting power of the
Company's then outstanding securities (and in such event, the Change in Control
shall be deemed to have occurred on the date Warburg, Pincus Capital Company,
L.P., ceases to be the Beneficial Owner of such greater combined voting power);
(iii) A change in identity of a majority of the members of the Board
within any twenty-four (24) month period; provided however, if such a change in
the identity of the members of the Board occurs following the acquisition of
fifty-one percent (51%) or more of the Company's then outstanding voting
securities by Warburg, Pincus Capital Company, L.P., no Change in Control shall
be deemed to have occurred if such change of Board membership was approved in
writing (or by an approved written resolution) by a majority of the Board and of
the Management Executive Committee serving immediately prior to such change of
Board membership. For purposes of this Section 2.l(f)(iii), Management
Executive Committee shall mean a Committee appointed in writing by the then-
acting Chief Executive Officer of the Company, comprised of corporate officers
and such additional key employees of the Company as the Chief Executive Officer
shall appoint from time to time. The Chief Executive Officer may remove any
member of the Management Executive Committee by notice in writing delivered to
such member and the other members of the Management Executive Committee;
(iv) The approval by the Board (or by the shareholders if shareholder
approval is required by applicable law or under the terms of any relevant
agreement) of an agreement for the sale or disposition of all or substantially
all of the Company's assets or a sale/leaseback of all or substantially all of
the Company's assets (with or without a purchase option);
-3-
<PAGE>
(v) A transfer of all or substantially all of the Company's assets
pursuant to a partnership or joint venture agreement where the Company's
resulting interest is or becomes fifty percent (50%) or less;
(vi) On or after the date hereof, the Board (or the shareholders if
shareholder approval is required by applicable law or under the terms of any
relevant agreement) shall approve a plan of complete liquidation of the Company;
or
(vii) The execution or approval by the Board of any agreement, the
consummation of which would result in one of the foregoing.
(g) "Company" shall mean Magma Copper Company, any and all subsidiary
companies of Magma Copper Company and any successor, including but not limited
to any Person acquiring a controlling interest in the stock, assets or business
of the Company through merger, consolidation, acquisition, reorganization, lease
of assets (with or without a purchase option) or other purchase or
restructuring.
(h) "Code" shall mean the Internal Revenue Code of 1986, as in effect
from time to time.
(i) "Disability" shall mean the Executive's inability, due to
physical or mental illness or condition, to substantially perform the essential
functions of his position for a period of six (6) or more months.
(j) "Dismissal for Cause" shall mean dismissal approved in good faith
by three quarters (3/4ths) of the members of the Board for:
(i) An act or acts of dishonesty on the part of the Executive
constituting a felony or serious misdemeanor and resulting or intended to result
directly or indirectly in gain or personal enrichment at the expense of the
Company;
(ii) Substantial competition with the Company (such as securing a
customer or customers of the Company for a competitor or recruiting employees of
the Company for a competitor) in a manner directly affecting the business of the
Company;
(iii) The Executive's willful refusal or failure to substantially
perform the essential functions of his job with the Company (other than failure
due to Disability); for such purpose the term "willful" shall mean done
intentionally, knowingly, and purposely, without reasonable justification
therefor;
-4-
<PAGE>
(iv) Gross negligence in the performance of the Executive's material
and substantial duties of employment with the Company;
(v) Conviction of a felony involving moral turpitude;
(vi) A significant violation by the Executive of those established
policies and procedures of the Company that were in effect on the date of the
Change in Control and were communicated to the Executive prior to the Change in
Control;
(vii) The continued failure of the Executive to substantially perform
the essential functions of the Executive's job with the Company (other than due
to Disability) after a written demand for substantial performance is delivered
to the Executive by the Chief Executive Officer of the Company, which identifies
the manner in which the Executive has not substantially performed the essential
functions of his job; or
(viii) Conduct by the Executive which is in violation of any provision
of this Employment Agreement.
No dismissal shall be deemed to be a Dismissal for Cause unless the Executive
receives thirty (30) days' notice and is permitted a reasonable opportunity to
appear before the Board with counsel of the Executive's choice prior to the
effective date of discharge.
(k) "Employee Benefit Plan" shall have the meaning given the term
under Section 3 of ERISA.
(l) "Employment Period" shall mean the period commencing on the date
of a Change in Control of the Company, and ending on the second (2nd)
anniversary of such date.
(m) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as in effect from time to time.
(n) "Good Reason" shall mean the Executive's death, Disability or
Retirement prior to the occurrence of a Termination Event, Dismissal for Cause
or the Executive's resignation for a reason other than the occurrence of a
Termination Event.
(o) "Option Stock Benefit Adjustment Period" shall, except as
modified by Section 5.3, mean the twelve (12) month period ending with the
anniversary of the last event constituting the Change in Control.
(p) "Person" shall have the meaning given that term when used in
Sections 13(d) and 14(d) of the Act.
(q) "Restricted Stock Benefit Adjustment Period" shall, except as
modified by Section 5.3, mean the twelve (12)
-5-
<PAGE>
month period after notice of a Termination Event is given pursuant to Section
5.1.
(r) "Retirement" shall mean the separation from employment of the
Executive following the attainment of normal retirement age under the Retirement
Plan for Salaried Employees of Magma Copper Company or pursuant to such other
arrangement providing for the Executive's retirement as shall be mutually agreed
upon in writing by the Company and the Executive as constituting "Retirement"
for purposes of this Employment Agreement.
(s) "Securities Restriction" shall mean a securities trading
restriction imposed by law, the rules of any securities exchange, any agreement
to which the Company is a party or the absence of a regular public market
permitting acquisitions and dispositions of Company stock in a public
transaction, which precludes the Executive from freely disposing of Company
stock and retaining the proceeds of such disposition.
(t) "Stock Benefit Adjustment Period" shall mean the Option Stock
Benefit Adjustment Period or the Restricted Stock Benefit Adjustment Period,
whichever is appropriate in the context in which the term is applied.
(u) "1987 Stock Plan" shall mean the Magma Copper Company 1987 Stock
Option and Stock Award Plan.
(v) "1989 Stock Plan" shall mean the Magma Copper Company 1989 Stock
Option and Stock Award Plan.
(w) "1993 Stock Plan" shall mean the Magma Copper Company 1993 Stock
Option and Stock Award Plan.
(x) "Stock Plans" shall mean the 1987 Stock Plan, the 1989 Stock Plan
and the 1993 Stock Plan.
(y) "Termination Event" shall mean, after a Change in Control or, at
the time of a Change in Control, the occurrence of one (1) or more of the
following, due to a cause other than Good Reason:
(i) The assignment to the Executive by the Company of duties
inconsistent with the Executive's position, duties, responsibilities and status
with the Company as in effect immediately prior to the Change in Control, or a
material change in the Executive's titles or officers as in effect immediately
prior to the Change in Control or any removal of the Executive from or any
failure to reelect the Executive to any of such positions except in connection
with the termination of his employment for Good Reason; for purposes of this
Employment Agreement, a mere change of title, position or reporting relationship
that does not result in a material diminution in scope, status, duties and
responsibilities shall not constitute a
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Termination Event, nor shall an isolated, insubstantial and inadvertent action
not taken in bad faith and which is promptly remedied after notice constitute a
Termination Event, nor shall a promotion to a position of higher scope, status,
duties and responsibilities or a transfer to a position of equal scope, status,
duties and responsibilities constitute a Termination Event, as long as such
promotion or transfer is consistent with the Executive's training and
professional qualifications or is otherwise agreed to by the Executive;
(ii) A reduction in the Executive's Base Compensation as in effect on
the date hereof or as the same may be increased from time to time during the
term of this Employment Agreement that is not implemented correspondingly within
the executive or officer class of employees generally;
(iii) The Executive's relocation to any place outside of the United
States, except for required travel by the Executive on the Company's business to
an extent substantially consistent with the Executive's business travel
obligations at the time of a Change in Control; or
(iv) Any material breach by the Company of any provision of this
Employment Agreement.
(z) "Termination Date" shall mean the thirtieth (30th) day
following the day on which any party to this Employment Agreement gives written
notice to the other party that a Termination Event has occurred.
(aa) "Value Loss" shall, except as modified by Section 5.3, mean
the difference between the highest price during the respective Stock Benefit
Adjustment Period at which the stock held, or that could have been held after
option exercise, or that could have been sold by the Executive in the absence of
the Securities Restriction and the highest price in effect during the respective
Stock Benefit Adjustment Period during which the Executive actually could sell
such stock due to the absence of a Securities Restriction.
2.2. Construction. This Employment Agreement shall be construed in
------------
accordance with the laws of the State of Arizona, without reference to
principles of conflict of laws. Titles to articles, sections and paragraphs in
this Employment Agreement are intended solely for purposes of convenience and
are to be disregarded in construing this Employment Agreement.
ARTICLE THREE
-------------
TERM AND CONDITIONS OF EMPLOYMENT
3.1. Terms of Agreement. This Employment Agreement shall be
------------------
effective as of the date hereof. The term of this Employment
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Agreement shall continue in effect from such date for a period of three (3)
years from such date, subject to the provisions of this Article Three, unless
sooner terminated by the parties in accordance with the provisions hereof. The
Company and the Executive shall retain the right to terminate the employment of
the Executive at any time and for any reason prior to a Change in Control,
without liability under this Employment Agreement. The Executive and the Company
acknowledge that, except as may be provided under any other written agreement
between the Executive and the Company, the employment of the Executive by the
Company is "at will" and, prior to a Change in Control, may be terminated by
either the Company or the Executive at any time. Moreover, prior to a Change in
Control, if the Executive's employment with the Company terminates, then the
Executive shall have no further rights under this Employment Agreement, except
as provided in Section 4.1. No termination or expiration of this Employment
Agreement shall affect any rights, obligations or liabilities of the Executive
or the Company that shall have accrued on or prior to the date of termination or
expiration.
3.2. Automatic Extension. Commencing on the third anniversary of the
-------------------
effective date hereof, and on each succeeding anniversary of the date hereof,
the term of this Employment Agreement shall automatically be extended for one
(1) additional year unless, not later than six (6) months preceding such
triennial anniversary date, the Company shall have given written notice pursuant
to Section 9.1 that it will not extend the terms of this Employment Agreement.
Notwithstanding the foregoing, if a Change in Control occurs while the Executive
is employed by the Company during the original or any extended term of this
Employment Agreement, the Company will continue thereafter to employ the
Executive, and the Executive will remain in the employ of the Company during the
Employment Period in accordance with the terms and provisions of this Employment
Agreement notwithstanding any notice issued by the Company precluding extension
of this Employment Agreement. The term of this Employment Agreement will
thereafter be automatically renewed pursuant to this Section 3.2, subject to
termination as provided herein. If a Change in Control occurs during the
original or any extended term of this Employment Agreement, notwithstanding any
notice issued by the Company precluding extension of the term of this Employment
Agreement, this Employment Agreement shall nevertheless continue in effect for a
period ending twenty-four (24) months following the occurrence of the Change in
Control. The automatic extension of the term of this Employment Agreement
pursuant to this Section 3.2 shall not be a modification of this Employment
Agreement in any significant respect within the meaning of section 28OG of the
Code and the rules and regulations thereunder. Notwithstanding the occurrence
of a Change in Control, in the event of the Executive's Disability, the Company
shall have the right to terminate this Employment Agreement by giving written
notice of termination pursuant to Section 9.1. Such termination shall be
effective as of the thirtieth (30th) day following the giving of such notice.
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3.3. Duties During the Employment Period. During the Employment
-----------------------------------
Period, the Executive shall continue in the same capacities and positions held
by the Executive at the time of the Change in Control or in other capacities and
positions as may be mutually agreed to by the Company and the Executive in
writing. During such time, the Executive shall devote his best efforts,
attention and skill to the business and affairs of the Company, as such business
and affairs now exist and as they may hereafter be conducted. The services
which are to be performed by the Executive hereunder are to be rendered in the
United States of America, or in such other place or places as shall be mutually
agreed upon in writing by the Executive and the Company from time to time.
3.4. Compensation During the Employment Period. During the
-----------------------------------------
Employment Period, the Executive shall be compensated as follows:
(a) The Executive shall receive, at such intervals and in accordance
with such standard policies as may be in effect on the date of the Change in
Control, an annual salary not less than the Executive's annual salary as in
effect as of the date of the Change in Control. During the Employment Period,
the Board or an appropriate committee thereof will consider and appraise at
least annually, the contributions of the Executive to the Company's operating
efficiency, growth, production and profits, and, in accordance with past
practice in effect prior to the Change in Control, the Executive's Base
Compensation rate shall be adjusted upward, at least annually, to be
commensurate with increases given to other corporate officers and key employees
generally and as the scope and success of the Company's operations or the
Executive's duties expand. The Executive's Base Compensation shall not be
reduced after any such increase.
(b) During the Employment Period, on the first (1st) anniversary of
the occurrence of the Change in Control, if the Executive is in the active
employment of the Company, the Executive shall receive an amount equal to forty
percent (40%) of his Average Base Compensation in effect as of the date of such
Change in Control. In the event that the Executive is in the active employment
of the Company on the second (2nd) anniversary of the occurrence of the Change
in Control, and he has been continuously employed by the Company since such
Change in Control, the Executive shall receive as of such date an additional
amount equal to seventy percent (70%) of his Average Base Compensation in effect
as of the date of such Change of Control. For purposes of determining whether
the Executive is in the active employment of the Company, an Executive who has
been separated from employment or who is otherwise entitled to benefits under
Article Five shall not be deemed to be in the active employment of the Company.
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ARTICLE FOUR
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SEPARATION AFTER A CHANGE IN CONTROL
4.1. Termination. In the event that, during any term of this
-----------
Employment Agreement, including the Employment Period, and coincident with or
following a Change in Control, the Executive is discharged from the employment
of the Company other than for Good Reason or the Executive resigns following the
occurrence of a Termination Event, the Executive shall be entitled to the
benefits provided in Article Five of this Employment Agreement. In the event
that, during any term of this Employment Agreement, including the Employment
Period, coincident with or following a Change in Control the separation or other
Termination Event of the Executive is on account of Good Reason, no compensation
or benefits shall be payable under Section 3.4 or Article Five. Notwithstanding
anything to the contrary, if a Change in Control occurs and the Executive's
employment with the Company is terminated without Good Reason prior to the
Change in Control and it is reasonably demonstrated by the Executive that such
termination of employment (a) was at the request of a third party who has taken
steps to effect the Change in Control or (b) was in anticipation of or in
connection with the Change in Control, the Executive shall, for purposes of this
Employment Agreement, be deemed to have been terminated by the Company as of the
Change in Control without Good Reason.
4.2. Disability; Retirement. In the event the Executive has been
----------------------
subject to Disability, upon expiration of the period qualifying the absence as a
Disability pursuant to Section 2.1(i), and in the event that the Executive
remains subject to Disability at the time of separation, he shall be ineligible
to receive benefits under Section 3.4 and Article Five following a Change of
Control. The term "Retirement" shall not include an election to retire after
occurrence of a Termination Event; any such retirement shall be treated
hereunder as a resignation following a Termination Event pursuant to Section
4.1.
ARTICLE FIVE
------------
TERMINATION BENEFITS
5.1. Notice of Termination Event. Following the occurrence of a
---------------------------
Termination Event, either party to this Employment Agreement may give notice of
the Termination Event, in the manner required by Section 9.1. Such notice shall
indicate the specific provision of this Employment Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances giving rise to
the notice. As of the Termination Date, if the party receiving such notice has
not contested the accuracy of the notice or has given written acknowledgment of
the Termination Event, pursuant to Section 9.1, then the Executive shall be
deemed to be discharged or to have resigned following a
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Termination Event pursuant to Section 4.1. In the event that the party receiving
such notice shall contest the other party's assertion of a Termination Event
prior to the Termination Date, the Termination Date shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction entered upon such arbitration
award (the time for appeal therefrom having expired and no appeal having been
perfected). In the event of such dispute, benefits pursuant to this Article Five
shall be paid to the Executive during the period of dispute unless the Company
and the Executive otherwise agree, and in such event the Executive agrees to
refund to the Company any amounts finally determined not to be payable by reason
of nonoccurrence or delayed occurrence of a Termination Event or Termination
Date, or may apply such amounts against amounts otherwise due following the
determined actual date of a Termination Date, including, if applicable during
the Employment Period.
5.2. Compensation Following Termination Event. In the event that
----------------------------------------
notice of a Termination Event is given pursuant to Section 5.1, until the
Executive's Termination Date (calculated as though such notice was acknowledged
as correct), the Executive shall continue as a regular employee and shall
receive all compensation and benefits from the Company to which he would be
entitled in the absence of the Termination Event or in the absence of separation
on account of Good Reason, at the amounts, rates and levels, and in the manner
payable, before the actions or event constituting the Termination Event,
including, if applicable, during the Employment Period. In the event that the
Executive's Termination Date shall occur during the Employment Period, the
Executive shall continue to receive all compensation payable, as described in
Section 3.4(a) during the Employment Period as though employment had continued
through the Employment Period, unless the Executive's Termination Event or other
separation from employment is for Good Reason.
5.3. Post-Termination Stock Related Compensation. Participants in
-------------------------------------------
one or more of the Stock Plans have received and will receive grants of stock
options, restricted stock and/or other awards thereunder. The Executive may be
a participant in one or more of the Stock Plans. If (a) with respect to stock
options, at the time of a Change in Control or at any time during the Option
Stock Benefit Adjustment Period or (b) with respect to restricted stock or other
awards, at the time of a Termination Event or at any time during the Restricted
Stock Benefit Adjustment Period, the Executive suffers a Value Loss, because he
cannot freely exercise options or other awards and/or sell or exchange Company
stock acquired as a result of option and restricted stock grants or other awards
under one or more of the Stock Plans due to a Securities Restriction being in
effect at any time during the Option Stock Benefit Adjustment Period or the
Restricted Stock Benefit Adjustment Period, respectively, the Executive shall be
entitled to compensation with respect to the
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<PAGE>
options or stock subject to the Value Loss pursuant to this Section 5.3. Any
amount payable pursuant to this Section 5.3 as compensation for a Value Loss
with respect to stock options shall be paid in a lump sum within sixty (60) days
after the end of the Option Stock Benefit Adjustment Period, and with respect to
restricted stock or other awards shall be paid in a lump sum within sixty (60)
days after the end of the Restricted Stock Benefit Adjustment Period. Value Loss
compensation for restricted stock or other awards shall not be payable for
options and option stock, and Value Loss compensation for option and option
stock shall not be payable for restricted stock or other awards, each Value Loss
being separately determined and compensated. Amounts payable under this Section
5.3 shall be calculated by the private law firm serving as employee benefits and
executive compensation counsel to the Board immediately prior to the Change in
Control, and the determination of such amount made by such counsel in good faith
shall be binding upon and conclusive upon both the Company and the Executive. In
the event that the stock which is the subject of this Section 5.3 remains
subject to a Securities Restriction throughout the entire respective Stock
Benefit Adjustment Period, the Value Loss payable shall be calculated between
the high price during the respective Stock Benefit Adjustment Periods and zero
with respect to restricted stock or other awards, and, with respect to stock
options, shall be the option exercise price as set forth in the Executive's
option grants. In such event, where the stock remains subject to a Securities
Restriction throughout the entire respective Stock Benefit Adjustment Period, in
order to receive the benefit provided under this Section 5.3, the Executive
shall surrender his options and/or restricted stock and/or other awards and/or
stock obtained through the exercise of such options in exchange for such
payment. If such options and/or restricted stock and/or other awards and/or
stock are not surrendered, no payment shall be made pursuant to this Section 5.3
with respect to such options, restricted stock and/or other awards and/or stock.
In the event of the permanent loss of a public market for the Common Stock of
the Company coincident with or immediately following a Change in Control (that
can be determined at such date to have occurred as of such date or immediately
thereafter by reason of deregistration or cessation of trading on a recognized
exchange), the Option Stock Benefit Adjustment Period shall be deemed to have
expired as of the date of the Change in Control, with respect to options and
stock acquired through exercise of options, and compensation under this Section
5.3 shall be determined as of such date and payable within sixty (60) days
thereafter. In the event of such permanent loss of a public market, with respect
to restricted stock or other awards, the Restricted Stock Benefit Adjustment
Period shall be deemed to expire as of the Termination Event
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<PAGE>
following or coincident with the Change in Control, and any compensation shall
be payable within sixty (60) days thereafter. In the event of such permanent
loss of a public market, with respect to restricted stock or other awards, the
Restricted Stock Benefit Adjustment Period shall be deemed to expire as of the
Termination Event following or coincident with the Change in Control, and any
compensation shall be payable within sixty (60) days after the date on which
notice of the Termination Event is given. In the event that any amounts (other
than grants of restricted stock or awards of stock options or stock issued on
the exercise thereof) are distributed or distributable to the Executive under
that certain Trust Agreement dated March 10, 1987, by and among the Company,
Newmont Mining Corporation and First Interstate Bank of Arizona, such amounts
shall be credited against any amounts payable under this Section 5.3 and shall
be subtracted from gross amounts payable pursuant to this Section 5.3 prior to
the payment of the net amount payable.
5.4. Retirement Benefits. In the event that the Executive shall
-------------------
become entitled to benefits pursuant to Section 4.1 and/or Section 5.1, the
Executive shall receive from the Company a monthly supplemental retirement
benefit equal to the excess of (a) over (b), where (a) is the retirement benefit
the Executive would be entitled to under the Retirement Plan for Salaried
Employees of Magma Copper Company (and under any related "excess benefit plan",
as defined in ERISA and under the retirement supplement contained in the Magma
Copper Company Special Executive Supplemental Benefit Plan had the Executive
remained in full-time employment for twenty-four (24) additional months
following his Termination Date (calculated as though notice pursuant to Section
5.1 has been acknowledged as correct), and (b) is the retirement benefit
actually payable to Executive under the Retirement Plan for Salaried Employees
of Magma Copper Company and any related excess benefit plan and under the
retirement supplement contained in the Magma Copper Company Special Executive
Supplemental Benefit Plan. Such monthly benefit shall commence as of the date
such benefits commence under the Retirement Plan for Salaried Employees of Magma
Copper Company, and shall be paid in the same form of monthly annuity payment as
elected by the Participant under such Retirement Plan, and shall be subject to
the same method of benefit calculation as under such Retirement Plan. Such
benefit shall be payable as though the Executive was fully vested in a
retirement benefit in the event the Executive is not actually fully vested under
the Retirement Plan for Salaried Employees of Magma Copper Company and shall
commence at the earliest age that the Executive could have elected to receive
benefits had he separated with a vested benefit under such retirement plan. If
the Magma Copper Company Special Executive Supplemental Benefit Plan is amended
to provide the benefit promised under this Section 5.4 for administrative
convenience, such benefit shall be provided under such plan, rather than under
this Employment Agreement, to preclude duplication of benefits. Benefits under
this Section 5.4 may be provided through a funding medium or trust maintained in
connection with the Magma Copper Company Special Executive Supplemental Benefit
Plan, or directly by the Company.
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5.5. Welfare Benefits. For a period of twenty-four (24) months,
----------------
commencing with the Executive's Termination Date (calculated as though notice
pursuant to Section 5.1 has been acknowledged as correct), the Executive (and
his dependents, as applicable) shall be provided by the Company with the same
life, health and disability plan participation, benefits and coverages to which
he was entitled as an employee immediately before the Change in Control. In the
event that under applicable law or the terms of the relevant Employee Benefit
Plans such participation, benefits and/or coverage cannot be provided to the
Executive following his Termination Date, such coverage and/or benefits shall be
provided directly by the Company pursuant to this Employment Agreement on a
comparable basis. In its sole discretion, the Company may obtain such coverage
and benefits for the Executive through private insurance acquired at the
Company's expense. Amounts paid or payable to or on behalf of the Executive
pursuant to any "employee welfare benefit plan," as defined in ERISA, providing
health and/or disability benefits, that is sponsored by the Company or an
affiliate of the Company, shall be credited against amounts due under this
Section 5.5. To the maximum extent permitted by applicable law, the benefits
provided under this Section 5.5 shall be in discharge of any obligations of the
Company or any rights of the Executive under the benefit continuation provisions
under Section 4980A of the Code and Part VI of Title I of the Employee
Retirement Income Security Act ("COBRA") or any other legislation of similar
import. The benefit received under this Section 5.5 shall be reduced by any
comparable benefit received under the Magma Copper Company Severance Pay Plan.
ARTICLE SIX
-----------
INTERNAL REVENUE CODE LIMITATIONS
6.1. Code Limitations. Notwithstanding anything to the contrary in
----------------
this Employment Agreement, if the Executive is entitled to benefits hereunder
following the occurrence of a Change in Control, in no event shall the present
value of benefits payable under this Employment Agreement, taken together with
the Executive's benefits under the Stock Plans, that, in the opinion of counsel
(as identified in Section 6.3), are considered "parachute payments" under
section 4999 of the Code, be reduced by the excise tax imposed by section 4999
of the Code. In the event that such benefits so taken together would exceed the
amount which is exempt from the excise tax imposed by section 4999 of the Code,
the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after the
deduction of any excise tax under Section 4999 and any interest charges or
penalties in respect of the imposition of such excise tax (but not any federal,
state or local income tax) on the present value of such benefits, and any
federal, state and local income tax, excise tax and penalties and interest, if
applicable, upon the
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additional payment provided for by this Section 6.1, shall be equal to the
present value of such benefits. For purposes of determining the additional
amount to be paid to the Executive pursuant to this Section 6.1, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the additional payment is
to be made and state and local income taxes at the highest marginal rates of
taxation in the state and locality of his residence on the date the additional
payment is made, net of the maximum reduction in federal income taxes which
could be obtained from deduction from such state and local taxes.
6.2. Definitions Applicable to This Article Six. For purposes of
------------------------------------------
this Article Six, the term "base amount" shall have the meaning ascribed to it
under section 280G(b)(3) of the Code, the term "parachute payment" shall have
the meaning ascribed to it under section 280G(b)(2) of the Code, "present value"
shall be determined in accordance with section 280G(d)(4) of the Code, and
"reasonable compensation" shall have the meaning ascribed to it under section
280G(b)(4) of the Code.
6.3. Interpretation. This Article Six shall be interpreted so as to
--------------
avoid the imposition of excise taxes on the Executive under section 4999 of the
Code, or to minimize such taxes. In applying the provisions of this Article Six
if, for any reason, an exemption from the application of the rules of section
4999 of the Code shall be available under the terms of said section or under any
applicable regulations or rulings thereunder, such exemption shall be fully
applied. No payment under this Employment Agreement or otherwise that is not,
in the opinion of counsel (as identified in this Section 6.3), a "parachute
payment" under section 4999 of the Code shall be taken into account in applying
the provisions of this Article Six. In application of the provisions of this
Article Six, calculations necessary to be made pursuant to the provisions of
this Article Six and interpretation of the Code and applicable regulations for
purposes of compliance with this Article Six shall be made by the private law
firm serving as employee benefits and executive compensation counsel to the
Board immediately prior to the Change in Control, and the determination of such
counsel made in good faith shall be binding and conclusive upon both the Company
and the Executive. All fees and expenses of such law firm pertaining thereto
shall be borne by the Company. Payments shall be made pursuant to this
Employment Agreement notwithstanding that the status of any payment as a
parachute payment has not been finally determined by the Internal Revenue
Service or any court of competent jurisdiction, or by arbitration as provided in
Article Eight. Any Gross-Up Payment, as determined pursuant to Section 6.1,
shall be paid by the Company to the Executive within five (5) days of the
receipt of the law firm's determination. If the law firm determines that no
excise tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the excise tax on the Executive's
applicable federal income tax return would not result in the
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<PAGE>
imposition of a negligence (or similar) penalty. Any determination by the law
firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the law firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 6.4 and the Executive thereafter is required to make a payment of any
excise tax, the law firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.
6.4. Internal Revenue Service Claims. The Executive shall notify the
-------------------------------
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
(10) business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the thirty (30) day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(a) give the Company any information reasonably requested by the
Company relating to such claim;
(b) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any excise tax or income tax (including interest and
penalties and respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 6.4, the
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Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any excise tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable years of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment shall be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
6.5. Internal Revenue Service Refunds. If, after the receipt by the
--------------------------------
Executive of an amount advanced by the Company pursuant to Section 6.4, the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 6.4), promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of any amount advanced by the Company
pursuant to Section 6.4, a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
ARTICLE SEVEN
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SUCCESSION AND ASSIGNMENT
7.1. Succession of Executive. This Employment Agreement shall inure
-----------------------
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors,
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administrators, successors, heirs, distributees, devises and legatees. In the
event of the Executive's death while any amount would still be payable hereunder
to the Executive had he lived, unless otherwise provided herein, such amount
shall be paid in accordance with the terms of this Employment Agreement to the
Executive's devisee, legatee or other beneficiary or, if there is not such
devisee, legatee or beneficiary, to his estate.
7.2. Successors to the Company. Except as otherwise provided herein,
-------------------------
this Employment Agreement shall be binding upon and inure to the benefit of the
Company and any successor of the Company, including, without limitation, any
corporation or corporations acquiring directly or indirectly all or
substantially all of the stock, business or assets of the Company whether by
merger, consolidation, division, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Employment
Agreement). The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Employment Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Employment
Agreement entitling the Executive to the benefits hereunder, as though the
Executive was subject to a Termination Event due to a cause other than Good
Reason.
7.3. Assignment. This Employment Agreement is personal in nature,
----------
and neither the Executive nor the Company may assign or transfer this Employment
Agreement or rights hereunder except as provided in this Article Seven. The
obligation of the Company hereunder shall constitute a general unsecured
obligation of the Company; provided that, to the maximum extent permitted under
applicable laws of bankruptcy or insolvency, the obligations of the Company
hereunder shall have the highest creditor priority applicable to wages payable
to employees. No right, benefit or interest hereunder shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or obligation or to
execution, attachment, levy or similar process, or assignment by operation of
law, except as otherwise provided in this Article Seven. Any attempt, voluntary
or involuntary, to effect any action specified in the immediately preceding
sentence shall, to the full extent permitted by law, be null, void and of no
effect.
ARTICLE EIGHT
-------------
ADDITIONAL RIGHTS AND RESPONSIBILITIES
8.1. Mitigation. The Executive shall not be required to mitigate
----------
damages or the amount of any payment provided for under
-18-
<PAGE>
this Employment Agreement by seeking other employment or otherwise. The
provisions of this Employment Agreement, and any payment provided for hereunder,
shall not reduce any amounts otherwise payable, or in any way diminish the
Executive's existing rights which would accrue solely as a result of the passage
of time, under any Company Employee Benefit Plan, "payroll practice" (as defined
in ERISA), compensation arrangement, incentive plan, stock option or other
stock-related plan other than under the Magma Copper Company Severance Pay Plan,
as provided in Section 5.5 and 5.6.
8.2. Legal Costs. If any legal action or other proceeding is brought
-----------
by the Executive for the enforcement of this Employment Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Employment Agreement, except as provided in Section
8.3, the Executive shall be entitled to recover reasonable attorneys fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which he may be entitled, in the event and to the extent that the
Executive prevails in such action or other proceeding. Notwithstanding anything
hereinabove to the contrary, as between the Executive and the Company, the
Company shall bear all legal costs and expenses of defending the validity of
this Employment Agreement against any third party. The Company shall bear all
legal costs and expenses incurred in contesting or disputing the
characterization of any amounts paid pursuant to this Employment Agreement as
being nondeductible under section 280G of the Code or subject to imposition of
an excise tax under section 4999 of the Code.
8.3. Arbitration. After the occurrence of a Change in Control, any
-----------
controversy or claim arising out of or relating to this Employment Agreement, or
any breach thereof, shall, except as provided in Article Six, be adjudicated
only by arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon such award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitration shall be held
in the City of Phoenix, Arizona, or such other place as may be agreed upon at
the time by the parties to the arbitration. The arbitrator(s) shall, in their
award, allocate between the parties the costs of arbitration, which shall
include reasonable attorneys' fees of the parties, as well as the arbitrators'
fees and expenses, in such proportions as the arbitrator(s) deem just.
Notwithstanding the foregoing and pursuant to Section 8.2, the Executive shall
be entitled to seek specific performance in a court of competent jurisdiction of
the Executive's right to be paid his full compensation until the Executive's
Termination Date, during the pendency or dispute of any controversy arising
under or in connection with this Employment Agreement.
-19-
<PAGE>
ARTICLE NINE
------------
MISCELLANEOUS
9.1. Notices Generally. Any notice or other communication required
-----------------
or permitted pursuant to the terms of this Employment Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States mail, first class, postage prepaid and registered with return
receipt requested, addressed to the intended recipient at his or its address set
forth below and, in the case of a notice or other communication to the Company,
directed to the attention of the Board with a copy to the Secretary of the
Company, or to such other address as the intended recipient may have theretofore
furnished to the sender in writing in accordance herewith, except that any
notice of change of address is received, notices shall be sent to the following
addresses:
If to the Executive: If to the Company:
Magma Copper Company
7400 North Oracle Road, Suite 200
Tucson, Arizona 85704
9.2. Amendment; Waivers. This Employment Agreement may be amended only by
------------------
written amendment duly executed by both parties or their legal representatives
and authorized by action of the Board. Except as otherwise specifically
provided in this Employment Agreement, no waiver by either party hereto of any
breach by the other party hereto of any condition or provision of this
Employment Agreement to be performed by such other party shall be deemed a
waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at any prior or
subsequent time.
9.3. Severability. If any one (1) or more of the provisions or parts of a
------------
provision contained in this Employment Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision or part of a provision of
this Employment Agreement, but this Agreement shall be reformed and construed as
if such invalid or illegal or unenforceable provision or party of a provision
had never been contained herein and such provisions or part thereof shall be
reformed so that it would be valid, legal and enforceable to the maximum extent
permitted by law.
9.4. Nature of Payments. Any payment made pursuant to this Employment
------------------
Agreement is not intended to be a penalty and shall not preclude the enforcement
of any other remedies available to the party making the payment.
-20-
<PAGE>
9.5. Withholding. Any payment provided for hereunder shall be payable net
-----------
of any applicable withholding required under federal, state or local law.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Employment Agreement as of the date and year first above written.
MAGMA COPPER COMPANY
____________________________________
By: J. Burgess Winter
Its: President and Chief Executive Officer
ATTEST:
____________________________________
By: Marsh H. Campbell
Its: Vice President, Human Resources
EXECUTIVE
By:______________________________
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<PAGE>
EXHIBIT 99.10
FIRST AMENDMENT
TO THE
MAGMA COPPER COMPANY
SPECIAL EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
Effective August 1, 1990, Magma Copper Company (the "Company") adopted
the MAGMA COPPER COMPANY SPECIAL EXECUTIVE SUPPLEMENTAL BENEFIT PLAN (the
"Plan"). The Plan was amended and restated, effective May 1, 1995. Contingent
on the approval of three-fourths of the participants participating in the Plan
as of the effective date of this Amendment, as required by section 11.1 of the
Plan, the Plan is hereby further amended effective November 30, 1995, as
follows:
1. This First Amendment shall amend only those provisions secifically
mentioned herein, and those provisions not so mentioned shall remain in full
force and effect.
2. Section 2.1(h) is hereby amended in its entirety and replaced with the
following:
(h) "Compensation"- All wages, salaries, cash bonuses and other amounts of
cash compensation paid to the Participant during the Plan Year, excluding any
compensation consisting of awards under any Magma Copper Company Stock Option
and Stock Award Plan, the 1993 Magma Copper Company Long-Term Incentive Plan (or
any successor long-term incentive plan) and the exercise of any grant, option or
right thereunder, and any additional compensation paid pursuant to an Employment
Agreement between a Participant and the Company providing for such additional
compensation following a "Change in Control" (as defined therein) by reason of
the occurrence of a "Termination Event" (as defined therein) due to a cause
other than "Good Reason" (as defined therein). "Compensation" shall also
include compensation deferred by a Participant under the Deferred Compensation
Plan and under the Salaried Savings Plan of Magma Copper Company, and amounts
contributed by the Employer pursuant to a salary reduction agreement that are
not includable in gross income of the Participant by reason of section 125 of
the Code, but shall not include any other contributions or any benefits under
any "employee benefit plan," as defined in the Act, sponsored by the Company or
an Affiliate.
3. Section 7.4 of the Plan is hereby amended by substituting the following
paragraph for the first paragraph under such section:
In the event that a Participant is "terminated" within two (2) years following a
Change in Control as described in Section 2. 1, the Participant shall be
entitled to the distribution of a benefit in accordance with the provisions of
Articles IV, V, or VI, provided, however, that the benefits to be distributed to
such Participant shall equal the benefits promised under the Plan
<PAGE>
to which the Participant would be entitled upon his normal retirement under the
Retirement Plan.
4. Section 11.1 of the Plan is hereby amended by adding the following sentence
as the last sentence of the section:
Notwithstanding any provisions of this section to the contrary, following a
Change in Control, Article VI of this Plan, and this sentence, cannot be amended
without obtaining the consent of three-fourths (3/4) of the Participants, as
provided above, nor can the medical benefit provided pursuant to Article VI be
terminated, as such benefits shall be accrued hereunder as of the date of the
Change in Control. Notwithstanding anything in this section to the contrary,
the Participant must meet all eligibility requirements for obtaining such
benefits.
Dated: __________, 1995 MAGMA COPPER COMPANY
By:__________________
Title:_______________
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<PAGE>
EXHIBIT 99.12
FIRST AMENDMENT
TO THE
MAGMA COPPER COMPANY
1993 STOCK OPTION AND STOCK AWARD PLAN
On February 24, 1993, MAGMA COPPER COMPANY (the "Company") adopted the
MAGMA COPPER COMPANY 1993 STOCK OPTION AND STOCK AWARD PLAN (the "Plan") for the
purpose of providing specified stock-related benefits to selected key employees
of the Company. By this instrument, the Company desires to amend the Plan.
1. This First Amendment shall amend only the section of the Plan set
forth herein and all other Plan provisions shall remain in full force and
effect.
2. Section 12.3 of the Plan is hereby amended by substituting the
following for the seven circumstances enumerated therein as constituting a
Change in Control:
(i) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty-five
percent (65%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided however, that a merger or
consolidation effected to implement a recapitalization of the Company
(or a similar transaction) in which no Person other than Warburg,
Pincus Capital Company, L.P., acquires thirty-five percent (35%) or
more of the Company's then outstanding voting securities shall not
constitute a Change in Control;
<PAGE>
(ii) A change in ownership of the Company through a transaction
or series of transactions, such that any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing thirty-five percent (35%) or more of the combined voting
power of the Company's then outstanding securities; provided that, for
such purposes, any acquisition by the Company shall be disregarded;
and provided further that, in the event of such a change in ownership,
if Warburg, Pincus Capital Company, L.P., as of the date of such
change of ownership and at all times thereafter, remains the
Beneficial Owner of a percentage interest in the Company equal to at
least ten percent (10%) more than any other Beneficial Owner of the
combined voting power of the Company's then outstanding securities, no
Change in Control shall be deemed to have occurred unless (A) the
majority of the Board serving immediately prior to such Change in
Control shall deem a Change in Control to have occurred, or (B)
Warburg, Pincus Capital Company, L.P., shall thereafter cease to be
the Beneficial Owner of a percentage ownership interest in the Company
equal to at least ten percent (10%) more than any other Beneficial
Owner of the combined voting power of the Company's then outstanding
securities (and in such event, the Change in Control shall be deemed
to have occurred on the date Warburg, Pincus Capital Company, L.P.,
ceases to be the Beneficial Owner of such greater combined voting
power);
(iii) A change in identity of a majority of the members of the
Board within any twenty-four (24) month period; provided however, if
such a change in the identity of the members of the Board occurs
following the acquisition of fifty-one percent (51%) or more of the
Company's then outstanding voting securities by Warburg, Pincus
Capital Company, L.P., no Change in Control shall be deemed to have
occurred if such change of Board membership was approved in writing
(or by an approved written resolution) by a majority of the Board and
of the Management Executive Committee serving immediately prior to
such change of Board membership. For purposes of this subsection
(iii), the term "Management Executive Committee" shall mean a
Committee appointed in writing by the then-acting Chief Executive
Officer of the Company, comprised of corporate officers and such
additional key employees of the Company as the Chief Executive Officer
shall appoint from time to time. The Chief Executive Officer may
remove any member of the Management Executive Committee by notice in
writing delivered to such member and the other members of the
Management Executive Committee;
-2-
<PAGE>
(iv) The approval by the Board (or by the shareholders if
shareholder approval is required by applicable law or under the terms
of any relevant agreement) of an agreement for the sale or disposition
of all or substantially all of the Company's assets or a
sale/leaseback of all or substantially all of the Company's assets
(with or without a purchase option);
(v) A transfer of all or substantially all of the Company's
assets pursuant to a partnership of joint venture agreement where the
Company's resulting interest is or becomes fifty percent (50%) or
less;
(vi) The Board (or the shareholders if shareholder approval is
required by applicable law or under the terms of any relevant
agreement) shall approve a plan of complete liquidation of the
Company; or
(vii) The execution or approval by the Board of any agreement,
the consummation of which would result in one of the foregoing.
3. Except as amended by this First Amendment, which is effective as
of the ____ day of _________________, 1995, the Company hereby ratifies the
terms of the Plan.
MAGMA COPPER COMPANY
By:_____________________________
Its:____________________________
-3-
<PAGE>
EXHIBIT 99.13
SECOND AMENDMENT
TO THE
MAGMA COPPER COMPANY
1989 STOCK OPTION AND STOCK AWARD PLAN
On May 4, 1989, MAGMA COPPER COMPANY (the "Company") adopted the MAGMA
COPPER COMPANY 1989 STOCK OPTION AND STOCK AWARD PLAN (the "Plan") for the
purpose of providing specified stock-related benefits to selected key employees
of the Company. The Plan was thereafter amended, effective February 12, 1992.
By this instrument, the Company desires further to amend the Plan.
1. This Second Amendment shall amend only the section of the Plan set
forth herein and all other Plan provisions shall remain in full force and
effect.
2. Section 10(d) of the Plan is hereby amended by substituting the
following for the portion of the section that defines the term "Change in
Control":
"A Change in Control" shall mean a change in ownership or managerial
control of the stock, assets or business of the Company resulting from one
or more of the following circumstances:
(A) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty-five
percent (65%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided however, that a merger or
consolidation effected to implement a recapitalization of the Company
(or a similar transaction) in which no Person other than Warburg,
Pincus Capital Company, L.P., acquires
<PAGE>
thirty-five percent (35%) or more of the Company's then outstanding
voting securities shall not constitute a Change in Control;
(B) A change in ownership of the Company through a transaction or
series of transactions, such that any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing thirty-five percent (35%) or more of the combined voting
power of the Company's then outstanding securities; provided that, for
such purposes, any acquisition by the Company shall be disregarded;
and provided further that, in the event of such a change in ownership,
if Warburg, Pincus Capital Company, L.P., as of the date of such
change of ownership and at all times thereafter, remains the
Beneficial Owner of a percentage interest in the Company equal to at
least ten percent (10%) more than any other Beneficial Owner of the
combined voting power of the Company's then outstanding securities, no
Change in Control shall be deemed to have occurred unless (A) the
majority of the Board serving immediately prior to such Change in
Control shall deem a Change in Control to have occurred, or (B)
Warburg, Pincus Capital Company, L.P., shall thereafter cease to be
the Beneficial Owner of a percentage ownership interest in the Company
equal to at least ten percent (10%) more than any other Beneficial
Owner of the combined voting power of the Company's then outstanding
securities (and in such event, the Change in Control shall be deemed
to have occurred on the date Warburg, Pincus Capital Company, L.P.,
ceases to be the Beneficial Owner of such greater combined voting
power);
(C) A change in identity of a majority of the members of the
Board within any twenty-four (24) month period; provided however, if
such a change in the identity of the members of the Board occurs
following the acquisition of fifty-one percent (51%) or more of the
Company's then outstanding voting securities by Warburg, Pincus
Capital Company, L.P., no Change in Control shall be deemed to have
occurred if such change of Board membership was approved in writing
(or by an approved written resolution) by a majority of the Board and
of the Management Executive Committee serving immediately prior to
such change of Board membership. For purposes of this Section
10(d)(C), the term "Management Executive Committee" shall mean a
Committee appointed in writing by the then-acting Chief Executive
Officer of the Company, comprised of corporate officers and such
additional key employees of the Company as the Chief Executive Officer
shall appoint from time to time. The Chief Executive Officer may
remove any member of the Management Executive Committee by notice
-2-
<PAGE>
in writing delivered to such member and the other members of the
Management Executive Committee;
(D) The approval by the Board (or by the shareholders if
shareholder approval is required by applicable law or under the terms
of any relevant agreement) of an agreement for the sale or disposition
of all or substantially all of the Company's assets or a
sale/leaseback of all or substantially all of the Company's assets
(with or without a purchase option);
(E) A transfer of all or substantially all of the Company's
assets pursuant to a partnership of joint venture agreement where the
Company's resulting interest is or becomes fifty percent (50%) or
less;
(F) The Board (or the shareholders if shareholder approval is
required by applicable law or under the terms of any relevant
agreement) shall approve a plan of complete liquidation of the
Company; or
(G) The execution or approval by the Board of any agreement, the
consummation of which would result in one of the foregoing.
For purposes of this Section 10(d), the term "Beneficial Owner" shall
have the same meaning as the term is given in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and the term "Person" shall
have the meaning given the term when used in sections 13(d) and 14(d) of
such act.
3. Except as amended by this Second Amendment, which is effective as
of the ____ day of ____________ 1995, the Company hereby ratifies the terms
of the Plan.
MAGMA COPPER COMPANY
By:_____________________________
Its:____________________________
-3-
<PAGE>
EXHIBIT 99.14
THIRD AMENDMENT TO
MAGMA COPPER COMPANY
1987 STOCK OPTION AND STOCK AWARD PLAN
Effective March 5, 1987, Magma Copper Company (the "Company") adopted the
Magma Copper Company 1987 Stock Option and Stock Award Plan (the "Plan"). The
Company previously amended the Plan to alter the option period under the Plan to
vest awards fully in the event of major corporate transactions, and for other
purposes. By this instrument, the Company desires to amend the definition of
"Change in Control" in the Plan to conform it to the definition used in other
Company Plans and agreements, and to grant to the Plan Committee discretion to
take certain actions following a Change in Control.
1. This Amendment shall amend only the Section of the Plan set forth
herein, and those Sections and subsections not expressly amended hereby
remain in full force and effect.
2. Section 14 of the Plan is hereby amended in its entirety to read
as follows:
In the event of a "Change in Control" of the Company, the
Committee may, in its discretion, without obtaining shareholder approval,
take any one or more of the following actions, with respect to any optionee
or participant:
(a) Accelerate the exercise dates of any or all outstanding stock
options or make some or all such stock options immediately fully vested and
exercisable;
<PAGE>
(b) Accelerate the restriction (lapse of forfeiture provision) period
of any restricted stock award subject to restrictions; or
(c) Pay cash to any or all holders of stock options in exchange for
the cancellation of their outstanding stock options.
"A Change in Control" shall mean a change in ownership or managerial
control of the stock, assets or business of the Company resulting from one
or more of the following circumstances:
(i) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty-five
percent (65%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided however, that a merger or
consolidation effected to implement a recapitalization of the Company
(or a similar transaction) in which no Person other than Warburg,
Pincus Capital Company, L.P., acquires thirty-five percent (35%) or
more of the Company's then outstanding voting securities shall not
constitute a Change in Control;
(ii) A change in ownership of the Company through a transaction
or series of transactions, such that any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing thirty-five percent (35%) or more of the combined voting
power of the Company's then outstanding securities; provided that, for
such purposes, any acquisition by the Company shall be disregarded,
and provided further that, in the event of such a change in ownership,
if Warburg, Pincus Capital Company, L.P., as of the date of such
change of ownership and at all times thereafter, remains the
Beneficial Owner of a percentage interest in the Company equal to
-2-
<PAGE>
at least ten percent (10%) more than any other Beneficial Owner of the
combined voting power of the Company's then outstanding securities, no
Change in Control shall be deemed to have occurred unless (A) the
majority of the Board serving immediately prior to such Change in
Control shall deem a Change in Control to have occurred, or (B)
Warburg, Pincus Capital Company, L.P., shall thereafter cease to be
the Beneficial Owner of a percentage ownership interest in the Company
equal to at least ten percent (1O%) more than any other Beneficial
Owner of the combined voting power of the Company's then outstanding
securities (and in such event, the Change in Control shall be deemed
to have occurred on the date Warburg, Pincus Capital Company, L.P.,
ceases to be the Beneficial Owner of such greater combined voting
power);
(iii) A change in identity of a majority of the members of the
Board within any twenty-four (24) month period; provided however, if
such a change in the identity of the members of the Board occurs
following the acquisition of fifty-one percent(51%) or more of the
Company's then outstanding voting securities by Warburg, Pincus
Capital Company, L.P., no Change in Control shall be deemed to have
occurred if such change of Board membership was approved in writing
(or by an approved written resolution) by a majority of the Board and
of the Management Executive Committee serving immediately prior to
such change of Board membership. For purposes of this Section 14, the
term "Management Executive Committee" shall mean a Committee appointed
in writing by the then-acting Chief Executive Officer of the Company,
comprised of corporate officers and such additional key employees of
the Company as the Chief Executive Officer shall appoint from time to
time. The Chief Executive Officer may remove any member of the
Management Executive Committee by notice in writing delivered to such
member and the other members of the Management Executive Committee;
(iv) The approval by the Board (or by the shareholders if
shareholder approval is required by applicable law or under the terms
of any relevant agreement) of an agreement for the sale or disposition
of all or substantially all of the Company's assets or a sale-
leaseback of all or substantially all of the Company's assets (with or
without a purchase option);
(v) A transfer of all or substantially all of the Company's
assets pursuant to a partnership of joint venture agreement where the
Company's resulting interest is or becomes fifty percent (50%) or
less;
(vi) The Board (or the shareholders if shareholder approval is
required by applicable law or under the terms of any relevant
agreement) shall approve a plan of complete liquidation of the
Company; or
(vii) The execution or approval by the Board of any agreement,
the consummation of which would result in one of the foregoing.
-3-
<PAGE>
For purposes of this Section 14, the term "Beneficial Owner" shall
have the same meaning as the term is given in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, and the term "Person" shall have the meaning
given the term when used in sections 13(d) and 14(d) of such act.
3. Except as amended by this Amendment, which is effective as of the
____ day of _____________, 1995, the Company hereby ratifies the terms of
the Plan.
MAGMA COPPER COMPANY
By:_____________________________
Its:____________________________
-4-
<PAGE>
EXHIBIT 99.15
FIRST AMENDMENT
TO THE
MAGMA COPPER COMPANY
CHIEF EXECUTIVE OFFICER SUPPLEMENTAL RETIREMENT PLAN
Effective January 1, 1993, MAGMA COPPER COMPANY (the "Company") adopted the
MAGMA COPPER COMPANY CHIEF EXECUTIVE OFFICER SUPPLEMENTAL PLAN (the "Plan") for
the purpose of providing the Company's Chief Executive Officer with certain
specified retirement benefits. By this instrument, the Company desires to amend
the definition of "Change in Control" in the Plan to conform it to the
definition used in other Company plans and agreements.
1. This Amendment shall amend only the section of the Plan referred
to herein and the remaining provisions of the Plan shall remain in full
force and effect.
2. Subsection 2.1(d) of the Plan is hereby amended to read as
follows:
"Change in Control" - A change in ownership or managerial control of
the stock, assets or business of the Company resulting from one or more of
the following circumstances:
(i) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty-five
percent (65%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided however, that a merger or
consolidation
<PAGE>
effected to implement a recapitalization of the Company (or a similar
transaction) in which no Person other than Warburg, Pincus Capital
Company, L.P., acquires thirty-five percent (35%) or more of the
Company's then outstanding voting securities shall not constitute a
Change in Control;
(ii) A change in ownership of the Company through a transaction
or series of transactions, such that any Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing thirty-five percent (35%) or more of the combined voting
power of the Company's then outstanding securities; provided that, for
such purposes, any acquisition by the Company shall be disregarded,
and provided further that, in the event of such a change in ownership,
if Warburg, Pincus Capital Company, L.P., as of the date of such
change of ownership and at all times thereafter, remains the
Beneficial Owner of a percentage interest in the Company equal to at
least ten percent (10%) more than any other Beneficial Owner of the
combined voting power of the Company's then outstanding securities, no
Change in Control shall be deemed to have occurred unless (A) the
majority of the Board serving immediately prior to such Change in
Control shall deem a Change in Control to have occurred, or (B)
Warburg, Pincus Capital Company, L.P., shall thereafter cease to be
the Beneficial Owner of a percentage ownership interest in the Company
equal to at least ten percent (1O%) more than any other Beneficial
Owner of the combined voting power of the Company's then outstanding
securities (and in such event, the Change in Control shall be deemed
to have occurred on the date Warburg, Pincus Capital Company, L.P.,
ceases to be the Beneficial Owner of such greater combined voting
power);
(iii) A change in identity of a majority of the members of the
Board within any twenty-four (24) month period, provided however, if
such a change in the identity of the members of the Board occurs
following the acquisition of fifty-one percent (51 %) or more of the
Company's then outstanding voting securities by Warburg, Pincus
Capital Company, L.P., no Change in Control shall be deemed to have
occurred if such change of Board membership was approved in writing
(or by an approved written resolution) by a majority of the Board and
of the Management Executive Committee serving immediately prior to
such change of Board membership. For purposes of this Section
2.1(d)(iii), the term "Management Executive Committee" shall mean a
Committee appointed in writing by the then-acting Chief Executive
Officer of the Company, comprised of corporate officers and such
additional key employees of the Company as the
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<PAGE>
Chief Executive Officer shall appoint from time to time. The Chief
Executive Officer may remove any member of the Management Executive
Committee by notice in writing delivered to such member and the other
members of the Management Executive Committee;
(iv) The approval by the Board (or by the shareholders if
shareholder approval is required by applicable law or under the terms
of any relevant agreement) of an agreement for the sale or disposition
of all or substantially all of the Company's assets or a
sale/leaseback of all or substantially all of the Company's assets
(with or without a purchase option);
(v) A transfer of all or substantially all of the Company's
assets pursuant to a partnership of joint venture agreement where the
Company's resulting interest is or becomes fifty percent (50%) or
less;
(vi) The Board (or the shareholders if shareholder approval is
required by applicable law or under the terms of any relevant
agreement) shall approve a plan of complete liquidation of the
Company; or
(vii) The execution or approval by the Board of any agreement,
the consummation of which would result in one of the foregoing.
3. Subsections 2.1(e) and (f) of the Plan are hereby deleted and each
succeeding subsection is hereby relettered accordingly.
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<PAGE>
4. This First Amendment shall be effective January 1, 1995.
5. Except as amended by this First Amendment, the Company hereby
ratifies the terms of the Plan.
MAGMA COPPER COMPANY
By:_____________________________
Its:____________________________
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<PAGE>
EXHIBIT 99.16
FIRST AMENDMENT TO THE
MAGMA COPPER COMPANY TRUST FUND
FOR EXECUTIVE BENEFITS
On February 13, 1987, Magma Copper Company (the "Company") established the
Magma Copper Company Trust Fund for Executive Benefits. The Trust Fund was
thereafter restated as of January 1, 1989. By this amendment the Company
intends to amend the Trust Fund to assure the funding of accrued benefits
through the Trust Fund, in accordance with the terms of the Trust Fund, upon the
occurrence of a Change in Control.
1. This amendment shall amend only those sections specifically referred to
herein, and those sections and subsections of the Trust Fund not specifically
referred to shall remain in full force and effect.
2. This First Amendment shall be effective as of November 11, 1993.
3. Section 1.4 is hereby amended by the addition of the following
paragraph as new paragraph appearing at the end thereof:
"In the event of a "Change in Control," as defined in Section 9.1, the
Company will transfer to the Trustee of the Magma Copper Company Trust Fund
for Executive Benefits an amount equal to the present value of the liability
for benefits accrued to the date of the Change in Control pursuant to the
Benefit Arrangements, less amounts already contributed to the Trust Fund.
The present value of such benefits as of such date shall be determined by
the firm of actuarial consultants serving as the Company's regular actuarial
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<PAGE>
consultant prior to the Change in Control or such other firm as may be
designated by the members of the Board who constituted the Board of
Directors, immediately prior to the Change in Control, using such
assumptions as were used in computing such liabilities for financial
reporting purposes by such actuarial consultants. Such transfer shall be
made not later than thirty (30) days after the date of such Change in
Control. The Trustee shall have no responsibility or duty to collect such
funds, and shall act solely at the direction of the Vice President Human
Resources with respect to such funding."
4. Section 9.1 is hereby amended by the addition of the following
paragraphs at the end thereof:
"For purposes of this Trust Agreement, the term "Change in Control" shall
mean a change in ownership or managerial control of the stock, assets or
business of the Company resulting from one (1) or more of the following
circumstances:
(a) On or after November 11, 1993, the shareholders of the Company approve
a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty-five percent
(65%) of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation; provided however, that a merger or consolidation effected to
implement a recapitalization of the Company (or a similar transaction), in
which no Person other than Warburg, Pincus Capital Company, L.P., acquires
thirty-five percent (35%) or more of the Company's then outstanding voting
securities shall not constitute a Change in Control;
(b) On or after November 11, 1994, a change in ownership of the Company
through a transaction or series of transactions, such that any Person is or
becomes a Beneficial Owner, directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of the combined
voting power of the Company's then outstanding securities; provided that,
for such purposes, any acquisition by the Company shall be disregarded; and
provided further that in the event of such a change in ownership, if
Warburg, Pincus Capital Company, L.P., as of the date of such change of
ownership and at all times thereafter, remains the
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<PAGE>
Beneficial Owner of a percentage interest in the Company equal to at least
ten percent (10%) or more than any other Beneficial Owner of the combined
voting power of the Company's then outstanding securities, no Change in
Control shall be deemed to have occurred unless (A) the majority of the
Board serving immediately prior to such Change in Control shall deem a
Change in Control to have occurred, or (B) Warburg, Pincus Capital Company,
L.P., shall thereafter cease to be the Beneficial Owner of a percentage
ownership interest in the Company equal to at least ten percent (10%) more
than any other Beneficial Owner of the combined voting power of the
Company's then outstanding securities (and in such event, the Change of
Control shall be deemed to have occurred on the date Warburg, Pincus
Capital Company, L.P., ceases to be the Beneficial Owner of such greater
combined voting power);
(c) A change in identity of a majority of the members of the Board within
any twenty-four (24) month period; provided however, if such a change in
the identity of the members of the Board occurs following the acquisition
of fifty-one percent (51%) or more of the Company's then outstanding voting
securities by Warburg, Pincus Capital Company, L.P., no Change in Control
shall be deemed to have occurred if such change of Board membership was
approved in writing (or by an approved written resolution) by a majority of
the Board and of the Management Executive Committee serving immediately
prior to such change of Board membership;
(d) The approval by the Board (or by the shareholders if shareholder
approval is required by applicable law or under the terms of any relevant
agreement) of an agreement for the sale or disposition of all or
substantially all of the Company's assets or a sale/leaseback of all or
substantially all of the Company's assets (with or without a purchase
option);
(e) A transfer of all or substantially all of the Company's assets pursuant
to a partnership or joint venture agreement where the Company's resulting
interest is or becomes fifty percent (50%) or less;
(f) On or after November 11, 1964, the Board (or the shareholders if
shareholder approval is required by applicable law or under the terms of
any relevant agreement) shall approve a plan of complete liquidation of the
Company; or
(g) The execution or approval by the Board of any agreement, the
consummation of which would result in one of the foregoing.
For purposes of this Section 9.1, the term "Beneficial Owner" shall have
the same meaning as the term is given in Rule
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<PAGE>
13d-3 under the Securities Exchange Act of 1934, as amended, and the term
"Person" shall have the meaning given the term when used in section 13(d) and
14(d) of such act. The term "Management Executive Committee" shall mean a
committee appointed in writing by the then - acting Chief Executive Officer of
the Company, comprised of such corporate officers and additional key employees
of the Company as the Chief Executive Officer of the Company shall appoint from
time to time. The Chief Executive Officer may remove any member of the
Management Executive Committee by notice in writing delivered to such member and
to the other members of Management Executive Committee."
5. Except as amended hereby, the Company hereby ratifies the terms of the
Trust Agreement, as previously amended and restated.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed by their duly authorized representatives this ____ day of
___________, 19___.
MAGMA COPPER COMPANY
By:____________________
Its:_________________
"Company"
Bank One, Arizona, NA (Formerly Known As The
Valley National Bank of Arizona)
By:____________________
Its:________________
"Trustee"
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<PAGE>
EXHIBIT 99.17
FIRST AMENDMENT TO THE
MAGMA COPPER COMPANY
1993 LONG TERM INCENTIVE PLAN
Effective January 1, 1993, Magma Copper Company (the "Company")
adopted the MAGMA COPPER COMPANY 1993 LONG TERM INCENTIVE PLAN (the "Plan"). By
this instrument, the Company desires to amend the Plan for the first time.
1. This Amendment shall amend only the Section of the Plan set forth
herein, and those Sections not amended hereby shall remain in full force and
effect.
2. Section 9.3 is hereby deleted and the following Section 9.3 is
hereby inserted in lieu thereof.
9.3 Payment. Payment of a mature Performance Share Award shall be
-------
made within sixty (60) days following the end of the Performance Period, or
within sixty (60) days following termination of employment pursuant to
Sections 7.2 and 9.2, if applicable. Awards may be payable in cash, or in
Common Stock, or in a combination of both, as determined by the Committee,
in its sole and absolute discretion. Payment of benefits in Common Stock
shall be deemed to have been made under the Stock Option and Stock Award
Plan and shall be credited against the limitation provided in Section 3.1
thereof, in accordance with the provisions of Section 3.2(a) of the Stock
Option and Stock Award Plan. In the event that all or part of a
Performance Share Award is to be paid in cash, for the purpose of
determining the amount of cash payable, the value of the mature Performance
Share Award will be valued at the average per share trading price of Common
Stock during the final calendar year of the Performance Period. To the
extent permitted under the Magma Copper Company Special Executive
Supplemental Deferred Compensation Plan, Performance Share Awards payable
in cash, or in Common Stock, or in a combination of both, under this Plan
may be deferred pursuant to the terms and provisions of such plan.
Notwithstanding anything in Article VII to the contrary, in no event will a
Performance Share Award be payable until at least six (6) months from the
date of grant, except in cases of death or disability. The Company is
obligated to make the payments provided under this Plan, but no Participant
shall have any right to any specific asset of the Company in connection
with the Plan and all
<PAGE>
payments shall be made from the general assets of the Company.
3. Except as amended by this First Amendment which is effective as of
January 1, 1995, the Company ratifies the terms of the Plan, as previously
stated.
Dated ,199_.
MAGMA COPPER COMPANY
By:
--------------------------
Its:
----------------------
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<PAGE>
EXHIBIT 99.18
FOURTH AMENDMENT TO THE
MAGMA COPPER COMPANY
SPECIAL EXECUTIVE DEFERRED COMPENSATION PLAN
On January 9, 1990, Magma Copper Company (the "Company") adopted the
MAGMA COPPER COMPANY SPECIAL EXECUTIVE DEFERRED COMPENSATION PLAN (the "Plan").
The Plan was subsequently amended and restated on September 4, 1990. On
December 14, 1990, the Plan was again amended and restated to make changes
requested by the Internal Revenue Service. The Plan was thereafter amended by
the First Amendment on January 1, 1991, the Second Amendment on December 23,
1991, and the Third Amendment on January 1, 1993. By this instrument, the
Company desires to further amend the Plan.
1. This Amendment shall amend only the Sections of the Plan set forth
herein, and those Sections not amended hereby shall remain in full force and
effect.
2. Section 2(C) is hereby deleted and the following Section 2(C) is
hereby inserted in lieu thereof.
"(C) "Change in Control" shall mean a change in ownership or
managerial control of the stock, assets or business of the Company
resulting from one (1) or more of the following circumstances:
(i) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than sixty-five
percent (65%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided however, that a merger or
consolidation effected to implement a recapitalization
<PAGE>
of the Company (or a similar transaction), in which no Person other
than Warburg, Pincus Capital Company, L.P., acquires thirty-five
percent (35%) or more of the Company's then outstanding voting
securities shall not constitute a Change in Control;
(ii) On or after November 11, 1994, a change in ownership of
the Company through a transaction or series of transactions, such that
any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing thirty-five percent (35%) or
more of the combined voting power of the Company's then outstanding
securities; provided that, for such purposes, any acquisition by the
Company shall be disregarded; and provided further that, in the event
of such a change in ownership, if Warburg, Pincus Capital Company,
L.P., as of the date of such change of ownership and at all times
thereafter, remains the Beneficial Ownership of a percentage interest
in the Company equal to at least ten percent (10%) more than any other
Beneficial Owner of the combined voting power of the Company's then
outstanding securities, no Change in Control shall be deemed to have
occurred unless (A) the majority of the Board serving immediately
prior to such Change in Control shall deem a Change in Control to have
occurred, or (B) Warburg, Pincus Capital Company, L.P., shall
thereafter cease to be the Beneficial Owner of a percentage ownership
interest in the Company equal to at least ten percent (10%) more than
any other Beneficial Owner of the combined voting power of the
Company's then outstanding securities (and in such event, the Change
in Control shall be deemed to have occurred on the date Warburg,
Pincus Capital Company, L.P., ceases to be the Beneficial Owner of
such greater combined voting power);
(iii) A change in identity of a majority of the members of
the Board within any twenty-four (24) month period; provided however,
if such a change in the identity of the members of the Board occurs
following the acquisition of fifty-one percent (51 %) or more of the
Company's then outstanding voting securities by Warburg, Pincus
Capital Company, L.P., no Change in Control shall be deemed to have
occurred if such change of Board membership was approved in writing
(or by an approved written resolution) by a majority of the Board and
of the Management Executive Committee serving immediately prior to
such change of Board membership;
(iv) The approval by the Board (or by the shareholders if
shareholder approval is required by applicable law or under the terms
of any relevant agreement) of an agreement for the sale or disposition
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<PAGE>
of all or substantially all of the Company's assets or a
sale/leaseback of all or substantially all of the Company's assets
(with or without a purchase option);
(v) A transfer of all or substantially all of the Company's
assets pursuant to a partnership or joint venture agreement where the
Company's resulting interest is or becomes fifty percent (50%) or
less;
(vi) The Board (or the shareholders if shareholder approval
is required by applicable law or under the terms of any relevant
agreement) shall approve a plan of complete liquidation of the
Company; or
(vii) The execution or approval by the Board of any
agreement, the consummation of which would result in one of the
foregoing.
For purposes of this Section 2(C), the term "Beneficial Owner" shall
have the same meaning as the term is given in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and the term "Person"
shall have the meaning given the term when used in sections 13(d) and
14(d) of such act. The term "Management Executive Committee" shall
mean a committee appointed in writing by the then-acting Chief
Executive Officer of the Company, comprised of such corporate officers
and additional key employees of the Company as the Chief Executive
Officer shall appoint from time to time. The Chief Executive Officer
may remove any member of the Management Executive Committee by notice
in writing delivered to such member and to the other members of
Management Executive Committee.
3. A new final paragraph to Article Four, Eligibility and Participation,
is hereby added, to provide as follows:
In addition to regular deferral described above, a Participant
who is also a participant in the Magma Copper Company 1993 Long Term
Incentive Plan may, prior to the date an award under Magma Copper
Company 1993 defer all or a portion of such award. Such deferral may
be made by a separate deferral election form applicable only to the
award under such plan. The form of payment of such deferral and the
eligible Beneficiary, in the case of the Participant's death, shall be
determined pursuant to the Participant's regular deferral election
form, as described in the preceding paragraphs of this Article Four.
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<PAGE>
4. Article Five, Deferral, is hereby amended and restated in the entirety to
provide as follows:
ARTICLE FIVE
DEFERRAL
--------
A Participant may elect to defer payment of his base pay for services
to be rendered during the following calendar year according to the
Participant's Deferred Compensation Agreement. The Participant shall
designate for deferral a stated dollar amount, or a designated full
percentage of base pay. A Participant who is not an officer of the Company
may designate a deferral amount or percentage, not to exceed six percent
(6%) (or such other percentage up to one hundred percent (100%) as the
Committee, in its sole and absolute discretion, may designate) of the
Participant's base pay for the calendar year. A Participant who is an
officer of the Company may designate a deferral amount or percentage, up to
one hundred percent (100%) (or such lesser percentage as the Committee, in
its sole and absolute discretion, may designate) of the Participant's base
pay for the calendar year. A Participant may thereafter prospectively
change, on a quarterly basis, the amount or percentage of his compensation
to be deferred. Such changes must be submitted to the Committee in writing
on such forms as the Committee may prescribe. Any such change shall be
effective for the calendar quarter following the calendar quarter during
which the notice of change is received by the Committee, and shall remain
in effect until the Participant change such election. For each dollar of
compensation so deferred, the Company will credit an additional dollar to
the Participant's account maintained pursuant to Article Six; provided,
however, that the additional amount so credited shall not exceed three
percent (3%) of the Participant's base pay for the applicable calendar
year.
A Participant may elect to defer all or a designated portion of his
award under the Magma Copper Company 1993 Long Term Incentive Plan. Such
deferral shall be elected pursuant to a separate Deferred Compensation
Agreement for each such award, and no additional contribution shall be
credited by the Company on account of such deferral.
5. Article Six, Accounting of Deferred Amounts, is hereby amended and
restated in the entirety to provide as follows:
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<PAGE>
ARTICLE SIX
ACCOUNTING OF DEFERRED AMOUNTS
------------------------------
The Plan Administrator shall maintain an individual account under the
name of each Participant on whose behalf compensation has been deferred
under the Plan. Each such account shall be adjusted to reflect the
compensation credited thereto, earnings credited on such compensation
pursuant to Article Seven and any payment of such amounts hereunder. Each
account shall be credited with earnings computed pursuant to Article Seven
as of the last day of each calendar quarter; provided, however, that in the
event and to the extent an award under the Magma Copper Company 1993 Long
Term Incentive Plan is payable in stock of the Company and is deferred
pursuant to this Plan, such Company stock shall be credited under a special
account in the Participant's name under this Plan, and the amount credited
to such account shall not be subject to "investment options" under Article
Seven, and shall remain denominated in Company stock. Such account shall be
payable in Company stock at the time of distribution.
The establishment and maintenance of a separate account for each
Participant shall not be construed as giving any person an interest in
assets of the Company or of any subsidiary of the Company, or a right to
payment other than as provided hereunder. Benefits hereunder shall
constitute an unsecured general obligation of the Company, but the Company
may create reserves, funds and/or provide for amounts to be held in trust
on the Company's behalf under the Trust Fund. Payment of benefits may be
made by the Company, the Trust Fund or through a service or benefit
provider to the Company or such Trust Fund.
6. Article Ten, Financial Necessity Distributions, is hereby amended and
restated in the entirety to provide as follows:
ARTICLE TEN
FINANCIAL NECESSITY AND ELECTIVE DISTRIBUTIONS
----------------------------------------------
Upon application by the Participant, the Plan Administrator may
direct payment of all or a portion of amounts credited to the account of a
Participant prior to his separation from employment in the event of
Unforeseeable
-5-
<PAGE>
Hardship. Any such application must set forth the circumstances
constituting such Unforeseeable Hardship. Notwithstanding the foregoing,
the Plan Administrator may not direct payment of any amounts credited to
the accounts of a Participant to the extent that such emergency is or may
be relieved (a) through reimbursement or compensation by insurance or
otherwise; (b) by liquidation of the Participant's assets, to the extent
that such liquidation would itself not cause severe financial hardship; or
(c) by cessation of deferrals under the Plan. Any distribution due to
Unforeseeable Hardship shall only be permitted to the extent reasonably
needed to satisfy such hardship, and shall be made in the sole discretion
of the Plan Administrator, both with respect to the determination as to
whether an Unforeseeable Hardship exists and as to the amount
distributable.
During any calendar year a Participant may withdraw up to 100% of his
or her account balance existing as of December 31 of the immediately
preceding calendar year, without demonstrating Unforeseeable Hardship. A
Participant who makes an election to withdraw any amount without
demonstrating Unforeseeable Hardship shall forfeit 10% of the amount
withdrawn. Distribution of withdrawals shall be made as soon as practicable
after the request for withdrawal is received by the Plan Administrator,
except that amounts deferred in the immediately preceding calendar year
will not be paid before March 16. All forfeited amounts shall be removed
from the Participant's account balance and shall be retained by the
Company.
7. The following paragraph is hereby inserted at the end of Article Six,
to be the final paragraph thereof.
In the event of a "Change in Control," as defined in Section 2(C), the
Company will transfer to the Trustee of the Trust Fund an amount equal to
the present value of the liability for benefits accrued to the date of the
Change in Control pursuant to Articles Five, Six and Seven, less amounts
already contributed to the Trust Fund. The present value of such benefits
as of such date shall be determined by the firm serving as the Company's
regular actuarial consultant prior to the Change in Control or such other
firm as may be designated by the members of the board who constituted the
Board of Directors immediately prior to the Change in Control, using such
assumptions as were used in computing such liabilities for financial
reporting purposes by such actuarial consultants. Such transfer shall be
made not later than thirty (30) days after the date of such Change in
Control.
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<PAGE>
8. Except as amended by this Fourth Amendment, which is effective as of
January 1, 1995, the Company ratifies the terms of the Plan, as previously
amended.
Dated , 1995.
MAGMA COPPER COMPANY
By: ____________________________
Its: ________________________
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<PAGE>
EXHIBIT 99.19
FIFTH AMENDMENT
TO THE
MAGMA COPPER COMPANY
SPECIAL EXECUTIVE DEFERRED COMPENSATION PLAN
On January 9, 1990, Magma Copper Company (the "Company") adopted the MAGMA
COPPER COMPANY SPECIAL EXECUTIVE DEFERRED COMPENSATION PLAN (the "Plan"). The
Plan was subsequently amended and restated on September 4, 1990. On December
14, 1990, the Plan was again amended and restated to make changes requested by
the Internal Revenue Service. The Plan was again amended and restated to make
changes requested by the Internal Revenue Service. The Plan was thereafter
amended by the First Amendment on January 1, 1991, the Second Amendment on
October , 1995. By this instrument, the Company desires to further amend the
Plan.
1. This Fifth Amendment shall amend only those provisions specifically
mentioned herein, and those provisions not so mentioned shall remain in full
force and effect.
2. The following two paragraphs are hereby inserted at the end of Article
Five to be the final two paragraphs thereof.
A Participant who holds stock options which could not be exercised as of
November 30, 1995, and who may receive an amount in exchange for the
cancellation of such options pursuant to the terms of the certain Merger
Agreement dated November 30, 1995, providing for the merger of the Company
into a subsidiary of The Broken Hill Proprietary Company Limited or its
affiliate may elect to defer all or any portion of such amount by execution
of a Deferred Compensation Agreement with regard to such amount prior to
the commencement of a tender offer for the Company's stock pursuant to such
Merger Agreement. No additional contribution shall be credited by the
Company on account of such deferral.
The amount considered as base pay or compensation for the purposes of
this Article Five shall include amounts contributed by the Company pursuant
to a salary reduction agreement that are not includable in gross income of
the Participant by reason of Section 125 of the Code.
Dated:__________________, 1995 MAGMA COPPER COMPANY
By:
-----------------------------------
Title:
--------------------------------
