Filed Pursuant to Rule 424(b)(5)
Registration No. 33-53021
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
SUBJECT TO COMPLETION, DATED MAY 15, 1995
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 7, 1994
$200,000,000
MAGMA COPPER COMPANY
___% SENIOR SUBORDINATED NOTES DUE MAY 15, 2005
--------------------
Interest on the % Senior Subordinated Notes due May 15, 2005 (the "Notes") is
payable semi-annually on May 15 and November 15 of each year, commencing
November 15, 1995. The Notes will mature on May 15, 2005. The Notes will be
general unsecured obligations of the Company and will be subordinated in right
of payment to Senior Indebtedness, pari passu with other Senior Subordinated
Debt Securities, including the Company's 12% Senior Subordinated Notes due
December 15, 2001 and 11 1/2 % Senior Subordinated Notes due January 15, 2002,
and senior to all other Subordinated Debt Securities of the Company. The Notes
will not be subject to redemption by the Company. The Notes will be represented
by a Global Security or Securities that will be deposited with, or on behalf of,
The Depository Trust Company ("DTC"), and will be available for purchase in
denominations of $1,000 or any integral multiple thereof. See "Description of
Certain Terms of the Notes."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "INVESTMENT CONSIDERATIONS" IN THE ACCOMPANYING
PROSPECTUS.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
------------------- ---------------- ---------------
Per Note .... % % %
Total(3) .... $ $ $
- --------
(1) Plus accrued interest, if any, from May , 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting expenses estimated at $ , payable by the Company.
--------------------
The Notes are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that the Notes will be ready for
delivery in book-entry form only through the facilities of DTC in New York, New
York on or about May , 1995 against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
--------------------
The date of this Prospectus Supplement is May , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes thereto of the
Company appearing elsewhere in or incorporated by reference into this Prospectus
Supplement or the accompanying Prospectus.
THE COMPANY
Magma Copper Company ("Magma" or the "Company") is a fully integrated
producer of electrolytic copper and ranks among the largest U.S. copper
producers. Magma's principal products are high-quality copper cathode and
high-quality copper rod, the latter of which is the basic feedstock of the
copper wire and cable industry.
The Company owns and operates underground copper mines at its San Manuel
and Superior Mining Divisions, an open-pit copper mine at its Pinto Valley
Mining Division, and in situ leaching operations at its San Manuel and Pinto
Valley Mining Divisions, all of which are located in southeastern Arizona.
Recently, the Company began development of its Robinson mine located near Ely,
Nevada. Production at this mine is expected to commence in the first quarter of
1996. In the fourth quarter of 1994, the Company completed the acquisition of a
company which owns one of the largest operating mines in Southern Peru
("Tintaya"). Tintaya operates an open-pit mine and is engaged in a variety of
development projects at this property.
The Company operates the largest and most modern copper smelting and
refining complex in the United States. The Company's smelter, which was recently
expanded, has a rated production capacity of 720 million pounds of copper anode
per year, representing approximately 25% of U.S. copper smelting capacity. In
addition to smelting and refining its own copper concentrate production, the
Company smelts and refines a substantial amount of copper concentrates on a
custom basis for, or purchased from, third parties, the profits from which
effectively reduce the Company's overall break-even cost of producing copper
from its mines.
THE OFFERING
Securities Offered .......$200,000,000 aggregate principal amount of % Senior
Subordinated Notes due May 15, 2005.
Maturity Date ............May 15, 2005.
Interest Payment Dates ...May 15 and November 15 of each year, commencing
November 15, 1995.
Ranking ..................Junior to Senior Indebtedness, pari passu with Senior
Subordinated Debt Securities and senior to
Subordinated Debt Securities.
Certain Covenants ........The Indenture governing the Notes will restrict the
ability of the Company to incur secured Debt that is
pari passu or junior to the Notes and to incur debt
that is junior to Senior Debt Securities and senior to
the Notes. The Indenture also contains a limitation on
the use of proceeds from certain asset dispositions.
Use of Proceeds ..........The net proceeds of this offering will be used to
repay short-term debt, to repurchase the Company's
publicly traded common stock purchase warrants, and
for general corporate purposes, which may include the
repurchase or redemption of higher cost Senior
Subordinated Notes currently outstanding.
S-3
<PAGE>
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS
Since 1988, when the Company became fully independent, it has substantially
improved its operating performance. The Company has increased copper production
from its own sources by approximately 48% from 402 million pounds in 1988 to 595
million pounds in 1994. Production from the leaching and solvent extraction and
electrowinning ("SX-EW") operations increased by 87% from 86 million pounds in
1988 to 161 million pounds in 1994. The Company's total production has increased
by approximately 78% from 500 million pounds of copper in 1988 to 889 million
pounds in 1994. Net cash operating costs of copper sold have decreased from
$0.78 per pound ($0.96 adjusted for inflation) in 1988 to $0.58 per pound in
1994. Net cash operating costs per pound represent (a) operating costs of Magma
source copper sold (excluding depreciation, depletion, and amortization) reduced
by credits for by-products and profits from custom processing divided by (b)
total pounds sold from Magma sources. The Company attributes its increased
production and productivity and reduction in operating costs primarily to
improved labor relations, which culminated in the execution in 1991 of a 15-year
collective bargaining agreement, as well as the use of innovative operating
technology, including an increase in production from lower cost SX-EW
technology.
For the quarter ended March 31, 1995, the Company's net income was $51.8
million, as compared to $7.6 million for the quarter ended March 31, 1994.
Earnings before net interest expense, taxes, depreciation, depletion and
amortization ("EBITDA") were $89.7 million for the first quarter of 1995, as
compared to $27.9 million for the first quarter of 1994. The improvements in net
income and EBITDA were primarily attributable to an increase in the Company's
average realized price of copper, which increased by $0.48 from $0.84 to $1.32
per pound, and to increased sales volume. The Company's average realized price
of copper includes hedging activities. The Company's average net operating cost
of $0.56 per pound for the quarter benefited from a sharp, temporary increase in
the price of molybdenum, a by-product of the copper concentrating process that
serves as a credit to the Company's cash operating costs.
Net income for 1994 was $87.4 million, compared to $21.9 million in 1993.
EBITDA was $199.2 million in 1994, as compared to $125.3 million in 1993. The
increases in earnings and EBITDA were attributable to reductions in net cash
operating costs, an increase in sales volume, and an increase in Magma's average
realized price per pound of copper sold. Net cash operating costs declined by
$0.08 per pound of copper in 1994, from an average cost of $0.66 in 1993 to
$0.58 in 1994. Sales of Magma source copper increased by over 7 percent, or 39
million pounds in 1994, from 558 million pounds in 1993 to 597 million pounds in
1994. Magma also benefited from an increase in the average realized price of
copper sold, which increased by $0.04 per pound from $0.94 in 1993 to $0.98 in
1994. Earnings for 1993 were negatively impacted by heavy rains and flooding
that occurred during the first quarter of 1993, which reduced after-tax earnings
for 1993 by $15.5 million, or $0.30 per share, and increased costs by $0.03 per
pound.
DEVELOPMENT PROJECTS
In recent periods, the Company has been engaged in a program to expand and
improve its smelting and refining complex and to increase its ore reserves and
production from Company reserves. The following sets forth a summary description
of certain of the Company's more significant projects, which are more fully
described in the reports incorporated by reference into this Prospectus.
Tintaya
On November 29, 1994, Magma Copper Company acquired Magma Tintaya S.A.
(formerly known as Empresa Minera Especial Tintaya S.A.), which owns one of the
largest operating copper mining projects in Southern Peru. At the closing, Magma
purchased 98.43% of Tintaya, with Tintaya's employees subscribing to purchase
the remaining 1.57% interest in accordance with an agreement with the Peruvian
government. Magma paid $247 million in cash for its interest in Tintaya and is
required to make an additional $85 million in capital expenditures at this
project over the five years ending November 29, 1999. The Company expects to
expend approximately $40 million of this amount during 1995.
S-4
<PAGE>
Tintaya is a low-cost, open pit copper mine and concentrator operation with
proven and probable reserves of 58 million metric tonnes of 1.78% sulfide copper
ore, or approximately 2.0 billion pounds of recoverable copper. In addition to
its large area of established ore reserves, the Company believes Tintaya has
excellent exploration potential. Magma has already identified several highly
prospective mineralized areas and is conducting a major exploration program to
prove up additional reserves. In 1993 and 1994, Tintaya produced approximately
110 million pounds of copper in concentrate per year at a cost of about $0.60
per pound of refined copper. Magma plans to increase production to 140 million
pounds per year, and, over the next two years, decrease net cash operating costs
to an estimated $0.55 per pound. Magma is studying the feasibility of an SX-EW
operation that could produce 70 million pounds of copper cathode per year from
an oxide mineralized resource of 21.7 million metric tonnes of 1.57 percent
oxide copper. The SX-EW operation may reduce net cash operating costs from
Tintaya to below $0.50 per pound and could expand the total annual production
rate from Tintaya to over 200 million pounds per year in 1997. The Company
anticipates that the construction of an SX-EW facility would cost approximately
$100 million based upon preliminary estimates.
Although the Company made an extensive evaluation of Tintaya prior to its
acquisition, there are certain risks inherent in the acquisition and operation
of foreign properties, including the risk of political instability, the
possibility of adverse economic or tax reforms, restrictions on the repatriation
of funds, and currency risks. As part of its investment in Tintaya, the Company
and the government of Peru entered into a judicial stability agreement and the
Company became a party to an existing tax stability agreement between the
government and Tintaya. These agreements provide, among other things, free
exchange of foreign currency, remittance abroad of profits and capital, the
right to use or sell any product derived from Tintaya, and tax and legal
stability. Although these agreements do not eliminate all risk associated with
its investment in Tintaya, the Company believes that such agreements minimize a
number of the risks typically associated with an investment in a foreign
property.
Robinson
Construction of the Company's Robinson mine began on October 12, 1994,
following final approval of the project by the Bureau of Land Management.
Production at the Robinson mine is expected to commence in the first quarter of
1996. The Robinson project is expected to have an initial construction cost of
$300 million to purchase equipment, construct a concentrator, and develop ore
reserves. Through March 31, 1995, $93 million of this amount had been spent.
Currently, the Robinson mine has defined copper and gold ore reserves of
approximately 252 million tons of 0.551% copper sulfide ore and 0.0102 ounces
per ton of gold, containing an estimated 2.3 billion pounds of recoverable
copper and 1.7 million ounces of gold. When the operation reaches planned
production, the Company expects Robinson to produce 146 million pounds of
copper, 117,000 ounces of gold and 363,000 ounces of silver annually over a
15-year period at a net cash operating cost of less than $0.50 per pound. Based
upon the results of preliminary studies, the Company believes that the Robinson
mine has significant potential for further increases in production and ore
reserves.
Other Capital Projects
During 1994, the Company completed an expansion of its smelter which resulted
in increased production, lower costs and improved environmental performance.
Smelter production is at levels above the 720 million pounds of copper per annum
(in anode form) originally anticipated.
In March 1994, the Company began development of the Lower Kalamazoo orebody.
Development of this orebody is expected to be completed and ready for production
in 1997 at a total capital cost of $165 million. At March 31, 1995, $66 million
had been expended on this project. Based on the Company's current mine plan, the
Lower Kalamazoo project is scheduled to produce approximately 2.1 billion pounds
of copper during the period from 1997 to 2009, at an average rate of 180 million
pounds of copper per year when the project reaches full production.
S-5
<PAGE>
The decision to complete ongoing projects or to undertake new projects is
subject to a variety of factors, which may include (depending on the project),
the price of copper, the completion of favorable feasibility studies, and the
receipt of necessary permits. There can be no assurance that the projects set
forth herein will be undertaken, or, if undertaken, will prove successful. If
the Company is unable to replace its reserves from the mine development projects
being evaluated, or with other reserves identified or acquired in the future,
the Company's dependency upon third party sources to supply copper concentrate
to its smelting and refining operations would increase.
CAPITAL RESOURCES AND LIQUIDITY
During the first quarter of 1995, and in 1994, the Company funded its
development projects through internally generated cash flow, short-term
borrowings, and existing cash balances. In this regard, in the first quarter of
1995, cash flow available for capital expenditures (net income plus
depreciation, depletion, and amortization) was $68.6 million with an average
realized price of copper sold of $1.32 per pound, as compared to $22.7 million
with an average realized price of copper sold of $0.84 per pound for the first
quarter of 1994. The Company's 1994 cash flow available for capital expenditures
was $162.5 million with an average realized price of copper sold of $0.98 per
pound, as compared to $90.2 million with an average realized price of copper
sold of $0.94 per pound in 1993. Increases in cash flow were attributable to
increased production, decreased costs, and higher copper prices. In 1993, cash
flow was adversely affected by storm damage from Arizona's abnormally high
rainfalls that occurred early in the year.
The Company anticipates spending approximately $610 million for the period
from April 1, 1995 to December 31, 1997 to complete currently approved
development projects, including those identified above (exclusive of the Tintaya
SX-EW facility which is the subject of a pending feasibility study). The Company
plans to invest about $345 million in the last three quarters of 1995, $160
million in 1996, and $105 million in 1997. The Company made $91 million in
capital expenditures in the first quarter of 1995.
In order to assure cash flow from operations to facilitate its contemplated
spending program, the Company has purchased a combination of put options,
futures, swap contracts, and forward commitments. For 1995, the Company
purchased put option contracts covering 529 million pounds of production at a
London Metals Exchange ("LME") based strike price of $0.85 per pound. In
addition, the Company purchased put options covering 121 million pounds at a
LME-based strike price of $0.95 per pound. The Company also entered into
Commodity Exchange ("Comex") based swap contracts covering 51 million pounds of
production at an average price of $1.03 per pound. When combined with the
amortization of the option premiums, these contracts create a floor price for
the Company's production of approximately $0.87 per pound for 1995. For 1996,
the Company purchased put options covering 676 million pounds of production,
creating a minimum realized price of approximately $0.93 per pound. For 1997,
the Company has purchased put options covering 364 million pounds of first and
second quarter production, creating a minimum realized price of approximately
$0.93 per pound. The Company believes these programs help to protect against the
volatility of copper prices.
In 1994, the Company increased its revolving line of credit from $200 million
to $300 million. At March 31, 1995, there were no amounts outstanding under this
facility. The Company is in the process of seeking an expansion of this facility
to $500 million from a limited bank group. The proposed facility would provide
for an all-in-drawn cost of borrowing of the London Interbank Offered Rate plus
50 basis points and a facility fee of 18.75 basis points. Covenants include a
limitation on total indebtedness and a minimum net worth test. The Company is
also in the process of negotiating a $50 million secured financing for the
acquisition of equipment for its Robinson mine. From time to time, Tintaya
secures short-term, working capital loans from Peruvian banking institutions. At
March 31, 1995, $22.5 million was outstanding under these arrangements.
For additional information relating to the Company, see "The Company" in the
accompanying Prospectus.
S-6
<PAGE>
USE OF PROCEEDS
The net proceeds of this offering will be used to repay short-term debt, to
repurchase the Company's publicly traded Common Stock purchase warrants, $8.50
exercise price (the "Warrants"), and for general corporate purposes, which may
include the repurchase or redemption of all or a portion of the Company's $125
million principal amount of 11 1/2 % Senior Subordinated Notes due January 15,
2002 (the "11 1/2 % Notes") or a portion of the Company's $200 million principal
amount of 12% Senior Subordinated Notes due December 15, 2001 (the "12% Notes").
The 11 1/2 % Notes are redeemable, in whole or in part, at the option of the
Company at 108% of par, plus accrued interest, through January 14, 1996, and at
declining amounts thereafter. The 12% Notes will be redeemable by the Company,
in whole or in part, at 106% of par for the period commencing December 15, 1996
and ending December 14, 1997, and at declining amounts thereafter. Pending use
of the net proceeds of this offering, the Company intends to invest such
proceeds in high quality, short-term, interest-bearing securities.
The Company intends to commence a tender offer for the approximately 4.1
million Warrants outstanding on May 16, 1995. Each Warrant entitles the holder
to purchase one share of Common Stock, $.01 per share, at an exercise price of
$8.50. The Warrants expire on November 30, 1995. The Company will offer to
purchase any and all of the Warrants at a purchase price of $8.25 per Warrant or
an aggregate of approximately $33.5 million. The closing sales price of the
Warrants on the New York Stock Exchange ("NYSE") Composite Tape was $7.00 on May
12, 1995. The closing sales price of the Common Stock on the NYSE Composite Tape
on such date was $15.25 per share. Depending on the number of Warrants tendered
and purchased in the tender offer, the Company may purchase Warrants or other
equity securities in the open market from time to time following the
consummation of the tender offer in an amount, including amounts expended in the
tender offer, not to exceed $50 million.
S-7
<PAGE>
<TABLE>
CAPITALIZATION
The following table sets forth the cash, short-term debt and capitalization
of the Company as of March 31, 1995, and as adjusted to give effect to the
issuance and sale of the Notes offered hereby and the application of the
proceeds received therefrom. This table should be read in conjunction with the
consolidated financial statements and accompanying notes of Magma appearing
elsewhere herein or incorporated by reference herein and in the accompanying
Prospectus.
<CAPTION>
AS OF MARCH 31, 1995
(DOLLAR AMOUNTS IN MILLIONS)
--------------------------
AS
ACTUAL ADJUSTED(1)
-------- -----------
<S> <C> <C>
Cash and marketable securities ......................... $ 56.9 $ 200.9
======== ========
Short-term debt ........................................ $ 22.5 --
======== ========
Long-term debt:
Notes offered hereby ................................. -- $ 200.0
12% Senior Subordinated Notes ........................ 200.0 200.0
11 1/2 % Senior Subordinated Notes ................... 125.0 125.0
Industrial Development Authority Bonds ............... 49.7 49.7
Promissory Note ...................................... 5.0 5.0
Capitalized Lease Obligations ........................ 10.6 10.6
-------- --------
Total long-term debt .............................. $ 390.3 $ 590.3
-------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares
authorized:
5 5/8 % Cumulative Convertible Preferred Stock,
Series D, $0.01 par value, 2,000,000 shares
issued and outstanding ............................. -- --
6% Cumulative Convertible Preferred Stock, Series
E, $0.01 par value, 2,000,000 shares issued and
outstanding ........................................ -- --
Common Stock, $0.01 par value, 100,000,000 shares
authorized; 46,112,065 shares issued and outstanding 0.5 0.5
Capital in excess of par value, as adjusted .......... 626.0 592.5
Retained earnings since January 1, 1992 .............. 186.7 186.7
Unearned stock grant compensation .................... (3.5) (3.5)
-------- --------
Total stockholders' equity ....................... $ 809.7 $ 776.2
-------- --------
Total stockholders' equity and long-term debt .... $1,200.0 $1,366.5
======== ========
<FN>
- --------
(1) Gives effect to the repayment of short-term debt and the repurchase of the
Company's outstanding Warrants at $8.25 per Warrant. Does not give effect to
the repurchase of any other equity securities or any repurchase or
redemption of the Company's outstanding Senior Subordinated Notes. See "Use
of Proceeds." Amounts do not give effect to the expenses of the offering or
the underwriting discount.
</FN>
</TABLE>
S-8
<PAGE>
SUMMARY FINANCIAL, OPERATING AND RESERVE DATA
Set forth below is certain historical financial, operating and reserve
information. The historical information of Magma Copper Company has been
summarized from the audited consolidated financial statements included in
Magma's Annual Report on Form 10-K for the year ended December 31, 1994 and the
unaudited condensed consolidated financial statements included in its Quarterly
Report on Form 10-Q for the three months ended March 31, 1995, which reports are
incorporated herein by reference. The results for the three months ended March
31, 1995 are unaudited but, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of results of operations for such periods, have been included. More
comprehensive financial, operating and reserve information is included in such
reports and the information that follows is qualified in its entirety by
reference to such reports and all of the financial statements and related notes
contained therein.
(dollar amounts in millions, except average realization,
earnings per share and reserve data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1992 1993 1994 1994(12) 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA:
STATEMENT OF OPERATIONS DATA:
Sales(1) .......................................................... $ 819.5 $ 792.4 $ 889.6 $ 175.5 $ 297.5
Cost of products sold ............................................. (630.4) (639.4) (654.5) (140.2) (195.9)
Depreciation, depletion and amortization .......................... (54.6) (65.4) (75.1) (15.1) (16.8)
Selling, general and administrative(1) ............................ (19.4) (22.1) (22.7) (5.2) (8.0)
Exploration, research and development ............................. (2.7) (9.3) (13.5) (3.2) (4.6)
Restructure expense ............................................... -- (2.0) -- -- --
-------- -------- -------- -------- --------
Income from operations ............................................ 112.4 54.2 123.8 11.8 72.2
Interest expense, net(2) .......................................... (35.8) (26.4) (14.3) (2.4) (4.3)
Other income ...................................................... 4.3 3.7 0.3 1.0 0.7
-------- -------- -------- -------- --------
Income before income taxes and extraordinary item ................. 80.9 31.5 109.8 10.4 68.6
Income tax provision .............................................. (22.6) (8.7) (22.4) (2.8) (16.8)
Extraordinary item, net of tax(3) ................................. (3.0) -- -- -- --
Cumulative effect of accounting changes, net of tax ............... -- (0.9) -- -- --
-------- -------- -------- -------- --------
Net income ........................................................ $ 55.3 $ 21.9 $ 87.4 $ 7.6 $ 51.8
======== ======== ======== ======== ========
Net income per common share, assuming full
dilution(4) ..................................................... $ 1.19 $ 0.40 $ 1.38 $ 0.10 $ 0.82
======== ======== ======== ======== ========
EBITDA(5) ......................................................... $ 171.3 $ 125.3 $ 199.2 $ 27.9 $ 89.7
Ratio of earnings to fixed charges(6) ............................. 2.7x 1.5x 3.1x 1.5x 6.4x
Ratio of earnings to combined fixed charges and
preferred stock dividends(6) .................................... 2.0x 1.4x 2.3x 1.1x 4.8x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and marketable securities .................................... $ 242.2 $ 339.3 $ 88.2 $ 326.0 $ 56.9
Net property, plant and mine development .......................... 783.6 866.4 1,217.2 882.6 1,299.8
Total assets ...................................................... 1,156.5 1,350.8 1,576.6 1,360.6 1,640.0
Long-term debt (exclusive of current portion) ..................... 395.0 392.3 386.8 390.1 384.7
Stockholders' equity .............................................. 465.4 680.2 760.1 684.4 809.7
OPERATING DATA:
Production:
Magma source copper (millions of pounds)(7) ..................... 559.5 563.4 595.4 151.8 172.0
Concentrate smelted (thousands of tons)(8) ...................... 1,060.1 1,076.0 1,208.0 264.0 318.0
New Fine copper (millions of pounds)(9) ......................... 771.8 845.6 888.6 209.1 225.3
Gold contained in residues and ore (thousands of
ounces)(10) ................................................... 106.9 103.4 77.0 20.2 26.7
Silver contained in residues (thousands of ounces)(10) . 2,726.6 2,947.9 3,289.0 731.7 881.1
Molybdenum disulfide production (millions of pounds
molybdenum contained) ......................................... 5.2 4.8 4.9 1.2 1.2
Average realization (including hedging activities):
Copper--per pound ............................................... $ 1.00 $ 0.94 $ 0.98 $ 0.84 $ 1.32
Gold--per ounce ................................................. 377.47 359.05 382.58 378.58 375.06
Silver--per ounce ............................................... 4.00 4.34 5.16 4.90 4.19
Molybdenum--per pound ........................................... 1.80 1.91 4.57 2.35 10.14
</TABLE>
RECOVERABLE COPPER
(THOUSANDS OF
POUNDS)
-------------------
Reserve data (at January 1, 1995)(11):
Proven/probable reserves in committed mine
plans .......................................... 9,663,259
(Footnotes to table appear on next page)
S-9
<PAGE>
(Footnotes to table on previous page)
- --------
(1) Certain freight costs have been reclassified as a deduction from revenue
rather than as a selling expense. All years have been restated to reflect
this change.
(2) Excludes capitalized interest of $17.7 million for 1994 and $7.8 million
for 1993, and $5.8 million and $4.8 million for the quarters ended March
31, 1995 and 1994, respectively.
(3) In May 1992, the Company redeemed all $100 million of its Subordinated
Reset Debentures and paid a premium on the early repayment of this debt.
(4) There were no cash dividends paid or declared on Common Stock during any of
these periods.
(5) "EBITDA" is earnings before net interest expense, taxes, depreciation,
depletion and amortization.
(6) In calculating the ratios: (i) "earnings" consist of income before taxes,
accounting changes and extraordinary items plus fixed charges adjusted for
capitalized interest and amortization of previously capitalized interest;
(ii) "fixed charges" consist of interest (including capitalized interest)
and the estimated interest portion of lease rental expenses, amortization
of debt expenses and write- offs of loan costs; and (iii) "preferred stock
dividends" include dividends paid in zero coupon notes and shares of Common
Stock. In calculating the ratio of earnings to fixed charges and preferred
stock dividends, the preferred stock dividend requirements were assumed to
be equal to the pretax earnings required to cover such dividend
requirements. The amount of such pretax earnings required to cover
preferred stock dividends was computed using tax rates for the applicable
year. Preferred stock dividends are included in total "fixed charges" and
deducted from "earnings."
(7) Saleable copper contained in concentrates plus electrowon copper.
(8) Includes all new sulfide concentrate smelted by the Company for its own
account and concentrate smelted for others on a custom basis and shipments
of unrefined copper.
(9) Includes all electrolytic copper produced by the Company for its own
account and refined copper produced for others on a custom basis.
(10) Includes production from the Company's concentrates and the Company's share
of production from custom concentrates.
(11) All reserves were determined based upon a pricing assumption of
approximately $0.80 per pound of copper.
(12) In November 1994, Magma acquired Tintaya. The pro forma effects of the
acquisition as if it had occurred on January 1, 1994 are presented in the
Company's Annual Report on Form 10-K for 1994, incorporated by reference
herein. For the three-month period ended March 31, 1994, the pro forma
effects of the acquisition (as if it had occurred on January 1, 1994) are
as follows:
THREE MONTHS ENDED
MARCH 31,
------------------
1994
------------------
(IN MILLIONS
EXCEPT
EARNINGS PER
SHARE DATA)
Total revenue ............................ $194.3
Income before extraordinary items ....... 10.1
Net income ............................... 10.1
Primary earnings per share ............... 0.15
Earnings per share assuming full dilution 0.15(a)
- --------
(a) The Company's convertible preferred stock is not included in the fully
diluted calculation as its effects are antidilutive.
S-10
<PAGE>
DESCRIPTION OF CERTAIN TERMS OF THE NOTES
The following description of certain terms of the Notes offered hereby
supplements and, to the extent inconsistent therewith, replaces the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus. Capitalized terms used herein and not defined are defined in the
Indenture and, in some cases, the accompanying Prospectus.
GENERAL
The Notes will be issued under an indenture, dated as of May 15, 1995 (the
"Senior Subordinated Indenture"), between the Company and State Street Bank and
Trust Company, as Trustee (the "Trustee"), which is more fully described in the
Prospectus, and a first supplemental indenture dated as of May 15, 1995 between
the Company and the Trustee (the "First Supplemental Indenture" and collectively
with the Senior Subordinated Indenture, the "Indenture") The Notes offered
hereby will be limited to $200,000,000 aggregate principal amount and will
mature on May 15, 2005. Interest at the annual rate set forth on the cover page
hereof will be payable semi-annually on May 15, 1995 and November 15, 1995,
commencing November 15, 1995, to the persons in whose names the Notes are
registered at the close of business on May 1 or November 1, as the case may be,
preceding such interest payment date. Interest on the Notes will accrue from May
__, 1995.
The Notes will be issued as a single series of Debt Securities under the
Indenture in denominations of $1,000 or any integral multiple thereof.
GLOBAL SECURITIES
The Notes will be represented by one or more Global Securities that will be
deposited with, or on behalf of, The Depository Trust Company (the
"Depositary"), and will be available for purchase in denominations of $1,000 and
any integral multiple thereof.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. The Depositary
was created to hold securities of its participants (defined below) and to
facilitate the clearance and settlement of transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
certificates. The Depositary's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
No Global Security may be transferred to, or registered or exchanged for
Notes registered in the name of, any Person other than the Depositary for such
Global Security or any nominee thereof, and no such transfer may be registered,
unless (1) the Depositary (A) notifies the Company that it is unwilling or
unable to continue as Depositary for such Global Security or (B) ceases to be a
clearing agency registered under the Exchange Act, (2) the Company executes and
delivers to the Trustee a Company Order that such Global Security shall be so
transferable, registrable and exchangeable, and such transfers shall be
registrable or (3) there shall have occurred and be continuing an Event of
Default with respect to the Securities evidenced by such Global Security.
Beneficial interests in a Global Security will trade in the Depositary's
same-day funds settlement system, in which secondary market trading activity in
those beneficial interests will be required by the Depositary to settle in
immediately available funds. There is no assurance as to the effect, if any,
that settlement in immediately available funds would have on trading activity in
such beneficial interests. Also, settlement for purchases of beneficial
interests in the Global Securities upon the original issuance thereof will be
required to be made in immediately available funds.
See "Description of Debt Securities--Global Securities" in the accompanying
Prospectus for additional information.
S-11
<PAGE>
COVENANTS
Holders of the Notes will be entitled to the benefit of the following
covenants.
Limitation on Subordinated Liens
Neither the Company nor any Subsidiary shall incur, issue, assume, or
guarantee any Debt which is pari passu or (by the express terms thereof)
subordinate in right of payment to the Notes, secured after the date of the
Senior Subordinated Indenture by a Mortgage on any Principal Property of the
Company or a Significant Subsidiary or on any shares of stock or Debt of any
Significant Subsidiary, unless the Company secures, or causes such Significant
Subsidiary to secure, the Notes and any other Senior Subordinated Debt
Securities entitled to the benefit of this covenant (i) equally and ratably with
(or, at the Company's option, prior to) such secured Debt or (ii) in the event
such secured Debt is subordinate in right of payment to the Senior Subordinated
Debt Securities, prior to such secured Debt, together, at the determination of
the Company, with certain other Debt of the Company; provided, however, that
such restriction shall not apply to the incurrence of any secured Debt if, after
giving effect thereto, the aggregate amount of all such Debt so secured after
the date of the Senior Subordinated Indenture and then outstanding would not
exceed 10% of the Consolidated Assets of the Company and its Subsidiaries.
This restriction will not apply to, and there shall be excluded in computing
secured Debt for the purpose of such restriction, Debt secured prior to the date
of the Senior Subordinated Indenture and Debt secured by (a) Mortgages on
property of, or on any shares of stock of or Debt of, any corporation existing
at the time such corporation becomes a Significant Subsidiary; (b) Mortgages in
favor of the Company or a Significant Subsidiary; (c) Mortgages in favor of
governmental bodies to secure progress, advance or other statutory or contract
payments; Mortgages for taxes, assessments, or other governmental changes or
levies; or materialmen's mechanics', carriers', workmen's, repairmen's,
landlord's, and other like Mortgages; (d) Mortgages on property, equipment,
mines or facilities, or shares of stock or Debt, to secure the payment of all or
any part of the purchase price thereof or the construction, improvement, or
development cost thereof, or any Debt incurred in connection therewith, existing
prior to, at the time of, or within 180 days after, the acquisition (including
any acquisition through merger or consolidation) or construction, improvement,
or development thereof, provided that any such Mortgage shall only extend to the
property, equipment, mines or facilities, or shares of stock or Debt, acquired
or constructed, improved or developed, or to property or mines, including
undeveloped mineralized deposits or orebodies or segments thereof, on which the
acquired or constructed, improved or developed property, equipment, mines, or
facilities is situated; (e) Mortgages securing certain tax-exempt obligations
issued by governmental bodies, including industrial revenue or pollution control
bonds; (f) Mortgages created in connection with a project financed, or assets
acquired, with, and created to secure, a Nonrecourse Obligation; (g) production
payments or other rights of others to the output of mines, refineries, smelters,
concentrators, or production facilities, including project financings, with
respect to any property or assets acquired, constructed, or improved by the
Company or a Subsidiary with the proceeds of such project financings; or
Mortgages to secure the payment of workmen's compensation or the performance of
tenders, bids, or similar contracts (including surety or appeal bonds) and
Mortgages entered into in the ordinary course of business for similar purposes;
or (h) subject to certain limitations, any extension, renewal, or refunding of
any Mortgage referred to in the foregoing clauses (a) through (g) inclusive.
(Section 1006 of the Senior Subordinated Indenture) The Senior Subordinated
Indenture does not restrict the Company or any Subsidiary from incurring
unsecured Debt.
Limitation on Certain Debt
The Company shall not incur any Debt which by its terms is both (i)
subordinated in right of payment to any Senior Debt and (ii) senior in right of
payment to the Notes. (Section 1007 of the Senior Subordinated Indenture)
S-12
<PAGE>
Certain Sales of Assets
In the event the Company or any of its Subsidiaries consummates the sale or
transfer of an asset or group of related assets having an aggregate fair market
value at the time of such sale or transfer (as determined in good faith by the
Board of Directors, whose determination thereof shall be conclusive) equal to or
exceeding 7.5% of Consolidated Assets, other than in the ordinary course of
business and sales or transfers of assets to the Company or a Subsidiary of the
Company or other entity in which the Company or any Subsidiary owns 50% or more
of the equity interest (a "Qualifying Asset Disposition"), the net proceeds from
such Qualifying Asset Disposition shall within 360 days be: (i) invested or
committed for investment, whether by contract or resolution of the Board of
Directors, either directly or through a Subsidiary of the Company or other
entity in which the Company or any Subsidiary owns 50% or more of the equity
interest, in any natural resource or related business (including, without
limitation, the production, exploration, extraction, development, marketing or
refining or further processing of natural resources and the purchase, lease or
other acquisition of property, equipment, mines or facilities related thereto),
or (ii) used to acquire the Notes, repay any Senior Indebtedness of the Company
or repay any debt which is either pari passu with the Notes or secured by the
assets sold or transferred. Pending any such application, such net proceeds
shall be invested in Permitted Investments. (Section 401 of the First
Supplemental Indenture)
Notwithstanding the foregoing, the Company may use up to an aggregate of
$50,000,000 of the net proceeds from all Qualifying Asset Dispositions after the
date of the First Supplemental Indenture for any purpose.
"Permitted Investments" means (i) interest bearing deposit accounts in
national or state banks having a combined capital and surplus of not less than
$100,000,000 and a Moody's Bank Credit Report Service short-term deposit rating
of P-1; (ii) bankers' acceptances drawn on and accepted by commercial banks
having a combined capital and surplus of not less than $100,000,000 and a
Moody's Bank Credit Report Service short-term deposit rating of P-1; (iii)
obligations of the United States of America or any agency or instrumentality of
the United States of America; (iv) commercial or finance company paper which is
rated A-1 or better by Standard and Poor's or P-1 by Moody's Investors Service;
(v) corporate debt securities rated A+ or better by Standard & Poor's or A-1 or
better by Moody's Investors Service; (vi) repurchase agreements with banking or
financial institutions having a combined capital surplus of not less than
$100,000,000 and a Moody's Bank Credit Report Service short-term deposit rating
of P-1 with respect to any of the foregoing obligations or securities; and (vii)
selected money market funds with assets of at least $1,000,000,000 and portfolio
guidelines consistent with the foregoing obligations and securities. Such
investments shall have maturity dates, or shall be subject to redemption by the
holder at the option of the holder, prior to the date which is one year from the
date of purchase of such investment.
Consolidation, Merger and Sale of Assets
The Company may not consolidate or merge with or into, or transfer or lease
all or substantially all of its assets to, any Person, and any other Person may
not consolidate or merge with or into the Company, unless (i) the Person formed
by such consolidation or into which the Company is merged or which acquires or
leases all or substantially all of the assets of the Company expressly assumes
all of the Company's obligations on the Notes and under the Indenture, (ii)
immediately after giving effect to such transaction no Event of Default shall
have happened and be continuing, and (iii) certain other conditions are met.
(Article Eight of the Senior Subordinated Indenture)
Holders of the Notes will not have the benefit of any specific covenants or
provisions in the Indenture or the Notes that would protect them in the event
the Company engages in or becomes the subject of a highly leveraged transaction,
other than as described above. Such covenants may not be waived or modified by
the Company or its Board of Directors, although holders of the Notes could waive
or modify such covenants as more fully described in the accompanying Prospectus
under "Modification and Waiver."
OTHER
The Notes will not be entitled to a sinking fund.
The provisions described in the accompanying Prospectus under "Description
of Debt Securities--Defeasance" will be applicable to the Notes.
S-13
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase the
principal amount of the Notes set forth opposite its name below:
PRINCIPAL
UNDERWRITERS AMOUNT OF NOTES
------------ ---------------
Goldman, Sachs & Co ............................ $
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated
------------
Total .......................................... $200,000,000
============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are commited to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public at
the initial public offering price set forth on the cover page of this Prospectus
Supplement and in part to certain securities dealers at such price less a
concession of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
Settlement for the Notes will be made in immediately available funds and
all secondary trading in the Notes will settle in immediately available
funds. See "Description of Certain Terms of the Notes--Global Securities."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Company by Snell &
Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004, counsel to the
Company, and for the Underwriters by Sullivan & Cromwell, 444 South Flower
Street, Los Angeles, California 90071.
S-14
<PAGE>
MAGMA COPPER COMPANY
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
-------------------
Magma Copper Company ("Magma" or the "Company") may offer from time to time
(i) Debt Securities ("Debt Securities"), consisting of debentures, notes and/or
other unsecured evidences of indebtedness in one or more series, which may be
senior ("Senior Debt Securities"), senior subordinated ("Senior Subordinated
Debt Securities") or subordinated ("Subordinated Debt Securities"), (ii) shares
of Preferred Stock, $.01 par value per share ("Preferred Stock") in one or more
series, (iii) shares of Common Stock, $.01 par value per share ("Common Stock"),
or (iv) Warrants ("Warrants") to purchase Debt Securities, Preferred Stock or
Common Stock (Debt Securities, Preferred Stock, Common Stock and Warrants are
collectively referred to as the "Securities"), at an aggregate initial offering
price not to exceed U.S. $300,000,000, at prices and on terms to be determined
at the time of sale.
The accompanying Prospectus Supplement sets forth with regard to the
particular Securities in respect of which this Prospectus is being delivered (i)
in the case of Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars, or in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
rate of interest, if any (which may be fixed or variable), or method of
calculation thereof, time of payment of any interest, any terms for redemption
at the option of the Company or the holder, any terms for sinking fund payments,
subordination terms, if any, any conversion or exchange rights, any listing on a
securities exchange, the initial public offering price and any other terms in
connection with the offering and sale of such Debt Securities, (ii) in the case
of Preferred Stock, the designation, number of shares, stated value and
liquidation preference per share, initial public offering price, dividend rate
(or method of calculation thereof), dates on which dividends shall be payable
and dates from which dividends shall accrue, any redemption or sinking fund
provisions, any conversion or exchange rights, whether the Company has elected
to offer the Preferred Stock in the form of depositary shares, any listing of
the Preferred Stock on a securities exchange and any other terms in connection
with the offering and sale of such Preferred Stock, (iii) in the case of Common
Stock, the number of shares of Common Stock, the initial public offering price
and the terms of the offering thereof, and (iv) in the case of Warrants, the
number and terms thereof, the designation and the number of Securities issuable
upon their exercise, the exercise price, any listing of the Warrants or the
underlying Securities on a securities exchange, the initial public offering
price and any other terms in connection with the offering, sale and exercise of
the Warrants. The Prospectus Supplement will also contain information, as
applicable, about certain United States Federal income tax considerations
relating to the Securities in respect of which this Prospectus is being
delivered.
The Company's Common Stock is listed on the New York Stock Exchange
(Symbol: "MCU"). Any Common Stock offered will be listed, subject to notice
of issuance, on such exchange.
The Company may sell Securities to or through underwriters acting as
principals for their own account or as agents, and also may sell Securities
directly to other purchasers or through agents designated from time to time. The
accompanying Prospectus Supplement sets forth the names of any underwriters or
agents involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the amounts of Securities, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents. See "Plan of Distribution" herein.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS, SEE "INVESTMENT CONSIDERATIONS."
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is April 21, 1994.
<PAGE>
AVAILABLE INFORMATION
Magma is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Magma with the Commission can be
inspected and copied at the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: 7 World Trade Center, 13th Floor, New York, New York 10007 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661- 2511. Copies of such information can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Magma's Common Stock, par value $.01 per share, 5
5/8 % Cumulative Convertible Preferred Stock, Series D, par value $.01 per
share, 6% Cumulative Convertible Preferred Stock, Series E, par value $.01 per
share, and Common Stock purchase warrants, $8.50 exercise price, are listed on
the New York Stock Exchange ("NYSE") and similar information can be inspected
and copied at the NYSE, 20 Broad Street, 17th Floor, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). As permitted by
the rules and regulations of the Commission, this Prospectus omits certain of
the information contained in the Registration Statement and reference is hereby
made to the Registration Statement and related exhibits for further information
with respect to the Company and the Securities offered hereby. Statements
contained herein concerning the provisions of any documents filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Magma with the Commission and are
hereby incorporated by reference into this Prospectus: (i) Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and (ii) the description of
the Common Stock contained in the Company's Form 8-A filed on October 22, 1992.
All other documents and reports filed pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference herein and shall be deemed to be a part hereof from the date of the
filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request of such person, a copy
of any or all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in the document which this Prospectus incorporates).
Requests should be directed to Mr. Richard Johnson, Assistant Treasurer, at the
Company's principal executive offices located at 7400 North Oracle Road, Suite
200, Tucson, Arizona 85704, telephone number (602) 575-5600.
2
<PAGE>
THE COMPANY
Magma is a fully integrated producer of electrolytic copper and ranks among
the largest U.S. copper producers. Magma's principal products are high quality
copper cathode and high quality copper rod, the latter of which is the basic
feedstock of the copper wire and cable industry.
The Company owns and operates underground copper mines at its San Manuel and
Superior Mining Divisions, open-pit copper mines at its San Manuel and Pinto
Valley Mining Divisions, and in situ leaching operations at its San Manuel and
Pinto Valley Mining Divisions, all in southeastern Arizona.
Magma operates the largest and most modern copper smelting and refining
complex in the United States through its wholly owned subsidiary, Magma Metals
Company. The smelter has a rated production capacity of 1.25 million tons of
copper concentrate per year, which represents up to 25% of U.S. smelting and
refining capacity. In addition to smelting and refining its own copper
concentrate production, the Company smelts and refines a substantial amount of
copper concentrates on a custom basis for, or purchased from, third parties, the
profits from which reduce the Company's overall break-even cost of producing
copper.
Magma was a wholly owned subsidiary of Newmont Mining Corporation
("Newmont") from 1969 until March 1987, and remained under its influence until
November 1988, when Magma undertook a recapitalization (the "Recapitalization")
in which it purchased all of the remaining equity interests held by Newmont.
RECENT OPERATING PERFORMANCE
Since the Recapitalization, the Company has substantially improved its
operating performance. The Company has increased copper production from its own
sources by approximately 40% from 402 million pounds in 1988 to 563 million
pounds in 1993. Production from the leaching, solvent extraction and
electrowinning ("SX-EW") operations increased by 87% from 86 million pounds in
1988 to 161 million pounds in 1993. The Company's total smelting and refining
production has increased by approximately 48% from 414 million pounds of copper
in 1988 to 615 million pounds in 1993. Net cash operating costs of copper sold
have decreased from $.78 per pound ($.93 adjusted for inflation) in 1988 to $.66
per pound in 1992. In 1993, despite the effects of extraordinary rains and
flooding early in the year, the Company was able to maintain the $.66 per pound
cost level that had been achieved in 1992. Further, as a result of intensified
cost reduction efforts, cash operating costs decreased to $.63 per pound in the
third quarter and $.61 per pound in the fourth quarter of 1993. Net cash
operating costs per pound represent (a) operating costs of Magma source copper
sold (excluding depreciation, depletion and amortization) reduced by credits for
by-products and profits from custom processing divided by (b) total pounds sold
from Magma sources. The Company attributes its increased production and
productivity and reduction in operating costs primarily to improved labor
relations, which culminated in the execution in 1991 of a 15-year collective
bargaining agreement, as well as the use of innovative operating technology,
including an increase in production from lower cost SX-EW technology.
During 1993, the Company's operations were adversely affected by
extraordinary rainfall conditions, lower copper prices (which were partially
offset by hedging activities) and other factors. As a result, total sales and
net income were $792.4 million and $21.9 million, respectively, for the year
ended December 31, 1993, compared to $819.5 million and $55.3 million,
respectively, for the year ended December 31, 1992. The Company estimates that
the extraordinary rainfalls reduced net income by approximately $15.5 million
during the first six months of 1993. Although the Company is still in the
process of repairing, upgrading and expanding certain of its facilities that
were damaged by the rainfalls, operations that were affected by the rainfalls
returned to normal in the second half of 1993.
The Company's operations are highly dependent on copper prices. As a hedge
against lower copper prices, the Company purchased put options on the London
Metal Exchange ("LME") covering 511.5 million pounds of 1993 production at an
exercise price of $.95 per pound. During the second, third and fourth quarters
of 1993, the Company exercised option contracts totalling 384 million pounds.
Largely as a result of these options, Magma was able to achieve an average
realized price per pound of $.94 in 1993, as compared to an average LME price of
$.87 per pound. For the first and second quarters of
3
<PAGE>
1994, the Company has purchased put option contracts covering 287 million pounds
of production, providing a minimum realized price of $.72 per pound on a LME
basis. For the third and fourth quarters of 1994, the Company has entered into
LME futures contracts covering 121 million pounds of production at an average
price of $.82 per pound and purchased put option contracts covering 176 million
pounds of production that provide a minimum realized price of $.74 per pound on
a LME basis. The Company has also purchased put option contracts covering 374
million pounds of its production during the first three quarters of 1995
providing a minimum realized price of $.74 per pound on a LME basis. Coupled
with expected reductions in cash operating costs, the Company believes that the
protection afforded by the options should result in positive cash flow from
operations during 1994. In addition to its hedging program, the Company has
accelerated measures designed to reduce its cash operating costs, with a view to
maintaining sufficient cash balances, cash flow and borrowing capacity necessary
to fund selected development projects.
DEVELOPMENT OPPORTUNITIES
The Company is currently pursuing or evaluating several major mine
development opportunities, as well as an expansion and upgrade to its smelting
and refining complex.
Robinson Mining District. In 1991, the Company completed a series of
transactions in which it acquired the Robinson Mining District ("Robinson") near
Ely, Nevada, for an aggregate cost of approximately $58 million. Based upon
drill and assay results, the Company believes that Robinson has 252 million tons
of proven/probable sulfide ore reserves with an average grade of .553% copper
and .0102 ounces of gold per ton, and 57 million tons of gold oxide ore reserves
with an average grade of .0086 ounces of gold per ton. The Company estimates
that Robinson could produce approximately 135 million pounds of copper annually
for 16 years through traditional methods. In addition, these studies estimate
that Robinson could produce an average of 97,300 ounces of gold and 390,000
ounces of silver annually from sulfide copper ore and 17,500 ounces of gold per
year from leaching operations during this time period. The Company is conducting
a further study of this property to determine the opportunity to increase
production and lower costs, which may require greater capital investment.
Development of Robinson requires, among other factors, appropriate environmental
and operating permits. In early 1993, the Bureau of Land Management determined
that an Environmental Impact Statement ("EIS") must be prepared to analyze the
Company's proposed re-development of the property. The Company believes the EIS
process will be completed during 1994 and production will begin in the first
quarter of 1996, although there can be no assurance in this regard.
Kalamazoo. The Company's Kalamazoo orebody, which is near its San Manual
underground mine, is comprised of two levels, an upper level which consists of
approximately 33 million tons of proven/probable ore reserves and a lower level
which contains approximately 186 million tons of proven/probable ore reserves.
In March 1993, the Company's Board of Directors approved funding for, and the
Company has begun, the development of the lower Kalamazoo orebody. Based on the
current mine plan, this project is scheduled to produce 2.13 billion pounds of
copper during the period from 1996 to 2009.
Florence. In July 1992, the Company completed the acquisition of a large
copper deposit near Florence, Arizona. The Company's project team has begun a
pre-feasibility study to determine the opportunity for the use of SX-EW leaching
technology at this deposit.
Smelting and Refining Complex. The Company is in the process of expanding
and upgrading its smelting and refining complex. During 1993, the smelter
produced 681 million pounds of copper in anode form, significantly in excess of
its design capacity of 600 million pounds. The expansion will increase design
capacity to 720 million pounds per year. The increase in design capacity,
scheduled to be completed in the second quarter of 1994, should enable the
Company to maintain its custom smelting business even with the expected increase
in smelting from Magma source copper when the Robinson Mining District begins
production. In addition, the smelter project, which includes the addition of a
new, large acid plant, will further improve the smelter's environmental
performance.
Capital Requirements. Based on present estimates development of the Robinson
Mining District could require capital expenditures on the order of approximately
$300 million for traditional concentrate
4
<PAGE>
production, development of the lower Kalamazoo orebody could require capital
expenditures of approximately $140 million and expansion of the Company's
smelting and refining complex is expected to require capital expenditures of
approximately $85 million, for an aggregate of approximately $500 million. Of
this amount, $105 million had been expended toward these projects as of December
31, 1993, $90 million is expected to be expended in 1994 and the remainder is
expected to be spent over the next four years. The foregoing estimates are
subject to change. The Company has not yet made any determination of the cost to
develop the Florence property.
The Company intends to finance any projects that it undertakes with internal
cash flow, cash reserves and additional financings if necessary. The completion
or success of these projects or, in some cases, the decision to undertake them
is subject to a number of factors, including the price of copper and, where
appropriate, the completion of favorable feasibility studies, permitting and
other factors. Many of these factors are outside of the Company's control. There
can be no assurance that the Company will undertake all of these opportunities
or that, if undertaken, they will prove successful. If the Company is unable to
replace its reserves from the mine development projects being pursued or
evaluated, or with other reserves identified or acquired in the future, the
Company's dependence upon third party sources to supply copper concentrate to
its smelting and refining operations would increase.
REFINANCINGS AND RELATED MATTERS
In the past three years, the Company has taken a number of significant
actions in an effort to enhance its financial position on a prospective basis,
including the following.
Debt Refinancing. Through a series of new debt offerings and redemptions of
previously outstanding indebtedness, the Company has refinanced almost all of
its outstanding public indebtedness, reducing the weighted average interest rate
on its outstanding debt from 14.1% to 10.7%. The refinancings resulted in a $9.7
million decrease in net interest expense in 1992 over 1991, which was partially
offset by a $3 million extraordinary loss related to premiums paid on early debt
repayments.
In May 1993, the Company established a $200 million unsecured revolving
credit facility. The facility has a five-year term and matures in May 1998. The
loan agreement evidencing the facility limits the ability of the Company and its
subsidiaries to encumber their assets and property, to enter into sale and
leaseback transactions, to enter into mergers and consolidations or to sell all
or substantially all of their assets (or certain identified assets), and to
repurchase or redeem subordinated indebtedness, including Senior Subordinated
Debt Securities and Subordinated Debt Securities, except in certain
circumstances. The loan agreement also limits the incurrence of indebtedness by
the Company's subsidiaries, requires that the Company and its subsidiaries
maintain a minimum consolidated net worth, and establishes a maximum ratio of
debt to capitalization and a minimum interest coverage ratio. As of March 31,
1994, there were no outstanding borrowings under the revolving credit facility.
Any borrowings under the credit facility will constitute Senior Indebtedness
with respect to each series of Senior Subordinated Securities and Subordinated
Securities, and will rank senior in right of payment thereto.
Enhanced Capital Base. During 1993, the Company raised $200 million of
additional equity through two convertible preferred stock offerings. In a public
offering completed in July 1993, the Company issued $100 million of convertible
preferred stock that carries a 5 5/8 % cumulative dividend. In December 1993,
the Company completed a public offering of $100 million of convertible preferred
stock that carries a 6% cumulative dividend.
In December 1992, the Company conducted an exchange offer under which all of
its then outstanding Series B Cumulative Convertible Exchangeable Preferred
Stock was exchanged for Common Stock. This preferred stock carried a cumulative
dividend obligation in excess of $9 million per year, which would have been
payable solely in cash beginning in November 1993.
In October 1992, the Company's stockholders voted to amend the Company's
Certificate of Incorporation to eliminate the dual class, disparate voting
rights structure of its Common Stock. The Company now has one class of Common
Stock, $.01 par value per share.
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<PAGE>
Accounting Adjustments. At the end of 1991, the Company implemented various
accounting adjustments in conjunction with the reorganization of the Company
into distinct profit centers. Although these adjustments reduced stockholders'
equity and lowered prior earnings, they did not impact the Company's cash
position or cash flow.
INVESTMENT CONSIDERATIONS
Copper Price Volatility. The profitability of the Company's operations is
largely dependent upon the worldwide market price for copper. A one cent per
pound change in the average price received for the Company's 1993 output would
have affected earnings before interest, taxes, depreciation and amortization by
an estimated $5.6 million. Copper prices have historically been subject to wide
fluctuations and are affected by numerous factors beyond the control of the
Company, including international economic and political conditions, levels of
supply and demand, the availability and cost of copper substitutes, inventory
levels maintained by copper producers and others and, to a lesser degree,
inventory carrying costs (primarily interest charges) and international exchange
rates. From time to time the Company engages in hedging activities in an effort
to stabilize the Company's cash flow in the event of declining copper prices.
Depending upon the hedging program employed, market conditions and other
factors, hedging activities could reduce the cash flow which the Company would
otherwise realize.
Competition. Certain foreign and domestic copper producers benefit from
higher-grade orebodies than those owned by the Company. Further, most foreign
producers benefit from lower labor rates and less stringent environmental
regulation than United States producers. Many foreign producers maintain maximum
production to meet government-imposed employment and foreign exchange revenue
goals, sometimes without regard to the condition of the world copper market or
the profitability of their mining operations. The Company and other copper
producers also compete with manufacturers of other materials, including
aluminum, stainless steel, plastics and fiber optic cables. Should copper prices
increase, use of these alternative materials may also increase.
Environmental Regulation. The mining and mineral processing industries are
subject to extensive regulations for the protection of the environment,
including regulations relating to air and water quality, mine reclamation,
remediation, solid and hazardous waste handling and disposal and the promotion
of occupational safety. From time to time the Company is cited for noncompliance
with applicable environmental laws and regulations. However, the Company
believes that it is currently in material compliance with these laws and
regulations and, although there can be no assurance in this regard, also
believes that there is no pending environmental matter that is likely to have a
material adverse effect on its results of operations. Future regulations or
regulatory interpretations could require the Company to modify or curtail its
operations or incur substantial additional expense. In this regard, the Company
cannot predict, at this time, the level of new emissions controls and related
costs which may be required for it to comply with standards governing emissions
of sulphur, particulates and air toxics that are expected to be adopted under
the federal Clean Air Act Amendments of 1990 and the Arizona Clean Air Act.
Industry Risks; Reserves. The Company is subject to the normal risks
encountered in the mining industry, such as unusual or unexpected geological
formations, cave-ins, flooding, fires, environmental issues and water issues.
The Company's mineral reserves may not conform to geological, geomechanical,
metallurgical or other expectations with the result that the volume and grade of
reserves recovered and rates of production may be less than anticipated.
Further, market price fluctuations in copper, changes in operating and capital
costs and other factors may affect ore reserves.
Development Projects. The existing open pit and underground mines at the
Company's San Manuel Division are scheduled to close in 1994 and 1998,
respectively, and its open pit mine at the Pinto Valley Division is scheduled to
close in 1999. The Company is pursuing or evaluating several development
opportunities in an effort to enhance its ore reserves. The Company is also in
the process of expanding and upgrading its smelting and refining complex.
Development of these projects will require several hundred million dollars in
capital investment. To the extent undertaken, the Company intends to finance its
development projects with internal cash flow, cash reserves and additional
financings as
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necessary. The success of these projects is subject to a number of factors, some
of which are outside of the Company's control. The cost estimates for these
projects are subject to change. If the Company is unable to replace its reserves
from the mine development projects being pursued or evaluated, or with other
reserves identified or acquired in the future, the Company's dependence upon
third party sources to supply copper concentrate to its smelting and refining
operations would increase.
USE OF PROCEEDS
The Company anticipates that the net proceeds of the sales of the Securities
will be used for general corporate purposes or such other uses as may be set
forth in a Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
For purposes of the following ratios: (i) "earnings" consist of income
before taxes, accounting changes and extraordinary items plus fixed charges
adjusted for capitalized interest and amortization of previously capitalized
interest; (ii) "fixed charges" consist of interest (including capitalized
interest) and the estimated interest portion of lease rental expenses,
amortization of debt expenses and write-offs of loan costs; and (iii) "preferred
stock dividend requirements" include dividends paid in zero coupon notes and
shares of Common Stock.
In calculating the ratio of earnings to combined fixed charges and preferred
stock dividend requirements, the preferred stock dividend requirements were
assumed to be equal to the pretax earnings required to cover such dividend
requirements. The amount of such pretax earnings required to cover preferred
stock dividends was computed using tax rates for the applicable year. Preferred
stock dividends are included in total "fixed charges" and deducted from
"earnings."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges .............2.1x 2.9x -- 2.7x 1.5x
Ratio of earnings to combined fixed charges and
preferred stock dividend requirements ........1.9x 2.5x -- 2.0x 1.4x
</TABLE>
Before giving effect to the non-cash accounting adjustments taken in 1991 in
connection with the Company's reorganization into distinct profit centers and
the related adoption of Statement of Financial Accounting Standards Board
("FASB") No. 109 "Accounting for Income Taxes" and FASB No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions," the ratio of
earnings to fixed charges for the year ended December 31, 1991 was 1.8x and the
ratio of earnings to combined fixed charges and preferred stock dividend
requirements for that year was 1.5x. After giving effect to such accounting
adjustments, earnings were inadequate to cover fixed charges by $167.5 million
for the year ended December 31, 1991 and were inadequate to cover combined fixed
charges and preferred stock dividend requirements by $179.8 million for that
year.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time in one or more series
and will constitute either Senior Debt Securities, Senior Subordinated Debt
Securities or Subordinated Debt Securities. The particular terms of each series
of Debt Securities offered hereunder, including the nature of any variations
from the following general provisions applicable to such Debt Securities, will
be described in a Prospectus Supplement relating to such Debt Securities. Senior
Debt Securities, Senior Subordinated Debt Securities and Subordinated Debt
Securities will each be issued under a separate Indenture (herein referred to as
the "Senior Indenture", "Senior Subordinated Indenture" and "Subordinated
Indenture", respectively; and individually an "Indenture" and collectively the
"Indentures") to be entered into by the Company prior to the issuance of such
Debt Securities. The forms of Indentures have been filed as
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exhibits to the Registration Statement. To the extent not included herein,
information regarding the trustee under an Indenture (individually a "Trustee"
and collectively the "Trustees") will be included in the applicable Prospectus
Supplement relating to the Debt Securities described therein.
The following discussion includes a summary description of the material
terms of the Indentures, other than terms which are specific to a particular
series of Debt Securities and which will be described in the Prospectus
Supplement relating to such series. The following summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the definitions therein
of certain terms capitalized in this Prospectus. Wherever particular Sections,
Articles or defined terms of the Indentures are referred to herein or in a
Prospectus Supplement, such Sections, Articles or defined terms are incorporated
herein or therein by reference.
GENERAL
The Debt Securities will be general unsecured obligations of the Company.
The Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, and Debt Securities may be issued thereunder from time to
time in separate series up to the aggregate amount from time to time authorized
by the Company for each series.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the series of Debt Securities in respect of which this
Prospectus is being delivered: (1) the title of such Debt Securities, and
whether such Debt Securities are Senior Debt Securities, Senior Subordinated
Debt Securities or Subordinated Debt Securities; (2) any limit on the aggregate
principal amount of such Debt Securities; (3) whether any of such Debt
Securities are to be issuable in permanent global form ("Global Security") and,
if so, the terms and conditions, if any, upon which interests in such Securities
in global form may be exchanged, in whole or in part, for the individual Debt
Securities represented thereby; (4) the person to whom any interest on any Debt
Security of the series shall be payable if other than the person in whose name
the Debt Security is registered on the Regular Record Date; (5) the date or
dates on which such Debt Securities will mature; (6) the rate or rates (which
may be fixed or variable) of interest, if any, or the method of calculation
thereof, which such Debt Securities will bear; (7) the date or dates from which
any such interest will accrue, the Interest Payment Dates on which any such
interest on such Debt Securities will be payable and the Regular Record Date for
any interest payable on any Interest Payment Date; (8) the place or places where
the principal of, premium, if any, and interest on such Debt Securities will be
payable; (9) the period or periods within which, the events upon the occurrence
of which, and the price or prices at which, such Debt Securities may, pursuant
to any optional or mandatory provisions, be redeemed or purchased, in whole or
in part, by the Company and any terms and conditions relevant thereto; (10) the
obligations of the Company, if any, to redeem or repurchase such Debt Securities
at the option of the holders; (11) the denominations in which any such Debt
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (12) the currency, currencies or currency unit or
units of payment of principal of and any premium and interest on such Debt
Securities if other than U.S. dollars; (13) any index or formula used to
determine the amount of payments of principal of and any premium and interest on
such Debt Securities; (14) if the principal of, or premium, if any, or interest
on such Debt Securities is to be payable, at the election of the Company or a
holder thereof, in one or more currencies or currency units other than that or
those in which such Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on Debt Securities of such series as to which such election
is made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made; (15) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities of the series which will be payable upon acceleration of the Maturity
thereof; (16) whether the subordination provisions summarized below, or
different subordination provisions, shall apply to Debt Securities that are
Senior Subordinated Debt Securities or Subordinated Debt Securities and, if so,
the aggregate principal amount of Senior Indebtedness then outstanding; (17) the
applicability of any provisions described under "Covenants with Respect to
Senior Debt Securities" or "Covenants with Respect to Senior Subordinated Debt
Securities"; (18) the applicability of any provisions described under
"Defeasance"; (19) the terms and conditions, if any, pursuant to
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<PAGE>
which the Debt Securities are convertible or exchangeable into Common Stock or
other Securities; and (20) any other terms of such Debt Securities not
inconsistent with the provisions of the respective Indentures.
Debt Securities may be issued at a discount from their principal amount.
United States Federal income tax considerations and other special considerations
applicable to any such Original Issue Discount Securities will be described in
the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such issue of Debt Securities will be set
forth in the applicable Prospectus Supplement.
The Indentures do not limit the amount of additional unsecured indebtedness
that the Company or its subsidiaries may incur. Further, certain of the
operations of the Company are and may in the future be conducted through
subsidiaries. To the extent so conducted, the ability of the Company to meet its
debt obligations, including obligations in respect of the Debt Securities, would
be dependent upon the earnings and cash flow of its subsidiaries, and the claims
of the holders of the Debt Securities will be effectively subordinated to the
claims of creditors of the Company's subsidiaries.
Unless otherwise specified in the resolutions or any supplemental indenture
establishing the terms of the offered Debt Securities, the terms of the offered
Debt Securities or the covenants contained in the Indenture do not afford
holders protection in the event of a highly leveraged or other similar
transaction involving the Company that may adversely affect securityholders.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES AND SUBORDINATED DEBT
SECURITIES
The term "Senior Indebtedness", when used with respect to any series of
Senior Subordinated Debt Securities, means indebtedness of the Company and
indebtedness guaranteed by the Company for principal of and premium and interest
on (a) money borrowed from banks or other lending institutions whether
outstanding on the date of the initial issuance of any Senior Subordinated Debt
Securities or thereafter incurred and (b) any other indebtedness or obligation
of the Company, whether outstanding on the date of the initial issuance of any
Senior Subordinated Debt Securities or thereafter created, incurred, assumed or
guaranteed, which is evidenced by a note or other similar instrument, including
Senior Debt Securities, unless by the terms of such note or other instrument it
is provided that such indebtedness is not superior in right of payment to the
Senior Subordinated Debt Securities; provided, however, that Senior Indebtedness
shall not include (w) any other series of Senior Subordinated Debt Securities,
including the Company's 12% Senior Subordinated Notes due 2001 or the Company's
11 1/2 % Senior Subordinated Notes due 2002, (x) any trade payables or notes or
other instruments evidencing the same, (y) notes or other obligations issued in
lieu of cash dividends on, or in exchange for, Capital Stock, or (z) any
liability for federal, state, local or other taxes owed or owing by the Company.
The term "Senior Indebtedness", when used with respect to any series of
Subordinated Debt Securities, means indebtedness of the Company and indebtedness
guaranteed by the Company for principal of and premium and interest on (a) money
borrowed from banks or other lending institutions whether outstanding on the
date of the initial issuance of any Subordinated Debt Securities or thereafter
incurred and (b) any other indebtedness or obligation of the Company, whether
outstanding on the date of the initial issuance of any Subordinated Debt
Securities or thereafter created, incurred, assumed or guaranteed, which is
evidenced by a note or other similar instrument, including Senior Debt
Securities and Senior Subordinated Debt Securities (including the Company's 12%
Senior Subordinated Notes due 2001 and the Company's 11 1/2 % Senior
Subordinated Notes due 2002), unless by the terms of such note or other
instrument it is provided that such indebtedness is not superior in right of
payment to the Subordinated Debt Securities; provided, however, that Senior
Indebtedness shall not include (w) any other series of Subordinated Debt
Securities, (x) any trade payables or notes or other instruments evidencing the
same, (y) notes or other obligations issued in lieu of cash dividends on, or in
exchange for, Capital Stock, or (z) any liability for federal, state, local or
other taxes owed or owing by the Company.
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<PAGE>
In either case, the term "Senior Indebtedness" includes, without limitation,
(i) any and all interest accruing on any of the Senior Indebtedness after the
commencement of any bankruptcy, insolvency, reorganization or other similar
proceeding, notwithstanding any provision or rule of law which might restrict
the rights of any holder thereof as to such interest, and (ii) any and all
claims for principal of, premium and interest on, and fees and expenses in
respect of, Senior Indebtedness described in clause (a) above, notwithstanding
any disallowance, avoidance or subordination of such claim under any insolvency,
fraudulent conveyance or equitable subordination law.
Payment of the principal amount of and premium, if any, and interest on the
Senior Subordinated Debt Securities and Subordinated Debt Securities,
respectively, will be subordinated in right of payment to the prior payment in
full of all Senior Indebtedness with respect thereto on the terms and conditions
of the respective Indentures governing such Senior Subordinated Debt Securities
and Subordinated Debt Securities, respectively. The Company is prohibited from
making any payment of principal of or premium or interest on Senior Subordinated
Debt Securities or Subordinated Debt Securities, as the case may be, and any
payment in respect of any redemption, retirement, purchase or other acquisition
of Senior Subordinated Debt Securities or Subordinated Debt Securities, as the
case may be, (i) unless, as of the earlier to occur of the date such payment is
made and the date that provision is made for such payment in accordance with the
terms of the applicable Indenture, all amounts then due and payable for
principal of and premium, if any, and interest on Senior Indebtedness with
respect to the Senior Subordinated Debt Securities or Subordinated Debt
Securities, as the case may be, have been paid in full, or (ii) if at the
earlier to occur of the date of such payment or provision therefor, there has
occurred any event of default under the terms of such Senior Indebtedness
entitling the holder of such Senior Indebtedness to accelerate the maturity
thereof as a result of such event of default. Notwithstanding such prohibition,
the Company may make such payments, if (a) the Company or the Trustee has
received a notice of a default or an event of default under any agreement
covering such Senior Indebtedness (other than notice of a default or event of
default relating to payments of principal or interest, either at maturity, upon
redemption, by declaration or otherwise), which default or event of default
would permit the holders of such Senior Indebtedness to accelerate its maturity
(whether or not such acceleration has occurred), and (b) 179 days have passed
after the earliest date on which such notice was given with respect to such
default or event of default (a "Payment Blockage Period") so long as the
applicable Indenture otherwise permits payment at that time; provided, however,
that only one Payment Blockage Period may be commenced within one 360-day period
with respect to the Senior Subordinated Debt Securities or Subordinated Debt
Securities, as the case may be. No event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Senior Indebtedness shall be, or be made, the basis for the
commencement of a second Payment Blockage Period by the representative for the
holders of such Senior Indebtedness unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days. (Article
Fifteen of Senior Subordinated Indenture and Subordinated Indenture)
Upon any payment or distribution of assets or securities of the Company of
any kind or character upon any dissolution, winding up or total liquidation or
reorganization of the Company (in bankruptcy or otherwise), the holders of
Senior Indebtedness with respect to the Senior Subordinated Debt Securities or
Subordinated Debt Securities, as the case may be, will first be entitled to
receive payment in full of principal of and premium, if any, and interest on
such Senior Indebtedness before the holders of Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, are entitled to
receive any payment of the principal of or premium or interest on such Senior
Subordinated Debt Securities or Subordinated Debt Securities, as the case may
be. (Article Fifteen of Senior Subordinated Indenture and Subordinated
Indenture)
By reason of such provisions, in the event of insolvency, holders of Senior
Subordinated Debt Securities and Subordinated Debt Securities may recover less,
ratably, than holders of Senior Indebtedness with respect thereto.
The Senior Debt Securities, when issued, will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company.
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<PAGE>
CONVERSION OR EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be convertible or
exchangeable into Common Stock or other securities on the terms and conditions
set forth therein.
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be issued only in fully registered form in denominations of
$1,000 or integral multiples thereof. (Section 302) Unless otherwise indicated
in the applicable Prospectus Supplement, payment of principal of, premium, if
any, and interest on the Debt Securities will be payable, and the exchange,
conversion and transfer of Debt Securities will be registerable, at the office
or agency of the Company maintained for such purposes and at any other office or
agency maintained for such purpose. (Sections 301, 305 and 1002) No service
charge will be made for any registration of transfer or exchange of the Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith. (Section 305)
All monies paid by the Company to a paying agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to the Company and thereafter the holder of such Debt
Security may look only to the Company for payment thereof. (Section 1003)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a Depositary ("Global Depositary") or its nominee identified in the
applicable Prospectus Supplement. In such a case, one or more Global Securities
will be issued in a denomination or aggregate denomination equal to the portion
of the aggregate principal amount of outstanding Debt Securities of the series
to be represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Global Depositary for such Global Security to a nominee of such Global
Depositary or by a nominee of such Global Depositary to such Global Depositary
or another nominee of such Global Depositary or by such Global Depositary or any
nominee to a successor Global Depositary or a nominee of such successor Global
Depositary and except in the circumstances described in the applicable
Prospectus Supplement. (Sections 204 and 305)
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Global Depositary will be represented by a Global Security
registered in the name of such Global Depositary or its nominee. Upon the
issuance of such Global Security, and the deposit of such Global Security with
or on behalf of the Global Depositary for such Global Security, the Global
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such Global
Depositary or its nominee ("participants"). The accounts to be credited will be
designated by the underwriters or agents of such Debt Securities or by the
Company, if such Debt Securities are offered and sold directly by the Company.
Ownership of beneficial interest in such Global Security will be limited to
participants or Persons that may hold interests through participants. Ownership
of beneficial interests by participants in such Global Security will be shown
on, and the transfer of that ownership interest will be effected only through,
records maintained by the Global Depositary or its nominee for such Global
Security. Ownership of beneficial interests in such Global Security by Persons
that hold through participants will be shown on, and the transfer of that
ownership interest within such participant will be effected only through,
records
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maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
So long as the Global Depositary for a Global Security, or its nominee, is
the registered owner of such Global Security, such Global Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the holders thereof for any purposes under the applicable
Indenture. (Sections 204 and 305) Accordingly, each Person owning a beneficial
interest in such Global Security must rely on the procedures of the Global
Depositary and, if such Person is not a participant, on the procedures of the
participant through which such Person owns its interest, to exercise any rights
of a holder under the applicable Indenture. The Company understands that under
existing industry practices, if the Company requests any action of holders or an
owner of a beneficial interest in such Global Security desires to give any
notice or take any action a holder is entitled to give or take under an
Indenture, the Global Depositary would authorize the participants to give such
notice or take such action, and participants would authorize beneficial owners
owning through such participants to give such notice or take such action or
would otherwise act upon the instructions of beneficial owners owning through
them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
COVENANTS WITH RESPECT TO SENIOR DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Senior Debt Securities, holders of such Senior Debt
Securities will be entitled to the benefit of one or both of the following
covenants.
Restrictions on Secured Debt
Neither the Company nor any Subsidiary shall incur, issue, assume or
guarantee any notes, bonds, debentures or other evidences of indebtedness for
money borrowed (collectively, "Debt") secured after the date of the Senior
Indenture by a mortgage, pledge or lien ("Mortgage") on any Principal Property
of the Company or a Significant Subsidiary or on any shares of stock or Debt of
any Significant Subsidiary, unless the Company secures, or causes such
Significant Subsidiary to secure, the Senior Debt Securities equally and ratably
with (or, at the Company's option, prior to) such secured Debt, together, at the
determination of the Company, with certain other Debt of the Company; provided,
however, that such restriction shall not apply to the incurrence of any secured
Debt if, after giving effect thereto, the aggregate outstanding principal amount
of all such Debt so secured after the date of the Senior Indenture, together
with all Attributable Debt of the Company and its Significant Subsidiaries in
respect of sale and leaseback transactions after the date of the Senior
Indenture and existing at such time involving Principal Properties owned by the
Company or a Significant Subsidiary (with the exception of such transactions
which are excluded as described in "Restrictions on Sales and Leasebacks"
below), would not exceed 10% of the Consolidated Assets of the Company and its
Subsidiaries.
This restriction will not apply to, and there shall be excluded in computing
secured Debt for the purpose of such restriction, Debt secured prior to the date
of the Senior Indenture and Debt secured by (a) Mortgages on property of, or on
any shares of stock of or Debt of, any corporation existing at the time such
corporation becomes a Significant Subsidiary; (b) Mortgages in favor of the
Company or a Significant Subsidiary; (c) Mortgages in favor of governmental
bodies to secure progress, advance or other statutory or contract payments;
Mortgages for taxes, assessments or other governmental charges or levies; or
materialmen's mechanics', carriers', workmen's, repairmen's, landlord's and
other like Mortgages; (d) Mortgages on property, equipment, mines or facilities,
or shares of stock or Debt, to secure the payment of all or any part of the
purchase price thereof or the construction, improvement or development cost
thereof, or any Debt incurred in connection therewith, existing prior to, at the
time of, or
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within 180 days after, the acquisition (including any acquisition through merger
or consolidation) or construction, improvement or development thereof, provided
that any such Mortgage shall only extend to the property, equipment, mines or
facilities, or shares of stock or Debt, acquired or constructed, improved or
developed, or to property or mines, including undeveloped mineralized deposits
or orebodies or segments thereof, on which the acquired or constructed, improved
or developed property, equipment, mines or facilities is situated; (e) Mortgages
securing certain tax-exempt obligations issued by governmental bodies, including
industrial revenue or pollution control bonds; (f) Mortgages created in
connection with a project financed, or assets acquired, with, and created to
secure, a Nonrecourse Obligation; (g) production payments or other rights of
others to the output of mines, refineries, smelters, concentrators or production
facilities, including project financings with respect to any property or assets
acquired, constructed or improved by the Company or a Subsidiary with the
proceeds of such project financings; or Mortgages to secure the payment of
workmen's compensation or the performance of tenders, bids or similar contracts
(including surety or appeal bonds) and Mortgages entered into in the ordinary
course of business for similar purposes; or (h) subject to certain limitations,
any extension, renewal or refunding of any Mortgage referred to in the foregoing
clauses (a) through (g) inclusive. (Section 1006 of Senior Indenture) The Senior
Indenture does not restrict the Company or any Subsidiary from incurring
unsecured Debt.
Restrictions on Sales and Leasebacks
Neither the Company nor any Significant Subsidiary may enter into any sale
and leaseback transaction involving any Principal Property, unless after giving
effect thereto the aggregate amount of all Attributable Debt with respect to all
such transactions occurring after the date of the Senior Indenture and existing
at such time plus all outstanding secured Debt incurred by the Company and its
Significant Subsidiaries after the date of the Senior Indenture (with the
exception of secured Debt which is excluded as described in "Restrictions on
Secured Debt" above) would not exceed 10% of Consolidated Assets of the Company
and its Subsidiaries.
This restriction does not apply to, and there shall be excluded from
Attributable Debt in any computation under such restriction, any sale and
leaseback transaction if (a) the lease is for a period, including renewal
rights, not in excess of three years; (b) the sale or transfer of the Principal
Property is made prior to, at the time of, or within 180 days after its
acquisition or completion of construction; (c) the lease secures or relates to
certain tax-exempt obligations issued by governmental bodies, including
industrial revenue or pollution control bonds; (d) the transaction is between
the Company and a Significant Subsidiary or between Significant Subsidiaries;
(e) the lease payment obligation is created in connection with a project
financed, or assets acquired, with, and such obligation constitutes, a
Nonrecourse Obligation; or (f) the Company or such Significant Subsidiary,
within 180 days after the sale is completed, applies to the retirement of Funded
Debt of the Company or a Significant Subsidiary, or to the purchase of other
property which will constitute Principal Property, an amount not less than the
greater of (i) the net proceeds of the sale of the Principal Property leased or
(ii) the fair market value of the Principal Property leased, as determined by
certain officers of the Company. The amount to be applied to the retirement of
Funded Debt shall be reduced by (x) the principal amount of any Funded Debt
(including the Debt Securities) of the Company or a Significant Subsidiary
retired and cancelled within 180 days after such sale with proceeds other than
the proceeds from such sale and (y) the principal amount of Funded Debt, other
than any Funded Debt referred to in the preceding clause (x), voluntarily
retired by the Company or any Significant Subsidiary within 180 days after such
sale using proceeds other than the proceeds of such sale. (Section 1007 of
Senior Indenture)
COVENANTS WITH RESPECT TO SENIOR SUBORDINATED DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Senior Subordinated Debt Securities, holders of such Senior
Subordinated Debt Securities will be entitled to the benefit of one or both of
the following covenants.
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Limitation on Subordinated Liens
Neither the Company nor any Subsidiary shall incur, issue, assume or
guarantee any Debt which is pari passu or (by the express terms thereof)
subordinate in right of payment to the Senior Subordinated Debt Securities,
secured after the date of the Senior Subordinated Indenture by a Mortgage on any
Principal Property of the Company or a Significant Subsidiary or on any shares
of stock or Debt of any Significant Subsidiary, unless the Company secures, or
causes such Significant Subsidiary to secure, the Senior Subordinated Debt
Securities (i) equally and ratably with (or, at the Company's option, prior to)
such secured Debt or (ii) in the event such secured Debt is subordinated in
right to payment to the Senior Subordinated Securities, prior to such secured
Debt, together, at the determination of the Company, with certain other Debt of
the Company; provided, however, that such restriction shall not apply to the
incurrence of any secured Debt if, after giving effect thereto, the aggregate
amount of all such Debt so secured after the date of the Senior Subordinated
Indenture and then outstanding would not exceed 10% of the Consolidated Assets
of the Company and its Subsidiaries.
This restriction will not apply to, and there shall be excluded in computing
secured Debt for the purpose of such restriction, Debt secured prior to the date
of the Senior Subordinated Indenture and Debt secured by (a) Mortgages on
property of, or on any shares of stock of or Debt of, any corporation existing
at the time such corporation becomes a Significant Subsidiary; (b) Mortgages in
favor of the Company or a Significant Subsidiary; (c) Mortgages in favor of
governmental bodies to secure progress, advance or other statutory or contract
payments; Mortgages for taxes, assessments or other governmental changes or
levies; or materialmen's mechanics', carriers', workmen's, repairmen's,
landlord's and other like Mortgages; (d) Mortgages on property, equipment, mines
or facilities, or shares of stock or Debt, to secure the payment of all or any
part of the purchase price thereof or the construction, improvement or
development cost thereof, or any Debt incurred in connection therewith, existing
prior to, at the time of, or within 180 days after, the acquisition (including
any acquisition through merger or consolidation) or construction, improvement or
development thereof, provided that any such Mortgage shall only extend to the
property, equipment, mines or facilities, or shares of stock or Debt, acquired
or constructed, improved or developed, or to property or mines, including
undeveloped mineralized deposits or orebodies or segments thereof, on which the
acquired or constructed, improved or developed property, equipment, mines or
facilities is situated; (e) Mortgages securing certain tax-exempt obligations
issued by governmental bodies, including industrial revenue or pollution control
bonds; (f) Mortgages created in connection with a project financed, or assets
acquired, with, and created to secure, a Nonrecourse Obligation; (g) production
payments or other rights of others to the output of mines, refineries, smelters,
concentrators or production facilities, including project financings, with
respect to any property or assets acquired, constructed or improved by the
Company or a Subsidiary with the proceeds of such project financings; or
Mortgages to secure the payment of workmen's compensation or the performance of
tenders, bids or similar contracts (including surety or appeal bonds) and
Mortgages entered into in the ordinary course of business for similar purposes;
or (h) subject to certain limitations, any extension, renewal or refunding of
any Mortgage referred to in the foregoing clauses (a) through (g) inclusive.
(Section 1006 of Senior Subordinated Indenture) The Senior Subordinated
Indenture does not restrict the Company or any Subsidiary from incurring
unsecured Debt. Limitation on Certain Debt
The Company shall not incur any Debt which by its terms is both (i)
subordinated in right of payment to any Senior Debt and (ii) senior in right of
payment to the Senior Subordinated Debt Securities.
EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect to
Debt Securities of any series: (a) failure to pay principal of or premium, if
any, on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure to make any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform in any material respect any
other covenant of the Company in the applicable Indenture (other than a covenant
included in such Indenture solely for the benefit of a series of Debt Securities
other than that series), continued for 60 days after written notice as provided
in the respective Indentures; (e)
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acceleration of any indebtedness for money borrowed by the Company in excess of
$20 million, if such acceleration is not annulled as provided in the respective
Indentures; (f) certain events of bankruptcy, insolvency or reorganization; and
(g) any other Event of Default provided with respect to Debt Securities of that
series. (Section 501)
If an Event of Default with respect to outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the holders of at
least 25% in principal amount of the outstanding Debt Securities of that series
by notice as provided in the respective Indentures may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all Debt Securities of that series to be due and
payable immediately. However, at any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree based on such acceleration has been obtained, the holders of
a majority in principal amount of the outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration. (Section
502) For information as to waiver of defaults, see "Modification and Waiver"
below.
The Indentures provide that, subject to the duty of the respective Trustees
thereunder during an Event of Default to act with the required standard of care,
such Trustee will be under no obligation to exercise any of its rights or powers
under the respective Indentures at the request or direction of any of the
holders, unless such holders shall have offered to such Trustee reasonable
security or indemnity. (Sections 601 and 603) Subject to certain provisions,
including those requiring security or indemnification of the Trustees, the
holders of a majority in principal amount of the outstanding Debt Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable Trustee, or
exercising any trust or power conferred on such Trustee, with respect to the
Debt Securities of that series. (Section 512)
No holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the applicable Indenture or for any remedy
thereunder, unless such holder shall have previously given to the applicable
Trustee written notice of a continuing Event of Default (as defined) and unless
also the holders of at least 25% in aggregate principal amount of the
outstanding Debt Securities of the same series shall have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the outstanding Debt Securities of the same
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507) However, such
limitations do not apply to a suit instituted by a holder of a Debt Security for
enforcement of payment of the principal of and interest on such Debt Security on
or after the respective due dates expressed in such Debt Security. (Section 508)
The Company will be required to furnish to the Trustees annually a statement
as to the performance by the Company of its obligations under the respective
Indentures and as to any default in such performance. (Section 1004)
MODIFICATION AND WAIVER
Without the consent of any holder of outstanding Debt Securities, the
Company and the Trustee may amend or supplement the Indentures or the Debt
Securities to cure any ambiguity, defect or inconsistency, or to make any change
that does not materially adversely affect the rights of any holder of Debt
Securities. (Section 901) Other modifications and amendments of the respective
Indentures may be made by the Company and the Trustee with the consent of the
holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities of each series affected thereby; provided, however,
that no such modification or amendment may, without the consent of the holder of
each outstanding Debt Security affected thereby: (a) change the Stated Maturity
of the principal of, or any installment of principal of, or interest on, any
Debt Security; (b) reduce the principal amount of, the rate of interest on, or
the premium, if any, payable upon the redemption of, any Debt Security; (c)
reduce the amount of principal of an Original Issue Discount Security payable
upon acceleration of the Maturity thereof; (d) change the place or currency of
payment of principal of, or premium, if any, or interest on any
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Debt Security; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security on or after the Stated Maturity
or Redemption Date thereof; (f) modify the conversion provisions applicable to
Convertible Debt Securities in a manner adverse to the holders thereof; (g)
modify the subordination provisions applicable to Senior Subordinated Debt
Securities or Subordinated Debt Securities in a manner adverse to the holders
thereof; or (h) reduce the percentage in principal amount of outstanding Debt
Securities of any series, the consent of the holders of which is required for
modification or amendment of the applicable Indenture or for waiver of
compliance with certain provisions of the applicable Indenture or for waiver of
certain defaults. (Section 902)
The holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain covenants of the applicable Indenture.
(Section 1009) The holders of not less than a majority in principal amount of
the outstanding Debt Securities of any series may, on behalf of the holders of
all Debt Securities of that series, waive any past default under the applicable
Indenture with respect to that series, except a default in the payment of the
principal of, or premium, if any, or interest on, any Debt Security of that
series or in respect of a provision which under the applicable Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Debt Security of that series affected. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate or merge with or into, or transfer or lease
all or substantially all of its assets to, any Person, and any other Person may
not consolidate or merge with or into, the Company, unless (i) the Person formed
by such consolidation or into which the Company is merged or which acquires or
leases all or substantially all of the assets of the Company expressly assumes
all of the Company's obligations on the Debt Securities and under the Indenture,
(ii) immediately after giving effect to such transaction no Event of Default
shall have happened and be continuing, and (iii) certain other conditions are
met. (Article Eight)
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Debt Securities of a series, the Company, at its option (i) will be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace destroyed, stolen, lost or mutilated Debt
Securities of such series, and to maintain an office or agency in respect of the
Debt Securities and hold moneys for payment in trust) or (ii) will be released
from its obligations to comply with the covenants that are specified under
"Covenants with Respect to Senior Debt Securities" or "Covenants with Respect to
Senior Subordinated Debt Securities" above (and any covenants that may apply to
Subordinated Debt Securities) with respect to the Debt Securities of such
series, and the occurrence of an event described in clause (d) under "Events of
Default" above with respect to any defeased covenant, and clauses (e) and (g)
under "Events of Default" above shall no longer be Events of Default, if in
either case the Company irrevocably deposits with the Trustee, in trust, money
or U.S. Government Obligations that through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an amount
sufficient to pay all the principal of and premium, if any, and any interest on
the Debt Securities of such series on the dates such payments are due (which may
include one or more redemption dates designated by the Company) in accordance
with the terms of such Debt Securities. Such a trust may only be established if,
among other things, (a) no Event of Default or event which with the giving of
notice or lapse of time, or both, would become an Event of Default under the
applicable Indenture shall have occurred and be continuing on the date of such
deposit, (b) no Event of Default described under clause (f) under "Events of
Default" above or event which with the giving of notice or lapse of time, or
both, would become an Event of Default described under such clause (f) shall
have occurred and be continuing at any time during the period ending on the 91st
day following such date of deposit, and (c) the Company shall have delivered an
Opinion of Counsel to the effect that the holders of the Debt Securities will
not recognize gain or loss for United States Federal income tax purposes as a
result of such deposit or defeasance and
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will be subject to United States Federal income tax in the same manner as if
such defeasance had not occurred. In the event the Company fails to comply with
its remaining obligations under the applicable Indenture after a defeasance of
such Indenture with respect to the Debt Securities of any series as described
under clause (ii) above and the Debt Securities of such series are declared due
and payable because of the occurrence of any undefeased Event of Default, the
amount of money and U.S. Government Obligations on deposit with the Trustee may
be insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect to such payments. (Article Thirteen)
Notwithstanding the description set forth under "Subordination of Senior
Subordinated Debt Securities and Subordinated Debt Securities" above, in the
event that the Company deposits money or U.S. Government Obligations in
compliance with the Indenture that governs the Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, in order to
defease all or certain of its obligations with respect to the applicable series
of Debt Securities, the moneys or U.S. Government Obligations so deposited will
not be subject to the subordination provisions of the applicable Indenture and
the indebtedness evidenced by such series of Debt Securities will not be
subordinated in right of payment to the holders of applicable Senior
Indebtedness to the extent of the moneys or U.S. Government Obligations so
deposited.
PROVISION OF FINANCIAL INFORMATION
The Company will provide to the Trustee a copy of all financial reports it
files with the Commission. If, during any reporting period, the Company is not
required to file such reports with the Commission, the Company will provide the
Trustee substantially similar financial reports concerning the Company as if the
Company were so required.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEE
Chemical Trust Company of California, an affiliate of Chemical Bank, N.A.,
will serve as Trustee under the Indenture governing the Senior Debt Securities.
Chemical Bank, N.A. is a lender and the administrative agent under the Company's
$200 million Revolving Credit Agreement.
State Street Bank and Trust Company will be the Trustee under the Indenture
governing the Senior Subordinated Debt Securities. It is also the trustee under
the indentures governing the Company's 12% Senior Subordinated Notes due 2001
and its 11 1/2 % Senior Subordinated Notes due 2002.
The Trustee with respect to the Indenture governing Subordinated Debt
Securities will be specified in the applicable Prospectus Supplement relating
thereto.
If any Trustee were to have any conflicting interest at the time of any
default under the Debt Securities, it would have to eliminate such conflict or
resign as Trustee. (Section 608)
CERTAIN DEFINITIONS
The following terms have the meanings ascribed to them below, except as
otherwise provided with respect to any series of Debt Securities:
The term "Attributable Debt" shall mean, as to any particular Capitalized
Lease under which any Person is at the time liable, at any date of which the
amount thereof is to be determined, the total net amount of rent required to be
paid by such Person under such Capitalized Lease during the remaining primary
term thereof, discounted from the respective due dates thereof to such date at
the rate of interest per annum implicit in the terms of such Capitalized Lease,
as determined in good faith by the Company. The net amount of rent required to
be paid under such Capitalized Lease for any such period shall be the amount of
the rent payable by the lessee with respect to such period, after excluding
amounts required to be paid on account of maintenance, repairs, insurance,
taxes, assessments, water rates and
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similar charges. In the case of any Capitalized Lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but shall not include any rent required to be paid under
such Capitalized Lease subsequent to the first date upon which it may be so
terminated.
The term "Consolidated Assets" shall mean the aggregate amount of assets,
all as set forth on the most recent balance sheet of the Company and its
consolidated Subsidiaries and computed in accordance with generally accepted
accounting principles.
The term "Funded Debt" shall mean all indebtedness for money borrowed having
a maturity of more than 12 months from the date as of which the amount thereof
is to be determined or having a maturity of less than 12 months but by its terms
being renewable or extendable beyond 12 months from such date at the option of
the borrower.
The term "Nonrecourse Obligation" shall mean indebtedness or lease payment
obligations substantially related to and entered into or effective before, at
the time of or after (i) the acquisition (including any acquisition by merger or
consolidation) of property or assets not currently owned by the Company or any
of its Significant Subsidiaries or (ii) the financing of the acquisition,
construction, development or improvement of property, equipment, mines or
facilities of the Company or any of its Significant Subsidiaries, as to which
the obligee with respect to such indebtedness or obligation has no recourse to
the general corporate funds of the Company or any of its Significant
Subsidiaries or to the assets, in general, of the Company or any of its
Significant Subsidiaries, other than the property, equipment, mines or
facilities acquired or constructed, improved or developed, or to property or
mines, including undeveloped mineralized deposits or orebodies or segments
thereof, on which the acquired or constructed, improved or developed property,
equipment, mines or facilities is situated or that forms, with the property,
equipment, mines or facilities acquired or constructed, improved or developed,
an integrated plan to bring into or enhance the production of minerals or metals
therefrom.
The term "Person" shall mean any individual, corporation, partnership, joint
venture, trust, association, company, joint-stock company, business trust,
unincorporated organization or government or any agency or political subdivision
thereof.
The term "Principal Property" shall mean any smelters, refineries, mines,
concentrators or other facilities, located within the present 50 states of the
United States of America (other than its territories or possessions), owned by
the Company or any Subsidiary, in each case the gross book value (without
deduction of any depreciation reserves) of which on the date as of which the
determination is being made exceeds 3% of Consolidated Assets, other than any
such portion thereof which is pollution control or other equipment or facility
financed by obligations issued by a State or local government unit; provided,
however, that Principal Property shall not include any smelters, refineries,
mines, concentrators or facilities or any portions thereof which the Board of
Directors of the Company declares by resolution are not of material importance
to the total business conducted by the Company and its Subsidiaries as an
entirety.
The term "Significant Subsidiary" shall mean any Subsidiary of the Company
which owns a Principal Property and any Subsidiary that owns directly or
indirectly stock of a Significant Subsidiary.
The term "Subsidiary" shall mean a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
The term "Voting Stock" shall mean stock which ordinarily has voting power
for the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
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DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below. Certain provisions applicable to the Preferred Stock are set
forth below under "Description of Common Stock."
The summary of terms of the Company's Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Certificate of Incorporation
and the certificate of designations relating to each series of the Preferred
Stock (the "Certificate of Designations"), the form of which is an exhibit to
the Registration Statement of which this Prospectus is a part.
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of preferred stock. In December 1993, the Company closed the
sale of 2.0 million shares of 6% Cumulative Convertible Preferred Stock, Series
E, $.01 par value. See "Series E Preferred Stock" below. Additionally, in July
1993, the Company issued 2.0 million shares of 5 5/8 % Cumulative Convertible
Preferred Stock, Series D, $.01 par value. See "Series D Preferred Stock" below.
The Company also has 5,112,765 shares of Series C Convertible Preferred Stock,
$.01 par value, reserved for issuance in certain instances. See "Reserved but
Unissued Series C Convertible Preferred Stock" below. The Company's preferred
stock may be issued from time to time in one or more series, without stockholder
approval. Subject to limitations prescribed by law, the Board of Directors is
authorized to determine the voting powers (if any), designation, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, for each series of preferred stock that may
be issued, and to fix the number of shares of each such series. Thus, the Board
of Directors, without stockholder approval, could authorize the issuance of
preferred stock with voting, conversion and other rights that could adversely
affect the voting power and other rights of holders of Common Stock or other
series of preferred stock or that could have the effect of delaying, deferring
or preventing a change in control of the Company. See "Description of Common
Stock" herein.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. The
applicable Prospectus Supplement will describe the following terms of the series
of Preferred Stock in respect of which this Prospectus is being delivered: (1)
the designation and stated value per share of such Preferred Stock and the
number of shares offered; (2) the amount of liquidation preference per share;
(3) the initial public offering price at which such Preferred Stock will be
issued and any exchange upon which the stock will be listed; (4) the dividend
rate (or method of calculation), the dates on which dividends shall be payable
and the dates from which dividends shall commence to cumulate, if any; (5) any
redemption or sinking fund provisions; (6) any conversion or exchange rights;
(7) whether the Company has elected to offer Depositary Shares as described
below under "Description of Depositary Shares"; and (8) any additional voting,
dividend, liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions.
GENERAL
The Preferred Stock offered hereby will be issued in one or more series. The
holders of Preferred Stock will have no preemptive rights. Preferred Stock, upon
issuance against full payment of the purchase price therefor, will be fully paid
and nonassessable. Neither the par value nor the liquidation preference is
indicative of the price at which the Preferred Stock will actually trade on or
after the date of issuance.
As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer Depositary Shares evidenced by Depositary Receipts,
each representing a fractional interest (to be specified in the Prospectus
Supplement relating to the particular series of the Preferred Stock) in a share
of the particular series of the Preferred Stock issued and deposited with a
Depositary (as defined below).
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RANK
The Preferred Stock shall, with respect to dividend rights and rights on
liquidation, winding up and dissolution of the Company, rank prior to the
Company's Common Stock and to all other classes and series of equity securities
of the Company now or hereafter authorized, issued or outstanding (the Common
Stock and such other classes and series of equity securities collectively may be
referred to herein as the "Junior Stock"), other than any classes or series of
equity securities of the Company ranking on a parity with (the "Parity Stock")
or senior to (the "Senior Stock") the Preferred Stock as to dividend rights and
rights upon liquidation, winding up or dissolution of the Company. The Preferred
Stock shall be junior to all outstanding debt of the Company. The Preferred
Stock shall be subject to creation of Senior Stock, Parity Stock and Junior
Stock to the extent not expressly prohibited by the Company's Certificate of
Incorporation.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds of the Company legally
available for payment, cash dividends, payable at such dates and at such rates
per share per annum as set forth in the applicable Prospectus Supplement. Such
rate may be fixed or variable or both. Each declared dividend shall be payable
to holders of record as they appear at the close of business on the stock books
of the Company (or, if applicable, on the records of the Depositary) on such
record dates, not more than 60 calendar days preceding the payment dates
therefor, as are determined by the Board of Directors (each of such dates, a
"Record Date").
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement. If dividends on a series of Preferred Stock are
noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and the Company will have no obligation to pay the dividend for
such period, whether or not dividends are declared payable on any future
dividend payment dates. Dividends on the shares of each series of Preferred
Stock for which dividends are cumulative will accrue from the date on which the
Company initially issues shares of such series. Accumulations of dividends on
shares of Preferred Stock will not bear interest.
No full dividends shall be declared or paid or set apart for payment on
preferred stock of the Company of any series ranking, as to dividends, on a
parity with or junior to the series of Preferred Stock offered by the Prospectus
Supplement attached hereto for any period unless full dividends for the
immediately preceding dividend period on such Preferred Stock (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such Preferred Stock are cumulative) have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment. When dividends are not so paid in full (or a sum
sufficient for such full payment is not so set apart) upon such Preferred Stock
and any other preferred stock of the Company ranking on a parity as to dividends
with the Preferred Stock, dividends upon shares of such Preferred Stock and
dividends on such other preferred stock shall be declared pro rata so that the
amount of dividends declared per share on such Preferred Stock and such Parity
Stock shall in all cases bear to each other the same ratio that accrued
dividends on the shares of such Preferred Stock and accrued dividends on shares
of such Parity Stock, bear to each other as of their respective immediately
preceding dividend periods. Unless full dividends on the series of Preferred
Stock offered by the Prospectus Supplement attached hereto have been declared
and paid or set apart for payment for the immediately preceding dividend period
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Preferred Stock are cumulative), (a) no cash
dividend or distribution (other than in shares of Junior Stock) may be declared,
set aside or paid on the Junior Stock, (b) the Company may not, directly or
indirectly, repurchase, redeem or otherwise acquire any shares of its Junior
Stock (or pay any monies into a sinking fund for the redemption of any shares)
except by conversion into or exchange for Junior Stock or in connection with any
employee benefit plan or arrangement, and (c) the Company may not, directly or
indirectly, repurchase, redeem or otherwise acquire any shares of such Preferred
Stock or Parity Stock (or pay any monies into a sinking fund for the
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redemption of any shares of any such stock) otherwise than pursuant to pro rata
offers to purchase or a concurrent redemption of all, or a pro rata portion, of
the outstanding shares of such Preferred Stock and Parity Stock (except by
conversion into or exchange for Junior Stock or in connection with any employee
benefit plan or arrangement).
CONVERTIBILITY
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into shares of Common
Stock of the Company or another series of preferred stock or other securities of
the Company will be set forth in the Prospectus Supplement relating thereto. See
"Description of Common Stock."
REDEMPTION
The terms, if any, on which shares of Preferred Stock of any series may be
redeemed will be set forth in the related Prospectus Supplement.
LIQUIDATION
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of a voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, the holders of a series of Preferred Stock will be
entitled, subject to the rights of creditors, but before any distribution or
payment to the holders of Common Stock or any other security ranking junior to
the Preferred Stock on liquidation, dissolution or winding up of the Company, to
receive out of the assets of the Company, whether such assets are capital or
surplus and whether or not any dividends as such are declared, an amount per
share as set forth in the related Prospectus Supplement plus any accrued and
unpaid dividends for prior dividend periods, if dividends on such series of
Preferred Stock are cumulative. If the amounts available for distribution with
respect to the Preferred Stock and all other outstanding stock of the Company
ranking on a parity with the Preferred Stock upon liquidation are not sufficient
to satisfy the full liquidation rights of all the outstanding Preferred Stock
and stock ranking on a parity therewith, then the holders of each series of such
stock will share ratably in any such distribution of assets in proportion to the
full respective preferential amount (which in the case of preferred stock may
include accumulated dividends) to which they are entitled. After payment of the
full amount of the liquidation preference, the holders of shares of Preferred
Stock will not be entitled to any further participation in any distribution of
assets by the Company.
VOTING
The Preferred Stock of a series will not be entitled to vote, except as
provided below or in the applicable Prospectus Supplement and as required by
applicable law. Unless otherwise specified in the related Prospectus Supplement,
at any time dividends in an amount equal to six quarterly dividend payments on
the Preferred Stock shall have accrued and be unpaid, holders of the Preferred
Stock shall have the right to a separate class vote (together with the holders
of shares of any Parity Stock upon which like voting rights have been conferred
and are exercisable, "Voting Parity Stock") to elect two additional members to
the Board of Directors at the next annual meeting of stockholders (or, if called
by 25% in interest of such Preferred Stock, a special meeting of stockholders)
and to maintain such director representation until dividends on the Preferred
Stock have been paid in full (including any accumulation in respect of unpaid
dividends from prior dividend periods, if dividends on such Preferred Stock are
cumulative) or declared and a sum sufficient for the payment thereof is set
apart for such payment. Additionally, without the affirmative vote of the
holders of two-thirds of the shares of Preferred Stock then outstanding (voting
separately as a class together with any Voting Parity Stock), the Company may
not, either directly or indirectly or through merger or consolidation with any
other corporation, (i) approve the authorization, creation or issuance, or an
increase in the authorized or issued amount, of any class or series of stock
ranking prior to the shares of Preferred Stock in rights and preferences, or
(ii) amend, alter or repeal its Certificate of Incorporation or the Certificate
of Designations relating to the Preferred Stock so as to materially and
adversely change the voting powers, rights or preferences of the Preferred
Stock;
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provided, however, that if any such amendment, alteration or repeal would
materially adversely affect any voting powers, rights or preferences of the
Preferred Stock or another series of Voting Parity Stock that are not enjoyed by
some or all of the other series otherwise entitled to vote in accordance
herewith, the affirmative vote of at least two-thirds of the votes entitled to
be cast by the holders of all series similarly affected shall be required in
lieu of the affirmative vote of at least two--thirds of the votes entitled to be
cast by the holders of the shares of Preferred Stock and the Voting Parity Stock
otherwise entitled to vote in accordance herewith; and provided, further, that
no vote of the holders of Preferred Stock shall be required if, at or prior to
the time when such amendment, alteration or repeal is to take effect, or when
the issuance of any such class or series of stock ranking prior to the shares of
Preferred Stock in rights and preferences, is to be made, as the case may be,
provision is made for the redemption of all shares of Preferred Stock at the
time outstanding. An amendment which increases the number of authorized shares
of or authorizes the creation or issuance of other classes or series of
preferred stock ranking junior to or on a parity with the Preferred Stock with
respect to the payment of dividends or distribution of assets upon liquidation,
dissolution or winding up, or substitutes the surviving entity in a merger,
consolidation, reorganization or other business combination for the Company,
shall not be considered to be an adverse change requiring the approval of the
Preferred Stock.
As more fully described under "Description of Depositary Shares" below, if
the Company elects to issue Depositary Shares, each representing a fraction of a
share of a series of the Preferred Stock, each such Depositary Share will, in
effect, be entitled to such fraction of a vote per Depositary Share.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the related Prospectus Supplement, and in the
Certificate of Incorporation and the Certificate of Designations related
thereto, or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
SERIES E PREFERRED STOCK
In December 1993, the Company issued 2.0 million shares of 6% Cumulative
Convertible Preferred Stock, Series E, $.01 par value (the "Series E Preferred
Stock"). Holders of the Series E Preferred Stock are entitled to receive, when,
as, and if declared by the Company's Board of Directors out of funds legally
available therefor, cumulative cash dividends at the rate of 6% per annum (an
amount equivalent to $3.00 per annum per share), payable quarterly in arrears.
In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of the Series E Preferred Stock will be entitled
to receive distributions in the amount of $50.00 per share, plus all accrued and
unpaid dividends. Each share of Series E Preferred Stock is convertible, in
whole or in part, at any time, unless previously redeemed, into 3.5945 shares of
Common Stock (equivalent to a conversion price of $13.91 per share of Common
Stock). The conversion rate is subject to adjustment upon the occurrence of
certain events.
The Series E Preferred Stock ranks junior to all outstanding debt of the
Company. With respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up, the Series E Preferred Stock ranks on a parity with
the Company's Series D Preferred Stock and senior to the Common Stock and the
Series C Preferred Stock.
Whenever dividends on the Series E Preferred Stock are in arrears for six
quarterly dividend periods, holders of the Series E Preferred Stock (voting
separately as a class together with holders of shares of the Company's Series D
Preferred Stock and any other class or series of equity securities ranking on a
parity with the Series E Preferred Stock) will have the right to elect two
additional directors to serve on the Company's Board of Directors until such
dividend arrearage is eliminated. In addition, certain changes that would be
materially adverse to the rights of holders of the Series E Preferred Stock
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and voting parity stock cannot be made without the affirmative vote of
two-thirds of the shares of Series E Preferred Stock and voting parity stock,
voting as a single class, entitled to be cast thereon.
The Series E Preferred Stock is not redeemable prior to December 1, 1996. On
and after such date, the Series E Preferred Stock is redeemable at the option of
the Company, in whole or in part, initially for $52.10 per share and thereafter
at prices declining ratably annually on each December 1 to $50.00 per share on
and after December 1, 2003.
SERIES D PREFERRED STOCK
In July 1993, the Company issued 2.0 million shares of 5 5/8 % Cumulative
Convertible Preferred Stock, Series D, $.01 par value (the "Series D Preferred
Stock"). Holders of the Series D Preferred Stock are entitled to receive, when,
as, and if declared by the Company's Board of Directors out of funds legally
available therefor, cumulative cash dividends at the rate of 5 5/8 % per annum
(an amount equivalent to $2.8125 per annum per share), payable quarterly in
arrears. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the holders of the Series D Preferred Stock will
be entitled to receive distributions in the amount of $50.00 per share, plus all
accrued and unpaid dividends. Each share of Series D Preferred Stock is
convertible, in whole or in part, at any time, unless previously redeemed, into
3.448 shares of Common Stock (equivalent to a conversion price of $14.50 per
share of Common Stock). The conversion rate is subject to adjustment upon the
occurrence of certain events.
The Series D Preferred Stock ranks junior to all outstanding debt of the
Company. With respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up, the Series D Preferred Stock ranks on a parity with
the Company's Series E Preferred Stock and senior to the Common Stock and the
Series C Preferred Stock.
Whenever dividends on the Series D Preferred Stock are in arrears for six
quarterly dividend periods, holders of the Series D Preferred Stock (voting
separately as a class together with holders of shares of the Company's Series E
Preferred Stock and any other class or series of equity securities ranking on a
parity with the Series D Preferred Stock) will have the right to elect two
additional directors to serve on the Company's Board of Directors until such
dividend arrearage is eliminated. In addition, certain changes that would be
materially adverse to the rights of holders of the Series D Preferred Stock and
voting parity stock cannot be made without the affirmative vote of two-thirds of
the shares of Series D Preferred Stock and voting parity stock, voting as a
single class, entitled to be cast thereon.
The Series D Preferred Stock is not redeemable prior to July 20, 1996. On
and after such date, the Series D Preferred Stock is redeemable at the option of
the Company, in whole or in part, initially for $51.969 per share and thereafter
at prices declining ratably annually on each July 20 to $50.00 per share on and
after July 20, 2003.
RESERVED BUT UNISSUED SERIES C CONVERTIBLE PREFERRED STOCK
The Company has reserved 5,112,765 shares of Series C Convertible Preferred
Stock, $.01 par value per share (the "Series C Preferred Stock"), for issuance
upon exercise of outstanding warrants if, for any reason, it is unable to issue
Common Stock to satisfy applicable exercise requirements. No Series C Preferred
Stock is outstanding and the Company is not presently aware of any reason that
would require it to issue such stock or preclude it from issuing Common Stock.
The Series C Preferred Stock ranks, with respect to the payment of dividends
and the distribution of assets, junior to all series of Preferred Stock. Subject
to the rights of a superior series of preferred stock, each share of Series C
Preferred Stock is entitled to receive, when, as, and if declared by the Board
of Directors out of funds legally available therefor, dividends payable in cash
in an amount per share equal to the aggregate per share amount of all cash
dividends, and the aggregate per share amount of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock, declared
on the Common Stock.
Each share of Series C Preferred Stock is entitled to such number of votes
as each share of Common Stock and, except as otherwise required by law, will
vote together with the Common Stock as a single class. Each share of Series C
Preferred Stock is convertible at any time into one share of fully paid and
non-assessable Common Stock.
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If the Company declares any dividend on the Common Stock payable in shares
of Common Stock, or effects a subdivision or combination or consolidation of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then the dividends and the number of votes per share to which
holders of shares of Series C Preferred Stock are entitled to will be adjusted
by multiplying the amount or number the holders were previously entitled to by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
The holders of Series C Preferred Stock have no preemptive rights and are
not subject to redemption. In the event of liquidation, dissolution, or winding
up of the Company, prior to distribution to the holders of shares of stock
ranking junior to the Series C Preferred Stock, the holders of Series C
Preferred Stock are entitled to $.10 per share plus an amount equal to any
unpaid dividends and distributions on the Series C Preferred Stock, provided
that the holders of Series C Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to certain adjustments, equal to the
aggregate amount to be distributed per share to holders of shares of Common
Stock.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts does not purport to be complete and is subject to
and qualified in its entirety by reference to the forms of Deposit Agreement and
Depositary Receipts relating to each series of the Preferred Stock which have
been or will be filed with the Commission at or prior to the time of the
offering of such series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, the Company will provide for the issuance by a
Depositary to the public of receipts for Depositary Shares, each of which will
represent a fractional interest (to be set forth in the Prospectus Supplement
relating to a particular series of the Preferred Stock which will be filed with
the Commission at or prior to the time of the offering of such series of the
Preferred Stock as described below).
The shares of any series of the Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000 (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name and
address of the Depositary. Subject to the terms of the Deposit Agreement, each
owner of a Depositary Share will be entitled, in proportion to the applicable
fractional interest in a share of Preferred Stock underlying such Depositary
Shares, to all the rights and preferences of the Preferred Stock underlying such
Depositary Share (including dividend, voting, redemption, conversion and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to the
terms thereof, a holder of Depositary Shares is entitled to have the Depositary
deliver to such holder the whole shares of Preferred Stock underlying the
Depositary Shares evidenced by the surrendered Depositary Receipts.
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DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction of
one cent, and any balance not so distributed shall be added to and treated as
part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the Preferred Stock shall be made available to holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary Shares
to be so redeemed at their respective addresses appearing in the Depositary's
books. The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares relating to shares of Preferred Stock so
redeemed. If less than all of the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which the
holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Depositary of the Depositary Receipts evidencing such
Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the number of shares of Preferred Stock
underlying such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the number of shares of Preferred Stock
underlying such Depositary Shares in accordance with such instructions, and the
Company will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. To the extent the
Depositary does not receive specific instructions from the holders of Depositary
Shares relating to such Preferred Stock, it will vote shares of Preferred Stock
in accordance with the recommendation of the Company, unless otherwise indicated
in the Prospectus Supplement.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary.
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However, any amendment which materially and adversely alters the rights of
the existing holders of Depositary Shares will not be effective unless such
amendment has been approved by the record holders of at least a majority of the
Depositary Shares then outstanding. A Deposit Agreement may be terminated by the
Company or the Depositary only if (i) all outstanding Depositary Shares relating
thereto have been redeemed or (ii) there has been a final distribution in
respect of the Preferred Stock of the relevant series in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to the holders of the related Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and any redemption of the Preferred Stock. Holders of Depositary
Shares will pay other transfer and other taxes and governmental charges and such
other charges as are expressly provided in the Deposit Agreement to be for their
accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Shares or other persons
believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
DESCRIPTION OF COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance of
100,000,000 shares of common stock, $.01 par value per share ("Common Stock").
The holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors of the Company out of funds legally available
therefor, provided that if any shares of preferred stock are at the time
outstanding, the payment of dividends on Common Stock or other distributions
(including purchases of Common Stock) may be subject to the declaration and
payment of full cumulative dividends, and the absence of arrearages in any
mandatory sinking fund, on outstanding shares of preferred stock.
The holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, including elections of directors. The holders
of Common Stock do not have any conversion, redemption or preemptive rights. In
the event of the dissolution, liquidation or winding up of the Company, holders
of Common Stock are entitled to share ratably in any assets remaining after the
satisfaction in full of the prior rights of creditors, including holders of the
Company's indebtedness, and the aggregate liquidation preference of any
preferred stock then outstanding.
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All outstanding shares of Common Stock are, and the shares offered hereby,
upon issuance, will be, fully paid and non-assessable.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may be considered as having an anti-takeover effect. Such provisions empower the
Board of Directors to fix the rights and preferences of and to issue shares of
preferred stock; limit certain substantial stockholders of the Company from
significantly increasing their interest in the stock or assets of the Company
without the consent of the Board of Directors and/or a supermajority of the
stockholders of the Company; prohibit stockholders of the Company from calling a
special meeting; place restrictions on the ability of stockholders to nominate
persons for the position of director; and require that the Board of Directors be
divided into three classes. In addition, certain provisions of law may have the
effect of protecting the Company against undesired takeover attempts.
Specifically, under Delaware law (and a similar provision of the Company's
Certificate of Incorporation), in certain instances, significant holders (as
specified) of the Company's voting stock may not, without approval of a
specified vote of the other stockholders, or approval of the Company's Board of
Directors (or the independent members thereof) prior to becoming a significant
holder, acquire additional interests in the Company's assets or capital stock.
The transfer agent for the Common Stock is Mellon Financial Services, whose
address is 111 Founders Plaza, 11th Floor, East Hartford, Connecticut 06108.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), as well as other types of Warrants. Warrants may
be issued independently of or together with any other Securities and may be
attached to or separate from such Securities. Each series of Warrants will be
issued under a separate warrant agreement (each a "Warrant Agreement") to be
entered into between the Company and a warrant agent ("Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Warrants of such series and will not assume any obligation or relationship of
agency or trust for or with any holders or beneficial owners of Warrants. The
following sets forth certain general terms and provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreement are set forth in the applicable Prospectus Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the following terms of
the Debt Warrants in respect of which this Prospectus is being delivered: (1)
the title of such Debt Warrants; (2) the aggregate number of such Debt Warrants;
(3) the price or prices at which such Debt Warrants will be issued; (4) the
currency or currencies, including composite currencies, in which the price of
such Debt Warrants may be payable; (5) the designation, aggregate principal
amount and terms of the Debt Securities purchasable upon exercise of such Debt
Warrants; (6) if applicable, the designation and terms of the Debt Securities
with which such Debt Warrants are issued and the number of such Debt Warrants
issued with each such Debt Security; (7) the currency or currencies, including
composite currencies, in which the principal of or any premium or interest on
the Debt Securities purchasable upon exercise of such Debt Warrant will be
payable; (8) if applicable, the date on and after which such Debt Warrants and
any related Debt Securities will be separately transferable; (9) the price at
which and currency or currencies, including composite currencies, in which the
Debt Securities purchasable upon exercise of such Debt Warrants may be
purchased; (10) the date on which the right to exercise such Debt Warrants shall
commence and the date on which such right shall expire; (11) if applicable, the
minimum or maximum amount of such Debt Warrants which may be exercised at any
one time; (12) information with respect to book-entry procedures, if any; (13)
if applicable, a discussion of certain United States Federal income tax
considerations; and (14) any other terms of such Debt Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Debt
Warrants.
OTHER WARRANTS
The Company may issue other Warrants. The applicable Prospectus Supplement
will describe the following terms of any such other Warrants in respect of which
this Prospectus is being delivered: (1) the
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title of such Warrants; (2) the securities (which may include Preferred Stock or
Common Stock) for which such Warrants are exercisable; (3) the price or prices
at which such Warrants will be issued; (4) the currency or currencies, including
composite currencies, in which the price of such Warrants may be payable; (5) if
applicable, the designation and terms of the Debt Securities or Preferred Stock
with which such Warrants are issued and the number of such Warrants issued with
each such Debt Security or share of Preferred Stock; (6) if applicable, the date
on and after which such Warrants and the related Debt Securities or Preferred
Stock will be separately transferable; (7) if applicable, a discussion of
certain United States Federal income tax considerations; and (8) any other terms
of such Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities (and, in the case of Preferred Stock,
Depositary Shares representing fractional interests therein) to one or more
underwriters for public offering and sale by them or may sell the Securities (or
Depositary Shares) to investors directly or through agents. Any such underwriter
or agent involved in the offer and sale of the Securities (or Depositary Shares)
will be named in the applicable Prospectus Supplement. The Company has reserved
the right to sell the Securities (or Depositary Shares) directly to investors on
its own behalf in those jurisdictions where it is authorized to do so.
Underwriters may offer and sell the Securities (or Depositary Shares) at a
fixed price or prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may offer and sell the Securities (or
Depositary Shares) in exchange for one or more of its outstanding series of
equity or debt securities (including any outstanding Securities). The Company
also may, from time to time, authorize dealers, acting as the Company's agents,
to offer and sell the Securities (or Depositary Shares) upon such terms and
conditions as set forth in the applicable Prospectus Supplement. In connection
with the sale of the Securities (or Depositary Shares), underwriters may receive
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of the Securities
(or Depositary Shares) for whom they may act as agent. Underwriters may sell the
Securities (or Depositary Shares) to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Securities (or Depositary Shares), and
any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable Prospectus
Supplement. Dealers and agents participating in the distribution of the
Securities (or Depositary Shares) may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Securities (or Depositary Shares) may be deemed to be underwriting
discounts and commissions. Underwriters, dealers and agents may be entitled,
under agreements entered into with the Company, to indemnification against and
contribution toward certain civil liabilities.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit agreements by
certain institutions to purchase the Securities (or Depositary Shares) from the
Company at the public offering price set forth in the applicable Prospectus
Supplement pursuant to delayed delivery contracts ("Contracts") providing for
payment and delivery on the date or dates stated in a Prospectus Supplement.
Each Contract will be for an amount not less than, and the aggregate amount of
the Securities (or Depositary Shares), based on the liquidation value thereof,
sold pursuant to Contracts will be not less nor more than the respective amounts
stated in a Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will be subject to the condition that the
purchase by an institution of the Securities (or Depositary Shares) covered by
Contracts will not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject.
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Any Securities issued hereunder (other than Common Stock) will be new issues
of securities with no established trading market. Any underwriters or agents to
or through whom such Securities are sold by the Company for public offering and
sale may make a market in such Securities, but such underwriters or agents will
not be obligated to do so and may discontinue any market at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any Securities.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in transactions with, and perform services for, the Company
and certain of its affiliates in the ordinary course of business.
EXPERTS
The consolidated balance sheets as of December 31, 1993 and 1992, and the
consolidated statements of operations, changes in stockholders' equity and cash
flows and the related schedules for each of the three years in the period ended
December 31, 1993, incorporated into this Prospectus and elsewhere in the
Registration Statement, have been audited by Arthur Andersen & Co., independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
VALIDITY OF THE SECURITIES
The validity of the Securities will be passed upon for the Company by Snell
& Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004, counsel to the
Company, and for any underwriters by the counsel named in the applicable
Prospectus Supplement.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE PROSPECTUS SUPPLEMENT NOR
THE PROSPECTUS CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Prospectus Summary .......................... S-3
Recent Developments ......................... S-4
Use of Proceeds ............................. S-7
Capitalization .............................. S-8
Summary Financial, Operating and Reserve Data S-9
Description of Certain Terms of the Notes ... S-11
Underwriting ................................ S-14
Validity of the Notes ....................... S-14
PROSPECTUS
Available Information ....................... 2
Incorporation of Certain Documents by
Reference .................................. 2
The Company ................................. 3
Investment Considerations ................... 6
Use of Proceeds ............................. 7
Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends Requirements ..... 7
Description of Debt Securities .............. 7
Description of Preferred Stock .............. 19
Description of Depositary Shares ............ 24
Description of Common Stock ................. 26
Description of Warrants ..................... 27
Plan of Distribution ........................ 28
Experts ..................................... 29
Validity of the Securities .................. 29
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$200,000,000
MAGMA COPPER COMPANY
% SENIOR SUBORDINATED NOTES
DUE MAY 15, 2005
----------------------------
PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
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