<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 6, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HOMESTAKE MINING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1041 94-2934609
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108-2788
(415) 981-8150
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WAYNE KIRK
VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108-2788
(415) 981-8150
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C> <C> <C>
MICHELLE L. JOHNSON RICHARD HALL WAYNE JARKE PETER ALLAN ATKINS
THELEN, MARRIN, JOHNSON & CRAVATH, SWAINE & MOORE GENERAL COUNSEL AND RICHARD PRITZ
BRIDGES LLP WORLDWIDE PLAZA SECRETARY SKADDEN, ARPS, SLATE,
TWO EMBARCADERO CENTER, 825 EIGHTH AVENUE SANTA FE PACIFIC GOLD MEAGHER & FLOM LLP
SUITE 2100 NEW YORK, NEW YORK 10019 CORPORATION 919 THIRD AVENUE
SAN FRANCISCO, CALIFORNIA 6200 UPTOWN BOULEVARD NE, NEW YORK, NEW YORK 10022
94111 SUITE 400
ALBUQUERQUE, NEW MEXICO
87110
</TABLE>
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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- ----------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(2)
- ----------------------------------------------------------------------------------------------------------
Common Stock, $1.00 par value(3)..... 148,220,666 shares $14.8125 $2,195,518,619.49 $665,308.67
- ----------------------------------------------------------------------------------------------------------
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</TABLE>
(1) This Registration Statement relates to Common Stock, $1.00 par value
("Homestake Common Stock") of Homestake Mining Company ("Homestake")
issuable to holders of Common Stock, par value $0.01 per share ("Santa Fe
Common Stock") of Santa Fe Pacific Gold Corporation ("Santa Fe") in the
proposed merger (the "Merger") of HMGLD Corp., a wholly-owned subsidiary of
Homestake, with and into Santa Fe. The amount of Homestake Common Stock to
be registered has been determined by multiplying the exchange ratio (1.115
shares of Homestake Common Stock for each share of Santa Fe Common Stock) by
132,933,333, the maximum aggregate number of shares of Santa Fe Common Stock
convertible in the Merger (the "Maximum Number of Santa Fe Common Shares").
(2) The registration fee was calculated pursuant to Rule 457(f) as one
thirty-third of one percent of $2,195,518,619.49 (the average of the high
and low prices of Santa Fe Common Stock on the New York Stock Exchange, Inc.
Composite Transaction Tape on January 3, 1997 multiplied by the Maximum
Number of Santa Fe Common Shares).
(3) Includes associated rights to purchase Homestake preferred stock exercisable
only upon the occurrence of certain events.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[HOMESTAKE MINING COMPANY LETTERHEAD]
-- , 1997
Dear Stockholder:
The Board of Directors cordially invites you to attend a Special Meeting of
Stockholders of Homestake Mining Company to be held at -- local time, on
-- , 1997, at -- , relating to a proposed combination of our company with
Santa Fe Pacific Gold Corporation.
At this important Special Meeting, you will be asked to approve (i) an
amendment to Homestake's Restated Certificate of Incorporation to increase the
authorized number of shares of Homestake Common Stock from 250,000,000 to
500,000,000, and (ii) the issue of shares of Homestake Common Stock to
stockholders of Santa Fe in exchange for their shares of Santa Fe Common Stock.
In the combination, each issued and outstanding share of Santa Fe Common Stock
will be converted into the right to receive 1.115 shares of Homestake Common
Stock.
Following the combination, Santa Fe will operate as a wholly-owned
subsidiary of Homestake. The Board of Directors of Homestake will consist of
twelve directors, including five individuals from each of Homestake's and Santa
Fe's existing Board of Directors.
The Board of Directors has determined unanimously that the combination is
fair to and in the best interests of the Homestake stockholders, and has
approved the amendment to Homestake's Restated Certificate of Incorporation.
Accordingly, the Board of Directors recommends that the Homestake stockholders
vote (i) "FOR" the proposal to amend Homestake's Restated Certificate of
Incorporation to increase the authorized number of shares of Homestake Common
Stock from 250,000,000 to 500,000,000, and (ii) "FOR" the proposal to issue
shares of Homestake Common Stock in the combination to the Santa Fe stockholders
for their shares of Santa Fe Common Stock.
We are excited about the opportunities created by the combination of
Homestake and Santa Fe. We believe that this transaction will result in a
larger, more diverse company that will be well-positioned to capitalize on
opportunities for future growth. We strongly recommend that you support these
proposals.
Very truly yours,
Harry M. Conger
Chairman of the Board
Jack E. Thompson
President and Chief Executive Officer
<PAGE> 3
HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108-2788
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON -- , 1997
TO THE STOCKHOLDERS OF HOMESTAKE MINING COMPANY:
Notice is hereby given that a Special Meeting of Stockholders of Homestake
Mining Company, a Delaware corporation, will be held at -- local time, on
-- , 1997, at -- , for the following purposes:
1. To consider and vote upon a proposal to amend Homestake's Restated
Certificate of Incorporation to increase the authorized number of shares of
Homestake Common Stock from 250,000,000 to 500,000,000. Upon approval of
such amendment, Homestake will have authorized capital of 500,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock.
2. To consider and vote upon a proposal to issue shares of Homestake
Common Stock to the stockholders of Santa Fe Pacific Gold Corporation, a
Delaware corporation, pursuant to an Agreement and Plan of Merger dated as
of December 8, 1996. Pursuant to the Agreement, Santa Fe will become a
wholly-owned subsidiary of Homestake, and each outstanding share of Santa
Fe Common Stock will be converted into the right to receive 1.115 shares of
Homestake Common Stock.
3. To transact such other business as may properly come before the
Homestake Special Meeting or any adjournments thereof.
Information regarding the matters to be acted upon at the Homestake Special
Meeting is contained in the Joint Proxy Statement/Prospectus accompanying this
notice. A copy of the Agreement is attached as Appendix A thereto.
The Board of Directors has fixed the close of business on -- , 1997, as
the Record Date for determining the holders of Homestake Common Stock entitled
to receive notice of, and to vote at, the Homestake Special Meeting and any
adjournments thereof. Only the record holders of Homestake Common Stock as of
the Record Date are entitled to vote at the Homestake Special Meeting or any
adjournments thereof.
All stockholders are cordially invited to attend the Homestake Special
Meeting in person. It is important that your shares of Homestake Common Stock be
represented at the Homestake Special Meeting regardless of the number of shares
you hold. TO ENSURE THAT YOU ARE REPRESENTED AT THE HOMESTAKE SPECIAL MEETING,
PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
using the return envelope which requires no postage if mailed in the United
States. Your early attention to the proxy will be greatly appreciated because it
will reduce the cost Homestake incurs in obtaining voting instructions from its
stockholders.
------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE (i)
"FOR" THE PROPOSAL TO AMEND HOMESTAKE'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF HOMESTAKE COMMON STOCK FROM
250,000,000 TO 500,000,000 AND (ii) "FOR" THE PROPOSAL TO ISSUE SHARES OF
HOMESTAKE COMMON STOCK TO THE STOCKHOLDERS OF SANTA FE IN EXCHANGE FOR THEIR
SHARES OF SANTA FE COMMON STOCK.
By Order of the Board of Directors,
Wayne Kirk
, 1997 Secretary
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR PROXY.
<PAGE> 4
[SANTA FE PACIFIC GOLD CORPORATION LETTERHEAD]
-- , 1997
Dear Stockholder:
The Board of Directors cordially invites you to attend a Special Meeting of
Stockholders of Santa Fe Pacific Gold Corporation to be held at --
local time, on -- , 1997, at -- relating to the proposed
combination of our company with Homestake Mining Company. In the combination,
each issued and outstanding share of Santa Fe Common Stock will be converted
into the right to receive 1.115 shares of Homestake Common Stock (the "Exchange
Ratio"). It is expected that the combination will be tax-free for U.S. federal
income tax purposes.
At this important Special Meeting, you will be asked to vote upon a
proposal to adopt the Agreement and Plan of Merger dated as of December 8, 1996
(the "Agreement"), among Homestake, HMGLD Corp., a wholly-owned subsidiary of
Homestake, and Santa Fe providing for the combination.
Following the combination, Santa Fe will operate as a wholly-owned
subsidiary of Homestake. The Board of Directors of Homestake will consist of
twelve directors, including five individuals from each of Homestake's and Santa
Fe's existing Board of Directors. Santa Fe stockholders will hold approximately
50% of Homestake's Common Stock following the combination.
The Board of Directors has determined unanimously that the combination is
fair to and in the best interests of the Santa Fe stockholders, and has approved
the Agreement. SBC Warburg Inc. has advised the Board of Directors that, as of
December 8, 1996, the Exchange Ratio is fair, from a financial point of view, to
Santa Fe's stockholders. Accordingly, the Board of Directors recommends that the
Santa Fe stockholders vote "FOR" the adoption of the Agreement.
We are excited about the opportunities created by the combination of Santa
Fe and Homestake. We believe this transaction will result in a larger, more
diverse company that will be well-positioned to capitalize on opportunities for
future growth. We strongly recommend that you support this proposal.
Very truly yours,
Patrick M. James
Chairman, President
and Chief Executive Officer
<PAGE> 5
SANTA FE PACIFIC GOLD CORPORATION
6200 UPTOWN BOULEVARD NE, SUITE 400
ALBUQUERQUE, NEW MEXICO 87110
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON -- , 1997
------------------------
-- , 1997
TO THE STOCKHOLDERS OF SANTA FE PACIFIC GOLD CORPORATION:
Notice is hereby given that a Special Meeting of Stockholders of Santa Fe
Pacific Gold Corporation, a Delaware corporation, will be held at -- local
time, on -- , 1997, at -- , for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger dated as of December 8, 1996 (the "Agreement"), among
Homestake Mining Company, a Delaware corporation, HMGLD Corp., a Delaware
corporation and a wholly-owned subsidiary of Homestake ("Sub"), and Santa
Fe pursuant to which, among other things, Sub will be merged with and into
Santa Fe and each share of Santa Fe Common Stock outstanding will be
converted into the right to receive 1.115 shares of Homestake Common Stock.
2. To transact such other business as may properly come before the
Santa Fe Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on -- ,
1997, as the Record Date for determining the holders of Santa Fe Common Stock
entitled to receive notice of, and to vote at, the Santa Fe Special Meeting and
any adjournments thereof. Only the holders of record of the Santa Fe Common
Stock as of the Record Date are entitled to vote at the Santa Fe Special Meeting
or any adjournments thereof.
The adoption of the Agreement requires the affirmative vote of the holders
of record of a majority of the shares of Santa Fe Common Stock outstanding on
the Record Date.
All stockholders are cordially invited to attend the Santa Fe Special
Meeting in person. It is important that your shares of Santa Fe Common Stock are
represented at the Santa Fe Special Meeting regardless of the number of shares
you hold. TO ENSURE THAT YOU ARE REPRESENTED AT THE SANTA FE SPECIAL MEETING,
PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
using the return envelope which requires no postage if mailed in the United
States. Your early attention to the proxy will be greatly appreciated because it
will reduce the cost Santa Fe incurs in obtaining voting instructions from its
stockholders. Prior to the voting of the proxy at the Santa Fe Special Meeting,
any person giving a proxy has the power to revoke it any time, and stockholders
who are present at the Santa Fe Special Meeting may withdraw their proxies and
vote in person.
------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO ADOPT THE AGREEMENT.
By Order of the Board of Directors,
Wayne Jarke
Secretary
DO NOT SEND YOUR STOCK CERTIFICATE TO SANTA FE WITH YOUR PROXY. AFTER THE MERGER
IS CONSUMMATED YOU WILL RECEIVE A LETTER CONTAINING INSTRUCTIONS FOR THE
SURRENDER OF YOUR SANTA FE STOCK CERTIFICATE IN EXCHANGE FOR A HOMESTAKE STOCK
CERTIFICATE.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR PROXY.
<PAGE> 6
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 6, 1997
HOMESTAKE
SANTE FE
JOINT PROXY STATEMENT OF
HOMESTAKE MINING COMPANY
AND
SANTA FE PACIFIC GOLD CORPORATION
SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD ON -- , 1997
------------------------
PROSPECTUS OF
HOMESTAKE MINING COMPANY
------------------------
This Joint Proxy Statement/Prospectus ("Proxy Statement") is being
furnished to the stockholders of Homestake Mining Company ("Homestake") and to
the stockholders of Santa Fe Pacific Gold Corporation ("Santa Fe") in connection
with the solicitation of proxies by the respective Boards of Directors of
Homestake and Santa Fe for use at special meetings of their stockholders to be
held on -- , 1997.
This Proxy Statement relates to a proposed combination of Homestake and
Santa Fe as contemplated by an Agreement and Plan of Merger dated as of December
8, 1996 (the "Agreement"), among Homestake, HMGLD Corp., a Delaware corporation
and wholly-owned subsidiary of Homestake ("Sub"), and Santa Fe, pursuant to
which, among other things (i) Sub will be merged (the "Merger") with and into
Santa Fe, (ii) Santa Fe will become a wholly-owned subsidiary of Homestake and
(iii) each share of Santa Fe Common Stock outstanding will be converted into the
right to receive 1.115 shares of Homestake Common Stock.
At the Homestake Special Meeting, the Homestake stockholders will be asked
to approve (i) an amendment to Homestake's Restated Certificate of Incorporation
to increase the authorized number of shares of Homestake Common Stock from
250,000,000 to 500,000,000, and (ii) the issue of shares of Homestake Common
Stock to the Santa Fe stockholders in exchange for their shares of Santa Fe
Common Stock pursuant to the Agreement. The Merger and the issue of Homestake
Common Stock to the Santa Fe stockholders in exchange for their shares of Santa
Fe Common Stock is sometimes referred to as the "Combination."
At the Santa Fe Special Meeting, the Santa Fe stockholders will be asked to
adopt the Agreement.
At January 2, 1997, there were 131,465,415 shares of Santa Fe Common Stock
outstanding and 1,467,918 shares of Santa Fe Common Stock subject to stock
options. If all of the stock options are exercised, a total of 148,220,666
shares of Homestake Common Stock will be issued to the Santa Fe stockholders.
At -- , 1997, the closing prices of Homestake and Santa Fe
Common Stock on the New York Stock Exchange Composite Transaction Tape were
$ -- and $ -- , respectively.
This Proxy Statement and the accompanying forms of proxy are first being
mailed to the stockholders of Homestake and Santa Fe on or about -- , 1997.
SEE "RISK FACTORS; CERTAIN FORWARD-LOOKING AND CAUTIONARY STATEMENTS" ON
PAGE 24 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY THE
STOCKHOLDERS OF HOMESTAKE AND SANTA FE.
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 PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROXY STATEMENT IS -- , 1997.
<PAGE> 7
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH THE
SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY HOMESTAKE OR SANTA FE. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OR TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF HOMESTAKE OR SANTA FE SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
Homestake and Santa Fe each 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"). Homestake has filed
with the Commission a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to (a) the Homestake Common Stock and (b) the associated rights to
purchase Homestake Preferred Stock pursuant to the Rights Agreement dated
October 16, 1987, between Homestake and The First National Bank of Boston, as
Rights Agent. The Registration Statement and the exhibits thereto, as well as
the reports, proxy statements and other information filed by Homestake and Santa
Fe with the Commission, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Suite 1300, Seven World Trade Center, New York, New York 10048, and at The
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material also can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Such reports, proxy and
information statements and other information may be found on the Commission's
Web site address, http://www.sec.gov. In addition, each of the Homestake Common
Stock and the Santa Fe Common Stock is listed on the New York Stock Exchange,
Inc. (the "NYSE"), and material filed by Homestake and Santa Fe may be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005. This
Proxy Statement does not contain all the information set forth in the
Registration Statement and the exhibits thereto, a portion of which has been
omitted in accordance with the rules and regulations of the Commission.
Reference is made to the Registration Statement and the exhibits thereto for
further information.
Statements contained in this Proxy Statement, or in any document
incorporated in this Proxy Statement by reference, as to the provisions of any
contract or other document referred to herein or therein are qualified in all
respects by reference to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document incorporated herein
by reference.
All information contained in this Proxy Statement or incorporated in this
Proxy Statement by reference relating to Homestake has been supplied by
Homestake, and all information relating to Santa Fe has been supplied by Santa
Fe.
2
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION................... 2
CERTAIN DEFINED TERMS................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE............................. 5
THE SPECIAL MEETINGS.................... 6
Homestake Special Meeting............. 6
Santa Fe Special Meeting.............. 7
Absence of Appraisal Rights........... 7
Voting of Proxies..................... 7
Revocability of Proxies............... 8
Solicitation of Proxies............... 8
SUMMARY................................. 9
Homestake............................. 9
Santa Fe.............................. 12
The Combination....................... 13
Benefits of the Combination........... 13
Selected Consolidated Historical
Financial Data of Homestake........ 17
Selected Consolidated Historical
Financial Data of Santa Fe......... 19
Unaudited Pro Forma Combined Selected
Financial Data..................... 21
Comparative Stock Prices and Premium
to Santa Fe Stockholders........... 22
Comparative Per Share Data............ 23
RISK FACTORS; CERTAIN FORWARD-LOOKING
AND CAUTIONARY STATEMENTS............. 24
THE COMPANIES........................... 30
Homestake............................. 30
Santa Fe.............................. 33
THE COMBINATION......................... 36
General............................... 36
Background of the Combination......... 36
Homestake Reasons for the Combination;
Recommendation of the Homestake
Board.............................. 41
Opinion of Homestake's Financial
Advisor............................ 43
Santa Fe Reasons for the Combination;
Recommendation of the Santa Fe
Board.............................. 47
Opinion of Santa Fe's Financial
Advisor............................ 48
United States Federal Income Tax
Consequences....................... 52
Anticipated Accounting Treatment...... 53
Regulatory Matters.................... 53
Absence of Appraisal Rights........... 53
Interests of Certain Persons in the
Combination........................ 54
Resale of Homestake Common Stock...... 58
Certain Litigation.................... 58
THE AGREEMENT........................... 59
General............................... 59
Conversion of Shares; Procedures for
Exchange of Certificates;
Fractional Shares.................. 59
Representations and Warranties........ 60
Conduct of Business Pending the
Combination........................ 60
Certain Actions with Respect to
Takeover Proposals................. 62
Certain Other Covenants............... 63
Conditions to the Consummation of the
Merger............................. 65
Termination........................... 66
Termination Fees...................... 67
Amendment and Waiver.................. 67
Fees and Expenses..................... 68
Amendments to Rights Agreements....... 68
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION................. 69
DIRECTORS AND MANAGEMENT OF HOMESTAKE
AFTER THE COMBINATION................. 78
Board of Directors of Homestake after
the Combination.................... 78
Management............................ 78
EXECUTIVE COMPENSATION.................. 80
Homestake Compensation................ 80
Santa Fe Compensation................. 85
BENEFICIAL OWNERSHIP OF SECURITIES...... 89
Security Ownership of Certain
Beneficial Owners.................. 89
Ownership of Common Stock By
Management......................... 90
AMENDMENTS TO HOMESTAKE CHARTER......... 92
DESCRIPTION OF HOMESTAKE CAPITAL
STOCK................................. 93
General............................... 93
"Fair Price" Charter Provision........ 94
Homestake Rights Agreement............ 95
COMPARISON OF STOCKHOLDER RIGHTS........ 96
Directors............................. 96
Business Combinations................. 96
Special Meetings of Stockholders...... 97
Amendments to the Charters............ 97
Amendments to the By-laws............. 97
Rights Agreements..................... 97
EXPERTS................................. 99
LEGAL MATTERS........................... 99
STOCKHOLDER PROPOSALS................... 99
APPENDICES
A -- Agreement and Plan of Merger
B -- Opinion of Dillon, Read & Co.
Inc.
C -- Opinion of SBC Warburg Inc.
</TABLE>
3
<PAGE> 9
CERTAIN DEFINED TERMS
In this Proxy Statement:
"Agreement" refers to the Agreement and Plan of Merger dated December 8,
1996, among Homestake, Sub and Santa Fe.
"Closing Date" refers to the date of the consummation of the Merger.
"Combination" refers to the Merger and the issue of Homestake Common Stock
to the Santa Fe stockholders in exchange for their shares of Santa Fe Common
Stock.
"Combined Company" refers to Homestake following the Combination.
"DGCL" refers to the Delaware General Corporation Law, as amended.
"Effective Time" refers to the effective time of the Merger.
"Exchange Ratio" refers to 1.115 shares of Homestake Common Stock for one
share of Santa Fe Common Stock, which is the exchange ratio set forth in the
Agreement.
"Homestake" refers to Homestake Mining Company, a Delaware corporation, and,
where the context so requires, Homestake and its subsidiaries and predecessor
entities.
"Homestake Board" refers to the Board of Directors of Homestake.
"Homestake Charter" refers to the Restated Certificate of Incorporation of
Homestake, as amended.
"Homestake Charter Amendment" refers to the proposed amendment to the
Homestake Charter to increase the authorized number of shares of Homestake
Common Stock from 250,000,000 to 500,000,000.
"Homestake Common Stock" refers to the common stock, $1.00 par value, of
Homestake.
"Homestake Preferred Stock" refers to the preferred stock, $1.00 par value,
of Homestake.
"Homestake Record Date" refers to -- , 1997, the record date for the
Homestake Special Meeting.
"Homestake Rights" refers to the rights to purchase Homestake Preferred
Stock in certain circumstances pursuant to the Homestake Rights Agreement.
"Homestake Rights Agreement" refers to the Rights Agreement dated October
16, 1987, between Homestake and The First National Bank of Boston, as Rights
Agent.
"Homestake Special Meeting" refers to the special meeting of the Homestake
stockholders to be held on -- , 1997.
"Homestake Stockholder Approval" refers to the approval by the Homestake
stockholders of the Homestake Charter Amendment and the Share Issuance.
"Merger" refers to the merger of Sub with and into Santa Fe pursuant to the
terms of the Agreement.
"Newmont Public Proposal" refers to the proposal announced December 5, 1996,
by Newmont Mining Corporation to acquire each share of Santa Fe Common Stock for
0.33 shares of Newmont common stock.
"Santa Fe" means Santa Fe Pacific Gold Corporation, a Delaware corporation,
and where the context so requires, Santa Fe and its subsidiaries.
"Santa Fe Board" refers to the Board of Directors of Santa Fe.
"Santa Fe Charter" refers to the Amended and Restated Certificate of
Incorporation of Santa Fe.
"Santa Fe Common Stock" refers to the common stock, $0.01 par value, of
Santa Fe.
"Santa Fe Record Date" refers to -- , 1997, the record date for the Santa
Fe Special Meeting.
"Santa Fe Rights" refers to rights to purchase preferred stock of Santa Fe
in certain circumstances pursuant to the Santa Fe Rights Agreement.
"Santa Fe Rights Agreement" refers to the Rights Agreement dated February
13, 1995, between Santa Fe and Harris Trust and Savings Bank, as Rights Agent,
as amended.
"Santa Fe Special Meeting" refers to the special meeting of the Sante Fe
stockholders to be held on -- , 1997.
"Santa Fe Stock Options" refers to options outstanding to acquire 1,467,918
shares of Santa Fe Common Stock.
"Santa Fe Stockholder Approval" refers to the adoption of the Agreement by
the Santa Fe stockholders.
"Share Issuance" refers to the issuance of up to approximately 148,220,666
shares of Homestake Common Stock to the Santa Fe stockholders pursuant to the
Agreement.
"Stockholder Approvals" refers to the Homestake Stockholder Approval and the
Santa Fe Stockholder Approval.
"Sub" refers to HMGLD Corp., a Delaware corporation and a wholly-owned
subsidiary of Homestake.
"Takeover Proposal" has the meaning set forth in "The Agreement--Certain
Actions with Respect to Takeover Proposals."
4
<PAGE> 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Homestake (File No.
1-8736) and Santa Fe (File No. 1-13096) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement:
1. Homestake's Annual Report on Form 10-K for the year ended December
31, 1995;
2. Homestake's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1996;
3. Homestake's Current Reports on Form 8-K, dated January 12, January
25, January 31, June 13, September 20, November 20 and December 12, 1996;
4. The description of the Homestake Common Stock contained in
Homestake's Registration Statement on Form S-4 (No. 33-48526) filed on June
10, 1992, including any amendment or report filed for the purpose of
updating such description;
5. The description of the Homestake Rights contained in Homestake's
Registration Statement on Form 8-A dated October 16, 1987;
6. Santa Fe's Annual Report on Form 10-K for the year ended December
31, 1995;
7. Santa Fe's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1996; and
8. Santa Fe's Current Report on Form 8-K, dated December 9, 1996.
All documents and reports filed by either Homestake or Santa Fe pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of its respective Special Meeting will be
deemed to be incorporated by reference in this Proxy Statement and to be a part
hereof from the dates of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein will be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Except as so modified or
superseded, any such statement will not be deemed to constitute a part of this
Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE, WITHOUT
CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF CAPITAL STOCK OF
HOMESTAKE OR SANTA FE, TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON WRITTEN OR
ORAL REQUEST TO THE FOLLOWING:
IN THE CASE OF DOCUMENTS RELATING TO HOMESTAKE:
WAYNE KIRK
VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108-2788
(415) 981-8150
IN THE CASE OF DOCUMENTS RELATING TO SANTA FE:
WAYNE JARKE
GENERAL COUNSEL AND SECRETARY
SANTA FE PACIFIC GOLD CORPORATION
6200 UPTOWN BOULEVARD NE, SUITE 400
ALBUQUERQUE, NEW MEXICO 87110
(505) 880-5300
IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL
MEETING, REQUESTS SHOULD BE RECEIVED BY -- , 1997.
5
<PAGE> 11
THE SPECIAL MEETINGS
HOMESTAKE SPECIAL MEETING
The Homestake Special Meeting will be held at -- at
-- a.m., local time, on -- , 1997. At the Homestake Special Meeting,
the holders of Homestake Common Stock will be asked to consider the following
matters:
1. A proposal to amend the Homestake Charter to increase the authorized
number of shares of Homestake Common Stock from 250,000,000 to 500,000,000 (the
"Homestake Charter Amendment"). Upon such amendment, Homestake will have
authorized capital of 500,000,000 shares of Common Stock and 10,000,000 shares
of Preferred Stock.
2. A proposal to issue shares of Homestake Common Stock to the Santa Fe
stockholders pursuant to the Agreement (the "Share Issuance"). Pursuant to the
Agreement, Santa Fe will become a wholly-owned subsidiary of Homestake and each
share of Santa Fe Common Stock outstanding will be converted into the right to
receive 1.115 shares of Homestake Common Stock.
3. Transaction of such other business as may properly come before the
Homestake Special Meeting or any adjournments thereof.
Approval of the Homestake Charter Amendment requires the affirmative vote
of the holders of a majority of the shares of Homestake Common Stock outstanding
on -- , the Homestake Record Date. Approval of the Share Issuance
requires the approval of a majority of votes cast in respect of the Share
Issuance; provided, however, that the total votes cast in respect of the Share
Issuance must represent at least a majority of the shares of Homestake Common
Stock that are entitled to vote on the proposal. Approval of the Homestake
Charter Amendment is a condition to the Share Issuance.
Only the record holders of Homestake Common Stock on the Homestake Record
Date are entitled to receive notice of and to vote at the Homestake Special
Meeting. On the Homestake Record Date, there were -- shares of
Homestake Common Stock outstanding held by -- record holders.
A majority of the shares of Homestake Common Stock outstanding on the
Homestake Record Date must be represented in person or by proxy at the Homestake
Special Meeting for a quorum to be present at the Homestake Special Meeting. In
the event a quorum is not present at the Homestake Special Meeting, the meeting
will be adjourned to solicit additional proxies.
Record holders of Homestake Common Stock on the Homestake Record Date are
entitled to one vote per share on each matter to be considered at the Homestake
Special Meeting. The Homestake Board is not aware of any matters to be presented
at the Homestake Special Meeting other than the Homestake Charter Amendment and
the Share Issuance.
At the close of business on -- , 1997, directors and executive
officers of Homestake and their affiliates beneficially owned -- shares
of Homestake Common Stock, which represented approximately -- % of the
shares of Homestake Common Stock outstanding on such date, and were entitled to
vote -- shares of Homestake Common Stock, which represented approximately
-- % of the shares of Homestake Common Stock outstanding on such date. Each
such director and executive officer of Homestake has indicated his or her
present intention to vote, or cause to be voted, the Homestake Common Stock
owned by him or her (i) "FOR" the Homestake Charter Amendment and (ii) "FOR" the
Share Issuance.
THE HOMESTAKE BOARD RECOMMENDS THAT THE HOMESTAKE STOCKHOLDERS VOTE "FOR"
THE HOMESTAKE CHARTER AMENDMENT AND "FOR" THE SHARE ISSUANCE.
6
<PAGE> 12
SANTA FE SPECIAL MEETING
The Santa Fe Special Meeting will be held at -- at -- a.m.,
local time, on -- , 1997. At the Santa Fe Special Meeting, the
holders of Santa Fe Common Stock will be asked to consider the following
matters:
1. A proposal to adopt the Agreement.
2. Transaction of such other business as may properly come before the Santa
Fe Special Meeting or any adjournments thereof.
The adoption of the Agreement requires the affirmative vote of the holders
of a majority of the shares of Santa Fe Common Stock outstanding on
-- , the Santa Fe Record Date.
Only the record holders of Santa Fe Common Stock on the Santa Fe Record
Date are entitled to receive notice of and to vote at the Santa Fe Special
Meeting. On the Santa Fe Record Date, there were -- shares of Santa Fe
Common Stock outstanding held by -- record holders.
A majority of the shares of Santa Fe Common Stock outstanding on the Santa
Fe Record Date must be represented in person or by proxy at the Santa Fe Special
Meeting for a quorum to be present at the Santa Fe Special Meeting. In the event
a quorum is not present at the Santa Fe Special Meeting, the meeting will be
adjourned to solicit additional proxies.
Record holders of Santa Fe Common Stock on the Santa Fe Record Date are
entitled to one vote per share on each matter to be considered at the Santa Fe
Special Meeting. The Santa Fe Board is not aware of any matters to be presented
at the Santa Fe Special Meeting other than the adoption of the Agreement.
At the close of business on -- , 1997, directors and executive officers
of Santa Fe and their affiliates beneficially owned -- shares of Santa Fe
Common Stock, which represented approximately -- % of the shares of Santa Fe
Common Stock outstanding on such date, and were entitled to vote -- shares of
Santa Fe Common Stock, which represented approximately -- % of the shares of
Santa Fe Common Stock outstanding on such date. Each such director and executive
officer of Santa Fe has indicated his or her present intention to vote, or cause
to be voted, the Santa Fe Common Stock owned by him or her "FOR" the proposal to
adopt the Agreement.
THE SANTA FE BOARD RECOMMENDS THAT THE SANTA FE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO ADOPT THE AGREEMENT.
ABSENCE OF APPRAISAL RIGHTS
Neither the Santa Fe stockholders nor the Homestake stockholders are
entitled to appraisal or dissenters' rights in respect of the Combination. See
"The Combination--Absence of Appraisal Rights."
VOTING OF PROXIES
Shares represented by all properly executed proxies received in time for
the Special Meetings will be voted at such Special Meetings in the manner
specified by the holders thereof. Properly executed proxies for shares of
Homestake Common Stock that do not contain voting instructions will be voted in
favor of the Homestake Charter Amendment and in favor of the Share Issuance.
Properly executed proxies for shares of Santa Fe Common Stock that do not
contain voting instructions will be voted in favor of adoption of the Agreement.
Shares of Homestake Common Stock or Santa Fe Common Stock represented at
the applicable Special Meeting but not voting, including shares with respect to
which the holders thereof have abstained on any matter, will be treated as
present at the applicable Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business.
With respect to the Homestake proposal to approve the Homestake Charter
Amendment, and with respect to the Santa Fe proposal to adopt the Agreement, the
failure to be represented at the applicable
7
<PAGE> 13
Special Meeting (in person or by proxy) or the abstention from voting will have
the same effect as a vote against such proposal. In addition, under the
applicable rules of the NYSE, brokers who hold shares in street name for
customers are prohibited from giving a proxy to vote such customers' shares with
respect to any such proposal in the absence of specific instructions from such
customers ("broker nonvotes"). Accordingly, with respect to each of such
proposals, broker nonvotes will also have the same effect as votes against such
proposal.
The persons named as proxies by a Homestake or Santa Fe stockholder may
propose and vote for one or more adjournments of the applicable Special Meeting,
including, without limitation, adjournments to permit further solicitations of
proxies in favor of any proposal; provided, however, that no proxy that is voted
against any of the proposals will be voted in favor of any such adjournment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Homestake or Santa Fe form of proxy
does not preclude a stockholder from voting in person. A stockholder may revoke
a proxy at any time prior to its exercise by filing with the Secretary of
Homestake (in the case of a Homestake stockholder) or with the Secretary of
Santa Fe (in the case of a Santa Fe stockholder) a duly executed revocation of
proxy, by submitting a duly executed proxy bearing a later date or by appearing
at the applicable Special Meeting and voting in person. Attendance at the
relevant Special Meeting will not, in and of itself, constitute revocation of a
proxy.
SOLICITATION OF PROXIES
Each of Homestake and Santa Fe will bear the cost of the solicitation of
proxies from its own stockholders, except that Homestake and Santa Fe will share
equally the cost of printing this Proxy Statement and the applicable fees
associated with the filing of this Proxy Statement with the Commission. In
addition to solicitation by mail, the directors, officers and employees of each
of Homestake and Santa Fe may solicit proxies from the stockholders of such
company by telephone or telegram or in person. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and Homestake and Santa Fe will reimburse such
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
in connection therewith. D.F. King & Co., Inc. will assist in the solicitation
of proxies by Homestake and Santa Fe and will receive $25,000 and reimbursement
of expenses. Homestake and Santa Fe will each pay one-half of D.F. King's fees
and expenses.
8
<PAGE> 14
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Proxy Statement. Reference is made to, and
this Summary is qualified in its entirety by, the more detailed information
contained or incorporated by reference in this Proxy Statement and the
Appendices hereto. Stockholders are urged to read this Proxy Statement and the
Appendices hereto in their entirety.
HOMESTAKE
Homestake is engaged principally in gold mining and related activities,
including exploration, extraction, processing, refining and reclamation. Gold
bullion, Homestake's principal product, is produced in the United States,
Canada, Australia and Chile. Homestake is actively engaged in exploration in the
United States, Canada, Australia, Venezuela, French Guiana, Brazil, Chile and
the Andean region of South America, and participates in development projects in
Russia and Bulgaria. Homestake is incorporated under Delaware law. The Homestake
Common Stock is listed on the NYSE under the symbol "HM," on the Swiss Stock
Exchange (Basel, Geneva and Zurich) and on the Australian Stock Exchange
Limited. Homestake's principal executive offices are located at 650 California
Street, San Francisco, California 94108-2788 (telephone number: (415) 981-8150).
See "The Companies--Homestake."
Following is certain information regarding Homestake's significant
properties.
<TABLE>
<CAPTION>
MINERALIZED
RESERVES AT MATERIAL AT
OWNERSHIP 1996 DECEMBER 31, DECEMBER 31,
GOLD MINES INTEREST PRODUCTION 1996 1996
- ---------------------------------------- ------------ ---------- ------------ ---------------------
(PERCENTAGE) (OUNCES) (CONTAINED TONS WEIGHTED
OUNCES) (MILLIONS) AVERAGE
---------- GRADE
(OZ/TON)
--------
<S> <C> <C> <C> <C> <C>
UNITED STATES
The HOMESTAKE MINE, located in Lead, 100 -- -- -- --
South Dakota, has operated for over
120 years. Operations consist of an
8,000 foot deep underground mine, an
open pit mine, a mill and a refinery.
Reserves were expanded by more than
one million ounces during 1995.
The MCLAUGHLIN MINE is located in 100 -- -- -- --
northern California. Mining ceased in
1996 and processing of stockpiled ore
will continue until 2003 at a
significantly reduced level of gold
production.
The ROUND MOUNTAIN MINE is located in 25 -- -- -- --
central Nevada, about 60 miles north
of Tonopah. The operation is one of
the largest heap leach gold mines in
the world. Completion of an 8,000
tons-per-day gravity mill to process
higher-grade sulfide ores is expected
in late 1997. Reserves were expanded
by more than two million ounces (100%
basis) during 1995.
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
MINERALIZED
RESERVES AT MATERIAL AT
OWNERSHIP 1996 DECEMBER 31 DECEMBER 31,
GOLD MINES INTEREST PRODUCTION 1996 1996
---------- ------------ ---------- ----------- ----------------------
(PERCENTAGE) (OUNCES) (CONTAINED TONS WEIGHTED
OUNCES) (MILLIONS) AVERAGE
GRADE
(OZ/TON)
<S> <C> <C> <C> <C> <C>
The MARIGOLD MINE is located about 40 33.3 -- -- -- --
miles southeast of Winnemucca, Nevada,
and has been in operation since 1989.
Mining is conducted by conventional
open pit methods. During 1995, the
mine was converted primarily to a heap
leach operation with intermittent
milling operations.
The PINSON MINE, located about 30 miles 50 -- -- -- --
northeast of Winnemucca, Nevada, has
operated since 1981. Mining is
conducted by conventional open pit
methods in several different areas.
Ore is processed by both heap leaching
and conventional milling methods. In
December 1996, Homestake increased its
interest in the Pinson Mine from 26.3%
to 50% and became operator of the
mine.
The RUBY HILL MINE is located near 100 N/A -- -- --
Eureka in central Nevada. Subject to
securing remaining permits, mining is
expected to commence in late 1997 with
production at an expected rate of
100,000 ounces per year. Ore from this
open pit mine will be heap leached.
CANADA
The ESKAY CREEK MINE is located 100 --(2)(3) Gold Gold Gold
approximately 50 air miles north of -- -- --
Stewart, British Columbia. This Silver Silver Silver
underground mine is one of Canada's -- -- --
highest-grade and Homestake's
lowest-cost operations. Ore at Eskay
Creek is crushed and blended prior to
the sale to third-party smelters for
final processing.(1)
The SNIP MINE is an underground mine 100 --(2) -- -- --
located in northwestern British
Columbia. It is a small high-grade
mine, which recovers approximately 92%
of the gold contained in the ore. In
April 1996, Prime Resources Group Inc.
increased its ownership in the Snip
Mine from 40% to 100%.(1)
The WILLIAMS MINE, Canada's largest 50 -- -- -- --
underground gold mine, is located in
the Hemlo Gold Camp, immediately north
of Lake Superior near Marathon,
Ontario.
</TABLE>
10
<PAGE> 16
<TABLE>
<CAPTION>
MINERALIZED
RESERVES AT MATERIAL AT
OWNERSHIP 1996 DECEMBER 31, DECEMBER 31,
GOLD MINES INTEREST PRODUCTION 1996 1996
---------- ------------ ---------- ------------ ----------------------
(PERCENTAGE) (OUNCES) (CONTAINED TONS WEIGHTED
OUNCES) (MILLIONS) AVERAGE
GRADE
(OZ/TON)
<S> <C> <C> <C> <C> <C>
The DAVID BELL MINE, which is adjacent 50 -- -- -- --
to the Williams Mine, is a smaller,
higher-grade underground mine.
Included with the David Bell mine is a
"Quarter Claim" royalty interest in a
neighboring mine. The Williams and
David Bell Mines are modern and low
cost.
AUSTRALIA
The consolidated surface and underground 50 -- -- -- --
operations at KALGOORLIE are
Australia's largest gold mining
complex. During 1995, a $90 million
(100% basis) mill expansion increased
the milling capacity at Kalgoorlie to
33,500 tons per day and will allow for
further expansion of the Super Pit.
Reserves were expanded by more than
two million ounces (100% basis) in
1995.
CHILE
The AGUA DE LA FALDA MINE is located 51 N/A -- -- --
approximately 600 miles north of
Santiago. Mine development commenced
in November 1996 and production is
expected to commence in April 1997, at
an expected rate of 35,000 ounces per
year. Ore from this underground mine
will be heap leached.
</TABLE>
<TABLE>
<CAPTION>
RESERVES AT
OWNERSHIP 1996 DECEMBER 31,
SULFUR MINE INTEREST PRODUCTION 1996
- ---------------------------------------- ------------ ---------- ------------
(PERCENTAGE)
<S> <C> <C> <C>
The MAIN PASS 299 sulfur deposit is 16.7 Sulfur Sulfur
located in the Gulf of Mexico off the --(4) --(4)
coast of Louisiana. It is the largest Oil Oil
Frasch sulfur deposit discovered in --(5) --(5)
North America since 1920. In addition
to sulfur, oil reserves overlie the
deposit.
</TABLE>
- ---------------
(1) The Eskay Creek and Snip mines are owned 100% by Prime Resources Group Inc.,
of which Homestake owns 50.6% of the outstanding stock. The ownership
interest and 1996 production amounts shown are Homestake's interests without
reduction for the 49.4% minority interest in Prime. Reserves and mineralized
material amounts shown are Homestake's interests after reduction for the
49.4% minority interest in Prime.
(2) Includes contained ounces of gold and gold equivalents in ore and
concentrates sold to smelters.
(3) Includes silver converted into gold equivalents at a ratio of -- ounces
of silver equals one ounce of gold production.
(4) Long tons of 2,240 pounds.
(5) Barrels.
11
<PAGE> 17
SANTA FE
Santa Fe is engaged in the mining and processing of gold ores and the
exploration and development of gold properties. Santa Fe's gold mines are
located in Nevada and California. Santa Fe also explores and evaluates precious
metals properties and prospects in the United States, elsewhere in North
America, and in South America, Central Asia, West Africa and the southwestern
Pacific region. Santa Fe is incorporated under Delaware law. The Santa Fe Common
Stock is listed on the NYSE under the symbol "GLD." Santa Fe's principal
executive offices are located at 6200 Uptown Boulevard NE, Suite 400,
Albuquerque, New Mexico 87110 (telephone number: (505) 880-5300). See "The
Companies--Santa Fe."
Following is certain information regarding Santa Fe's operating properties.
<TABLE>
<CAPTION>
MINERALIZED
RESERVES AT MATERIAL AT
OWNERSHIP 1996 DECEMBER 31, DECEMBER 31,
GOLD MINES INTEREST PRODUCTION 1996 1996
- -------------------------------------- ------------ ---------- ------------ --------------------------
(PERCENTAGE) (OUNCES) (CONTAINED TONS WEIGHTED
OUNCES) (MILLIONS) AVERAGE
---------- GRADE
(oz/ton)
------------
<S> <C> <C> <C> <C> <C>
UNITED STATES
The TWIN CREEKS MINE is an open pit 100 -- -- -- --
mining operation approximately 45
miles northeast of Winnemucca,
Nevada. Ore is processed through
oxide milling, heap leaching and,
beginning in the first quarter of
1997, pressure oxidation facilities.
Start-up of a second pressure
oxidation circuit is expected in
late 1997.
The LONE TREE COMPLEX consists of 100 -- -- -- --
three open pit mining operations:
LONE TREE MINE, (approximately 34
miles southeast of Winnemucca,
Nevada), TRENTON CANYON MINE
(approximately 13 miles south of
Valmy, Nevada) and MULE CANYON MINE
(approximately 14 miles east of
Battle Mountain, Nevada). Production
commenced from the Lone Tree Mine in
1991 and at the nearby Trenton
Canyon Mine and Mule Canyon Mine in
late 1996. Ore is processed through
heap leaching, oxide milling and
pressure oxidation facilities.
Completion of a flotation mill at
the Lone Tree Mine for the
processing of lower-grade sulfide
ores is expected in the second
quarter of 1997. A portion of the
ore from the Mule Canyon Mine and
the concentrates from the flotation
mill are expected to be processed at
the Twin Creeks Mine.
The MESQUITE MINE is located in 100 -- -- -- --
southern California approximately 35
miles northeast of Brawley. Mining
is conducted utilizing conventional
open pit methods and ore is
processed through heap leaching
facilities.
</TABLE>
12
<PAGE> 18
<TABLE>
<CAPTION>
MINERALIZED
RESERVES AT MATERIAL AT
OWNERSHIP 1996 DECEMBER 31, DECEMBER 31,
GOLD MINES INTEREST PRODUCTION 1996 1996
- -------------------------------------- ------------ ---------- ------------ --------------------------
(PERCENTAGE) (OUNCES) (CONTAINED TONS WEIGHTED
OUNCES) (MILLIONS) AVERAGE
---------- GRADE
(oz/ton)
------------
<S> <C> <C> <C> <C> <C>
The ROSEBUD MINE is a 50 N/A -- -- --
development-phase underground mine
approximately 50 miles west of
Winnemucca, Nevada. Subject to
securing remaining permits,
production is expected to commence
in mid-1997 at an average annual
rate of 100,000 ounces. Oxide ore
produced from the Rosebud Mine will
be shipped to the Twin Creeks Mine
for processing.
</TABLE>
THE COMBINATION
The Merger. Subject to the terms and conditions of the Agreement, Sub will
be merged with and into Santa Fe. Santa Fe will be the surviving corporation in
the Merger and will be a wholly-owned subsidiary of Homestake.
Conversion of Santa Fe Common Stock; Exchange Ratio. Each share of Santa Fe
Common Stock outstanding will be converted into the right to receive 1.115
shares of Homestake Common Stock (the "Exchange Ratio"), except that cash will
be paid in lieu of fractional shares of Homestake Common Stock. Pursuant to the
Homestake Rights Agreement, each share of Homestake Common Stock issued in the
Share Issuance will be accompanied by one Homestake Right. See "Description of
Homestake Capital Stock" for a description of the Homestake Rights.
The shares of Homestake Common Stock currently outstanding will be
unchanged by the Combination.
BENEFITS OF THE COMBINATION
Homestake and Santa Fe believe that the Combination will result in a number
of benefits, including the following:
- The Combination will create the largest North American-based gold mining
company in terms of gold reserves. As of December 31, 1995, the Combined
Company would have had 39.4 million ounces of gold reserves (after
reduction for minority interests).
- With principal operating properties in the United States, Canada and
Australia, the Combined Company will have the lowest political risk
profile of any major North American-based gold mining company.
- Production for the Combined Company is expected to reach approximately
3.2 million ounces of gold equivalents in 1998, with 1997 and 1998
average cash production costs expected to be under $245 per equivalent
ounce.
- The Combined Company will have a strong balance sheet and greater
operating cash flow than either company has currently. The Combined
Company will have the ability to compete more effectively for
acquisition, exploration and development opportunities throughout the
world. Further, the greater operating cash flow will enable the Combined
Company to manage more easily Santa Fe's debt service requirements.
- The Combined Company will have the largest land holdings in Nevada of any
gold mining company (1.7 million acres), with a total world property
position of approximately 21 million acres. The Combined Company will
also have the financial resources to conduct an aggressive exploration
13
<PAGE> 19
program on the highly prospective Nevada land holdings, as well as in
other locations throughout the world.
- The Combined Company will be able to apply Homestake's metallurgical and
underground mining experience to Santa Fe's operations in Nevada, and
will be able to apply Santa Fe's metallurgical and ore processing
technology to Homestake's developing operations in Chile and elsewhere.
- By combining Homestake's and Santa Fe's administrative functions and
exploration activities, and by eliminating duplicative functions and
facilities, the Combined Company expects to realize significant cost
savings, approximating annual savings of $30 million by the end of 1997.
- The Combination is expected to be accretive to Homestake's earnings per
share in 1997 and 1998 (before estimated one-time transaction and
restructuring costs of $50 million) even at reduced gold prices, due in
part to Santa Fe's gold hedging program.
- The Combination is expected to be accounted for as a "pooling of
interests," whereby Homestake will record the acquisition of the Santa Fe
assets at Santa Fe's historical carrying values.
- The receipt of shares of Homestake Common Stock by the Santa Fe
stockholders is expected to be tax-free under United States federal
income tax law.
See "Risk Factors; Certain Forward-Looking and Cautionary Statements" for a
discussion of certain factors that may affect when, and the extent to which, the
Combined Company will realize the foregoing benefits. No assurance can be given
as to when or the extent to which the foregoing benefits will be realized.
Directors and Management of Homestake after the Combination. At the
Effective Time, Homestake's By-laws will be amended to reduce the number of
Homestake directors from 13 to 12 (comprised of three classes of four directors
each). Following the Combination, the Homestake Board will consist of (i) five
individuals designated by Homestake from the current Homestake Board; (ii) five
individuals designated by Santa Fe from the current Santa Fe Board; and (iii)
two directors who will be chosen by those ten individuals. See "Directors and
Management of Homestake after the Combination" for information about the
designees to the Homestake Board.
After the Combination, Jack E. Thompson, the President and Chief Executive
Officer of Homestake, will become Homestake's Chairman of the Board and Chief
Executive Officer. Patrick M. James, the Chairman, President and Chief Executive
Officer of Santa Fe, will become Homestake's President and Chief Operating
Officer.
Recommendations of the Boards of Directors. The Homestake Board has
determined unanimously that the Combination is fair to and in the best interests
of the Homestake stockholders. Accordingly, the Homestake Board unanimously
recommends that the Homestake stockholders vote "FOR" the Homestake Charter
Amendment and "FOR" the Share Issuance. See "The Combination--Homestake Reasons
for the Combination; Recommendation of the Homestake Board."
The Santa Fe Board has determined unanimously that the Combination is fair
to and in the best interests of the Santa Fe stockholders. Accordingly, the
Santa Fe Board unanimously recommends that the Santa Fe stockholders vote "FOR"
the adoption of the Agreement. See "The Combination--Santa Fe Reasons for the
Combination; Recommendation of the Santa Fe Board."
Opinions of Financial Advisors. On December 8, 1996, Dillon, Read & Co.
Inc. ("Dillon Read") delivered its written opinion to the Homestake Board to the
effect that, based upon and subject to certain matters stated therein, as of the
date of such opinion, the Exchange Ratio is fair to the Homestake stockholders
from a financial point of view. See "The Combination--Opinion of Homestake's
Financial Advisor" for a summary of the material quantitative analyses performed
by Dillon Read in arriving at its opinion, as well as a description of the
assumptions and qualifications made, matters considered and limitations relating
thereto. A copy of the full text of the written opinion of Dillon Read, attached
hereto as Appendix B, is incorporated herein by reference and should be read
carefully in its entirety. Homestake has agreed to pay a fee to Dillon Read for
its services in connection with the Combination, a substantial portion of which
is contingent upon the consummation of the Combination.
14
<PAGE> 20
SBC Warburg Inc. ("SBCW") has delivered its written opinion to the Santa Fe
Board to the effect that, as of December 8, 1996, the Exchange Ratio was fair,
from a financial point of view, to the Santa Fe stockholders. See "The
Combination--Opinion of Santa Fe's Financial Advisor" for a summary of the
material quantitative analyses performed by SBCW in arriving at its opinion, as
well as a description of the assumptions and qualifications made, matters
considered and limitations relating thereto. A copy of the full text of the
written opinion of SBCW, attached hereto as Appendix C, is incorporated herein
by reference and should be read carefully in its entirety. Santa Fe has agreed
to pay fees to SBCW for its services in connection with the Combination, a
substantial portion of which are contingent upon the consummation of the
Combination.
Certain United States Federal Income Tax Consequences. It is a condition to
the consummation of the Merger that Homestake and Santa Fe receive opinions of
their respective counsel to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Based on these opinions, no gain or loss
will be recognized for United States federal income tax purposes by either
Homestake or Santa Fe as a result of the Merger, and no gain or loss will be
recognized for United States federal income tax purposes by holders of Santa Fe
Common Stock upon the conversion of Santa Fe Common Stock into shares of
Homestake Common Stock pursuant to the Agreement (except to the extent of any
cash received in lieu of fractional shares). See "The Combination-- United
States Federal Income Tax Consequences" and "The Agreement--Conditions to the
Consummation of the Merger."
Anticipated Accounting Treatment. The Combination is expected to be
accounted for as a pooling of interests in accordance with United States
generally accepted accounting principles. It is a condition to the consummation
of the Merger that Homestake and Santa Fe receive letters from their respective
independent accountants, Coopers & Lybrand L.L.P. ("Coopers") and Price
Waterhouse LLP ("Price Waterhouse"), to the effect that the Combination will
qualify for pooling of interests accounting treatment. See "The
Combination--Anticipated Accounting Treatment" and "The Agreement--Conditions to
the Consummation of the Merger."
Interests of Certain Persons in the Combination. Certain directors and
executive officers of each of Homestake and Santa Fe have interests in the
Combination that are different from, or in addition to, the interests of
stockholders of Homestake or Santa Fe, as applicable. Such interests relate to
or arise from, among other things: (i) the terms of the Agreement providing for
the Homestake Board after the Combination to include five members from the Board
of Directors of each of Homestake and Santa Fe; (ii) the vesting and payment of
certain benefits to outside directors of Homestake who voluntarily resign in
connection with the Combination; (iii) the availability of severance benefits,
in certain circumstances, to senior executives of Homestake and Santa Fe; (iv)
the acceleration of outstanding stock options to acquire Santa Fe Common Stock
(the "Santa Fe Stock Options") and the lapse of restrictions on shares of
currently restricted Santa Fe Common Stock held by employees of Santa Fe,
including executive officers; and (v) the designation of Mr. Thompson as
Chairman and Chief Executive Officer of Homestake and of Mr. James as President
and Chief Operating Officer of Homestake. See "The Combination--Interests of
Certain Persons in the Combination" and "Directors and Management of Homestake
after the Combination."
Conditions to the Merger. The obligations of Homestake and Santa Fe to
consummate the Merger are subject to various conditions, including: (i) receipt
of the Stockholder Approvals; (ii) approval for listing on the NYSE of the
shares of Homestake Common Stock to be issued pursuant to the Agreement; (iii)
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"); (iv) the absence of legal
restraints or prohibitions preventing the consummation of the Merger; (v) the
receipt of independent accountants' letters to the effect that the Combination
qualifies as a pooling of interests; (vi) the absence of certain material
litigation; (vii) the representations and warranties of the other party
contained in the Agreement being materially true; (viii) the performance of the
other party in all material respects of all obligations contained in the
Agreement; (ix) the receipt of opinions of counsel in respect of certain federal
income tax consequences of the Merger; and (x) the absence of material adverse
changes with respect to the other party. See "The Combination--Regulatory
Matters" and "The Agreement--Conditions to the Consummation of the Merger."
15
<PAGE> 21
Regulatory Matters. The HSR Act and the rules and regulations promulgated
thereunder provide that the Combination may not be consummated until certain
information has been submitted to the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and specified HSR Act waiting period requirements have
been satisfied. On December 19, 1996, Homestake and Santa Fe filed all required
notification and report forms, and on January 18, 1997, the waiting period under
the HSR Act will expire (unless Homestake and Santa Fe receive a request for
additional information from the Antitrust Division or the FTC). The expiration
of the HSR Act waiting period does not preclude the Antitrust Division or the
FTC from challenging the Combination on antitrust grounds. Neither Homestake nor
Santa Fe believes the Combination will violate federal antitrust laws. See "The
Combination--Regulatory Matters."
Termination of the Agreement. Subject to certain limitations, the Agreement
is subject to termination at the option of either Homestake or Santa Fe if the
Combination is not consummated on or before June 30, 1997, and prior to such
time upon the occurrence of certain events. The Agreement may also be terminated
by the mutual written consent of Homestake and Santa Fe. If there is a Takeover
Proposal for Homestake or Santa Fe, Homestake or Santa Fe may be required, in
certain circumstances, to pay to the other party a fee in the amount of $65
million (the "Termination Fee") upon the termination of the Agreement. In
certain other circumstances, a party's expenses, not to exceed $5 million, are
reimburseable upon termination. See "The Agreement--Termination" and
"--Termination Fees."
16
<PAGE> 22
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF HOMESTAKE
The following table sets forth certain consolidated historical financial
data of Homestake and its subsidiaries, and is based on the consolidated
financial statements and selected financial data of Homestake, including notes
thereto, which are incorporated by reference in this Proxy Statement, and should
be read in conjunction therewith. See "Incorporation of Certain Documents by
Reference." Data for the nine months ended September 30, 1996 and 1995 reflect,
in the opinion of Homestake, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such data. Results
for the nine months ended September 30, 1996 are not necessarily indicative of
results which may be expected for any other interim period or for the year as a
whole.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA(1)
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues.................. $ 746,365 $ 705,487 $ 722,228 $ 683,520 $ 671,600
Income (loss) from
continuing operations... 30,327 78,016(2) 52,494(3) (175,836)(4) (207,756)(5)
Income (loss) per share
from continuing
operations.............. 0.22 0.57(2) 0.38(3) (1.31)(4) (1.57)(5)
Total assets.............. 1,321,633 1,201,968 1,121,250 1,145,169 1,352,831
Long-term
obligations(6).......... 305,418 295,719 282,865 293,176 365,383
Shareholders' equity...... 635,857 588,770 515,244 465,438 675,642
Cash dividends per
share................... 0.20 0.175 0.10 0.20 0.20
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues.................. $ 587,983 $ 556,950
Net income................ 27,856(7) 22,684
Net income per share...... 0.19(7) 0.16
</TABLE>
- ---------------
(1) Selected financial information reflects the 1992 combination of Homestake
and International Corona Corporation (now Homestake Canada Inc. ("HCI"))
accounted for as a pooling of interests, and accounts for HCI's former
non-gold operations as discontinued operations.
(2) Includes a gain of $12.6 million ($15.7 million pretax) or $0.09 per share
on the sale of Homestake's interest in the Dee Mine and a gain of $11.2
million (no tax expense) or $0.08 per share on dilution of Homestake's
interest in Prime Resources Group Inc.
(3) Includes expense of $12.8 million ($16.0 million pretax) or $0.09 per share
for the write-down of oil assets at Main Pass 299 and expense of $6.8
million ($8.2 million pretax) or $0.05 per share for restructuring and
business combination costs.
(4) Includes expense of $117.7 million ($130.3 million pretax) or $0.87 per
share for write-downs of certain mining properties and investments and
expense of $32.3 million ($48.4 million pretax) or $0.24 per share for
restructuring and business combination costs.
(5) Includes expense of $165.5 million ($172.4 million pretax) or $1.25 per
share for write-downs of certain mining properties and investments and
expense of $7.8 million ($13.6 million pretax) or $0.06 per share for HCI's
1991 restructuring.
Footnotes continued on following page
17
<PAGE> 23
(6) Long-term obligations include:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Long-term debt.................. $185,000 $185,000 $189,191 $ 65,209 $146,305
Gold loans...................... 139,965 132,885
Accrued reclamation costs....... 44,051 33,892 22,138 32,344 34,222
Accrued pension and other
postretirement benefit
obligations................... 63,092 64,066 59,626 49,900 41,776
Other........................... 13,275 12,761 11,910 5,758 10,195
-------- -------- -------- -------- --------
$305,418 $295,719 $282,865 $293,176 $365,383
======== ======== ======== ======== ========
</TABLE>
The 1993 increase in long-term debt was due to the issuance of $150
million principal amount of 5.5% convertible subordinated notes which
mature on June 23, 2000. Proceeds from the issuance of the notes were used
to retire existing gold loans and other long-term debt. The 1992 reduction
in long-term debt primarily was due to net repayments of debt following the
business combination with HCI.
Amounts for long-term debt and gold loans do not include the current
portion as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current portion of long-term
debt.......................... $ $ $ 3,785 $ 18,322 $ 54,890
Current portion of gold loans... 23,261 18,094
------ ------- -------
$ $ $ 3,785 $ 41,583 $ 72,984
====== ======= =======
</TABLE>
(7) Includes net income of $4.9 million ($5.5 million pretax) or $0.03 per share
from a litigation recovery.
18
<PAGE> 24
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF SANTA FE
The following table sets forth certain consolidated historical financial
data of Santa Fe and its subsidiaries, and is based on the consolidated
financial statements and selected financial data of Santa Fe, including notes
thereto, which are incorporated by reference in this Proxy Statement, and should
be read in conjunction therewith. See "Incorporation of Certain Documents by
Reference." Data for the nine months ended September 30, 1996 and 1995 reflect,
in the opinion of Santa Fe, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such data. Results for the
nine months ended September 30, 1996 are not necessarily indicative of results
which may be expected for any other interim period or for the year as a whole.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues(1).................. $ 353,633 $377,584 $234,925 $126,261 $ 83,022
Income from continuing
operations................. 39,812 56,701 27,668 14,678 4,053
Income per share from
continuing operations...... 0.30 0.46 0.25(2) 0.13(2) 0.04(2)
Total assets................. 1,018,168 857,639 832,552 476,344 563,550
Long-term obligations(4)..... 262,065 151,715 377,012 279,769 314,649
Shareholders' equity......... 555,057 521,505(3) 228,129(3) 75,799(3) 164,953
Cash dividends per
share(5)................... 0.05
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
1996 1995
---------- --------
<S> <C> <C> <C> <C> <C>
Revenues..................... $ 244,236 $260,404
Net income................... 15,574 32,269
Net income per share......... 0.12 0.25
</TABLE>
- ---------------
(1) Reflects the commencement of production at the Lone Tree Mine in August
1991, the acquisition of the Chimney Creek Mine and the Mesquite Mine in an
asset exchange as of June 25, 1993 and the commencement of refractory ore
processing at the Lone Tree Mine in February 1994.
(2) Per share data for the years 1991 through 1993 are based on 112.2 million
shares, which represented shares owned by Santa Fe Pacific Corporation,
after giving effect to a 1.112 million-for-1 stock split, which was declared
on February 22, 1994.
(3) The decrease in 1992 is primarily attributable to a dividend to Santa Fe
Pacific Corporation of $116.7 million of intercompany notes receivable; the
increase in 1993 is primarily attributable to the $117.2 million after-tax
noncash gain relating to an asset exchange; and the increase in 1994 is
primarily attributable to net proceeds received from the initial public
offerings.
(4) Long-term obligations include:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Long-term debt.................. $199,861 $ 90,000 $194,000 $125,700 $126,720
Gold loans...................... 133,851 149,296 183,189
Other........................... 62,204 61,715 49,161 4,773 4,740
---------- -------- -------- -------- --------
$262,065 $151,715 $377,012 $279,769 $314,649
========== ======== ======== ======== ========
</TABLE>
Footnotes continued on following page
19
<PAGE> 25
Gold loans represent the gold bullion portion of bank project financings
for the Lone Tree Mine and the Twin Creeks Mine. In 1994, project
financings were repaid and long-term debt was reduced with a portion of the
net proceeds from the initial public offerings. The increase in long-term
debt in 1993 is primarily attributable to borrowings to finance the Lone
Tree Mine sulfide expansion project. In July 1995, Santa Fe issued $200
million of 8.375% senior debentures, from which a portion of the proceeds
were used to repay borrowings under Santa Fe's bank credit facility.
Amounts for long-term debt and gold loans do not include the current
portion as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current portion of long-term debt............ $ -- $ -- $ 6,000 $18,720 $15,674
Current portion of gold loans................ -- -- 15,445 12,908 --
------- ------- ------- ------- -------
$ -- $ -- $21,445 $31,628 $15,674
======= ======= ======= ======= =======
</TABLE>
(5) Cash dividends per share exclude dividends paid to Santa Fe Pacific
Corporation. Santa Fe was a subsidiary of Santa Fe Pacific Corporation
through September 1994.
20
<PAGE> 26
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
The following tables present pro forma combined selected financial data for
Homestake giving effect to the Combination and accounting for the Combination as
a pooling of interests. The pro forma financial data do not purport to represent
what the combined financial position or results of operations would actually
have been if the Combination had occurred at the beginning of the periods or to
project the combined financial position or results of operations for any future
date or period. For additional information, see the historical financial
statements of Homestake and Santa Fe and notes thereto. See "Incorporation of
Certain Documents by Reference" and "Unaudited Pro Forma Condensed Combined
Financial Information."
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA(1)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................. $1,099,998 $1,083,071 $ 957,153 $ 809,781 $ 754,622
Income (loss) from continuing
operations......................... 70,139 134,717 80,162 (161,158) (203,703)
Income (loss) per share from
continuing
operations......................... 0.25 0.49 0.31 (0.62) (0.79)
Total assets......................... 2,339,801 2,059,607 1,953,802 1,621,513 1,916,381
Long-term obligations................ 567,483 447,434 659,877 572,945 680,032
Shareholders' equity................. 1,190,914 1,110,275 743,373 541,237 840,595
Cash dividends per share(2).......... 0.20 0.175 0.10 0.20 0.20
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------
1996 1995
-------- --------
<S> <C> <C> <C>
Revenues.................................. $832,219 $817,354
Net income................................ 43,430 54,953
Net income per share...................... 0.15 0.19
</TABLE>
- ---------------
(1) See footnotes (1) through (7) of the Selected Consolidated Historical
Financial Data of Homestake, footnotes (1) through (5) of the Selected
Consolidated Historical Financial Data of Santa Fe, and the Notes to the
Unaudited Pro Forma Financial Statements.
(2) Pro forma combined cash dividends per share reflect Homestake's historical
cash dividend rate per share declared in the periods indicated.
21
<PAGE> 27
COMPARATIVE STOCK PRICES AND PREMIUM TO SANTA FE STOCKHOLDERS
Homestake Common Stock and Santa Fe Common Stock are each listed on the
NYSE. The following table sets forth the high and low sale prices per share of
Homestake Common Stock and Santa Fe Common Stock as reported on the NYSE
Composite Transaction Tape for the periods indicated.
<TABLE>
<CAPTION>
HOMESTAKE COMMON SANTA FE COMMON
STOCK STOCK
----------------- -----------------
CALENDAR QUARTER HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1995
First Quarter......................................... $19.13 $14.75 $12.88 $ 9.00
Second Quarter........................................ 19.13 15.63 14.00 11.63
Third Quarter......................................... 18.13 16.13 13.75 11.88
Fourth Quarter........................................ 17.38 15.13 13.13 9.75
1996
First Quarter......................................... 20.63 15.75 18.25 12.13
Second Quarter........................................ 20.88 16.88 17.13 13.13
Third Quarter......................................... 18.00 14.25 15.00 12.25
October 1-December 4.................................. 16.63 13.63 13.13 10.75
December 5-December 31................................ 16.38 13.88 17.00 11.75
1997
January 1---..........................................
</TABLE>
On December 4, 1996, the closing sale prices of Homestake Common Stock and
Santa Fe Common Stock, as reported on the NYSE Composite Transaction Tape, were
$15.38 and $11.88, respectively. Based on the December 4, 1996, closing sale
price for Homestake Common Stock, 1.115 shares of Homestake Common Stock would
have been equivalent to $17.15 per share of Santa Fe Common Stock, which
represents a premium of 44% to the Santa Fe stockholders. On December 5, 1996,
Newmont Mining Corporation ("Newmont") announced a proposal (the "Newmont Public
Proposal") to acquire each share of Santa Fe Common Stock for 0.33 shares of
Newmont common stock ("Newmont Common Stock"). On December 5, 1996, the closing
sale price of Newmont Common Stock, as reported on the NYSE Composite
Transaction Tape, was $47.13. Based on this price, 0.33 shares of Newmont Common
Stock would have been equivalent to $15.55 per share of Santa Fe Common Stock.
On December 6, 1996, the last trading day prior to the execution of the
Agreement, the closing sale prices of Homestake Common Stock and Santa Fe Common
Stock, as reported on the NYSE Composite Transaction Tape, were $15.63 per share
and $15.38 per share, respectively. Based on the December 6, 1996 closing sale
price for Homestake Common Stock, 1.115 shares of Homestake Common Stock would
have been equivalent to $17.42 per share of Santa Fe Common Stock.
On -- , 1997, the last trading day prior to the date of this Proxy
Statement, the closing sale prices of Homestake Common Stock and Santa Fe Common
Stock, as reported on the NYSE Composite Transaction Tape, were $ -- per share
and $ -- per share, respectively. Based on the -- 1997 closing sale price
for Homestake Common Stock, 1.115 shares of Homestake Common Stock would have
been equivalent to $ -- per share of Santa Fe Common Stock.
The market value of the shares of Homestake Common Stock that Santa Fe
stockholders will receive in the Combination may vary significantly from the
prices shown above. Stockholders are urged to obtain current quotations for the
market prices of Homestake Common Stock.
22
<PAGE> 28
COMPARATIVE PER SHARE DATA
The following table presents Homestake's and Santa Fe's historical per
share data and pro forma combined per share data for the first nine months of
1996 and 1995 and for the years ended December 31, 1995, 1994 and 1993, giving
effect to the Combination and accounting for the Combination as a pooling of
interests, based upon the consolidated historical financial statements of
Homestake and Santa Fe and the pro forma condensed combined financial
statements. The pro forma combined information does not purport to represent
what the combined financial position or results of operations would actually
have been if the Combination had occurred at the beginning of the periods or to
project the combined financial position or results of operations for any future
date or period. The information presented below should be read in conjunction
with the consolidated historical financial statements of Homestake and Santa Fe,
the Unaudited Pro Forma Condensed Combined Financial Information and the
Selected Consolidated Historical Financial Data of Homestake and Santa Fe. See
"Incorporation of Certain Documents by Reference" and "Unaudited Pro Forma
Condensed Combined Financial Information."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------
1996 1995 1995 1994 1993
----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Per share of Homestake Common Stock:
Book value(1)........................................ $5.21 $4.32 $4.52 $ 4.27 $3.75
Cash dividends....................................... 0.15 0.15 0.20 0.175 0.10
Net income........................................... 0.19 0.16 0.22 0.57 0.38
Per share of Santa Fe Common Stock:
Book value(1)........................................ $4.29 $4.17 $4.22 $ 3.97 $2.03
Cash dividends(2).................................... 0.05 0.05 0.05
Income from continuing operations.................... 0.12 0.25 0.30 0.46 0.25
PRO FORMA:
Combined per share of Homestake Common Stock:
Book value(1)........................................ $4.44 $4.02 $4.15 $ 3.91 $2.83
Cash dividends(3).................................... 0.15 0.15 0.20 0.175 0.10
Income from continuing operations.................... 0.15 0.19 0.25 0.49 0.31
Combined per share of Santa Fe Common Stock
equivalent(4):
Book value........................................... $4.95 $4.48 $4.63 $ 4.36 $3.16
Cash dividends....................................... 0.17 0.17 0.22 0.20 0.11
Income from continuing operations.................... 0.17 0.22 0.27 0.55 0.34
</TABLE>
- ---------------
(1) Book value per share is shareholders' equity divided by common shares
outstanding at September 30, 1996 and 1995 and December 31, 1995, 1994 and
1993.
(2) Cash dividends per share of Santa Fe Common Stock exclude dividends paid to
Santa Fe Pacific Corporation. Santa Fe was a subsidiary of Santa Fe Pacific
Corporation through September 1994.
(3) Pro forma combined cash dividends per share of Homestake Common Stock
reflect Homestake's historical cash dividend rate per share declared in the
periods indicated.
(4) Pro forma combined per share of Santa Fe Common Stock equivalent information
reflects the pro forma combined per share of Homestake Common Stock amount
multiplied by the Exchange Ratio of 1.115 shares of Homestake Common Stock
for each share of Santa Fe Common Stock.
23
<PAGE> 29
RISK FACTORS; CERTAIN FORWARD-LOOKING AND CAUTIONARY STATEMENTS
The risk factors identified below should be considered (i) by Santa Fe
stockholders, in evaluating whether to vote for the adoption of the Agreement
and thereby become holders of Homestake Common Stock and (ii) by Homestake
stockholders, in evaluating whether to vote for the Homestake Charter Amendment
and the Share Issuance. These factors should be considered in conjunction with
the other information contained in this Proxy Statement, the Appendices hereto
and the documents incorporated by reference herein.
This Proxy Statement (including the documents incorporated by reference
herein) contains certain forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995) and information relating
to Homestake and Santa Fe that are based on the beliefs of the managements of
Homestake and Santa Fe, as applicable, as well as assumptions made by and
information currently available to the managements of Homestake and Santa Fe, as
applicable. Any statements made in this Proxy Statement that are not historical
in nature, including statements preceded by the words "anticipate," "believe,"
"estimate," "expect," "intend," "will" and similar expressions, as they relate
to Homestake or Santa Fe or the managements of either of them, are
forward-looking statements. Estimates of reserves, future production and future
cash costs per ounce of gold-equivalent production are also forward-looking
statements.
Ability to Achieve Cost Savings. Estimates of cost savings for the
Combined Company are based in part on the expectation that the Combined Company
will be able to eliminate certain overlapping expenses, such as general
administrative and operating expenses, that currently are incurred separately by
Homestake and Santa Fe, and the expectation that Homestake will combine its
exploration program with Santa Fe's exploration program and continue the
combined exploration program at expected levels for less cost.
Certain of the anticipated cost savings are based on the planned closing of
Santa Fe's Albuquerque headquarters, the relocation of certain Santa Fe
personnel to San Francisco and Nevada and the relocation of certain Homestake
personnel to Nevada. Although Homestake plans to close the Albuquerque
headquarters shortly after the consummation of the Combination, there can be no
assurances that it will be able to do so as soon as expected. It also may take
Homestake longer than anticipated to determine where administrative and
operating functions of the two companies are duplicative so that overlap can be
eliminated. In addition, unexpected delays may occur and related expenses may
exceed estimates in connection with the actual moving of personnel to San
Francisco and Nevada.
Certain of the anticipated cost savings are based on Homestake's
expectation of combining its and Santa Fe's exploration programs and continuing
the combined exploration program at expected levels for less cost. Factors which
could delay the combination of the exploration programs, or which could affect
the level of costs, include the ability to terminate or modify commitments with
respect to existing exploration projects, and the emergence of unanticipated
difficulties or changes at existing exploration projects, which could lead
Homestake to decide to postpone certain aspects of the combined exploration
program.
Actual cost savings resulting from the Combination may be lower than
anticipated, and realization of cost savings may be delayed. Accordingly, no
assurance can be given as to when or the extent to which such cost savings may
be realized.
Risks of Gold Mining. The business of gold exploration, development and
production by its nature involves significant risks. Among other things, the
business depends on successful location of mineable reserves and skillful
management. Gold exploration is highly speculative in nature, involves many
risks and frequently is non-productive. Once mineralization is discovered and
determined to be economically recoverable, it usually takes a number of years
from the initial phases of exploration until production commences, during which
time the economic feasibility of production may change. Substantial expenditures
are required to establish reserves through drilling, to determine means of
production and metallurgical processes to extract the metal from ore, and, in
the case of new properties, to construct mining and processing facilities.
Mining is subject to a variety of risks and hazards, including rock falls
and slides, cave-ins, flooding and other weather conditions, and other acts of
God. Homestake and Santa Fe each maintains and Homestake intends to maintain
property and liability insurance consistent with industry practice, but such
insurance contains exclusions and limitations on coverage. For example, coverage
for environmental liability generally is
24
<PAGE> 30
limited and may be totally unavailable. There can be no assurances that
insurance will continue to be available at economically acceptable premiums.
Production costs also can be affected by unforeseen changes in ore grades and
recoveries, permitting requirements, environmental factors, work interruptions,
operating circumstances, unexpected changes in the quantity or quality of
reserves, unstable or unexpected ground conditions, and technical issues.
Homestake and Santa Fe conduct mining operations and exploration in a
number of countries. Some countries have higher levels of political and economic
risk than others, including potential for such factors as government
instability, uncertainty of laws and legal enforcement and compliance, defects
in or uncertainty as to title to mining property, expropriation of property,
restrictions on production, export controls, currency non-convertibility,
fluctuations in currency exchange rates against the United States dollar,
inflation and other general economic and political uncertainties.
Estimates of Production. Estimates of future production and mine life for
particular properties and production estimates for each of Homestake and Santa
Fe as a whole are derived from annual mining plans that have been developed
based on, among other things, mining experience, reserve estimates, assumptions
regarding ground conditions and physical characteristics of ores (such as
hardness and presence or absence of certain metallurgical characteristics), and
estimated rates and costs of production. Actual production may vary from
estimates for a variety of reasons, including risks and hazards of the types
discussed above, actual ore mined varying from estimates of grade and
metallurgical and other characteristics, mining dilution, strikes and other
actions by labor at unionized locations, restrictions imposed by government
agencies and other factors. Estimates of production from properties not yet in
production or from operations that are to be expanded are based on similar
factors (including, in some instances, feasibility reports prepared by company
personnel and/or outside consultants) but, as such estimates do not have the
benefit of actual experience, there is a greater likelihood that actual results
will vary from the estimates.
Estimates of Operating Costs and Capital Costs; Capital
Projects. Estimates of cash costs for mining operations are developed based on
past experience, reserve and production estimates, anticipated mining and ground
conditions, estimated costs of materials, supplies and utilities, exchange rates
and other items. Estimates of amortization of noncash costs are based on total
capital costs and reserve estimates and may change at least annually based on
actual amounts of unamortized capital and changes in reserve estimates. If the
net book value of mining operations exceeds the estimated future undiscounted
cash flows from that mine, then an impairment loss based on the discounted cash
flows would be recognized as an expense in the period such evaluation is made.
Estimates for reclamation and environmental remediation costs are developed
based on existing and expected legal requirements, past reclamation experience,
cost estimates provided by company employees and third parties and other
factors. Estimates also reflect assumptions with respect to actions of
government agencies, including exercise of discretion and the amount of time
government agencies may take in completing processes required under applicable
laws and regulations. As a result, final costs may vary significantly from
estimates. Homestake and Santa Fe each periodically reevaluates its reclamation
cost estimates and reclamation reserves to take account of such factors.
Estimates of future capital costs are based on a variety of factors and may
include past operating experience, estimated levels of future production,
estimates by and contract terms with third-party suppliers, expectations as to
government and legal requirements, feasibility reports (which may be prepared by
company personnel and/or outside consultants) and other factors. Capital cost
estimates for new projects under development generally are subject to greater
uncertainties than additional capital costs for existing operations.
Estimated periods for completion of capital projects are based on many
factors, including Homestake's and Santa Fe's respective experience in
completing capital projects, and estimates provided by and contract terms with
contractors, engineers, suppliers and others involved in design and construction
of projects. Estimates also reflect assumptions with respect to factors beyond
the control of Homestake and Santa Fe, including, but not limited to, the time
government agencies may take in processing applications, issuing permits and
otherwise completing processes required under applicable laws and regulations.
Actual time to completion may vary significantly from estimates.
25
<PAGE> 31
Estimates of exploration costs are based upon many factors such as past
exploration costs, estimates of the level and cost of future activities, and
assumptions regarding anticipated results on each property. Actual costs may
vary during the year as a result of such factors as actual exploration results
(which could result in increasing or decreasing expenditures for particular
properties), changed conditions, and acquisitions and dispositions of property.
Price Fluctuations; Forward Sales and Hedging. The results of Homestake's
and Santa Fe's operations are affected significantly by the market price of
gold. The results of Homestake's operations are also affected, to a lesser
extent, by the market price of silver. The markets for gold and silver are
worldwide markets. Gold and silver prices are influenced by numerous factors
over which Homestake and Santa Fe have no control, including expectations with
respect to the rate of inflation, the relative strength of the United States
dollar and certain other currencies (principally Canadian and Australian
dollars), interest rates, global or regional political or economic crises,
demand for jewelry and industrial products containing gold and silver,
speculation, and sales by central banks and other holders and producers of gold
and silver in response to these factors. The supply of gold and silver consists
of a combination of new mine production, recycling of industrial products
containing gold and silver, and sales from existing stocks of bullion and
fabricated gold and silver held by governments, public and private financial
institutions, and individuals.
Homestake's general policy is to sell its production at current prices and
not to enter into forward sales, derivatives or other hedging arrangements that
establish a price for the sale of future gold and silver production. As a
result, in general, Homestake's profitability is fully exposed to fluctuations
in the current price of gold and silver in world markets. Homestake's average
realized selling prices of gold and silver were $386 and $5 per ounce,
respectively, in 1995 and $389 and $5 per ounce, respectively, in 1996. In
certain limited circumstances, Homestake will enter into forward sales
commitments for small portions of its production. In the fourth quarter of 1996,
Homestake entered into forward sales commitments on a fixed basis through 2003
at an average price per ounce of $426 for 680,088 ounces of gold expected to be
produced from the McLaughlin Mine stockpiles. These forward sales were effected
to ensure recovery of cash production costs and remaining capital costs and
reclamation expenses.
Homestake's results are also affected to a lesser degree by the market
prices for sulfur and for crude oil. Sulfur prices are affected principally by
the demand for fertilizer and the availability of by-product sulfur recovered
during the refining and processing of oil and natural gas. Crude oil prices are
affected principally by supply and demand for gasoline and fuel oil as well as
global or regional political or economic crises.
Santa Fe's hedging activities are intended to minimize the effect of
declines in gold prices on Santa Fe's results of operations for a period of
time. Santa Fe's hedging policy prohibits speculative trading, requires trading
with creditworthy counterparties and currently limits Santa Fe's maximum hedging
position to 2.7 million ounces. Additionally, hedging authority is vested in a
limited number of officers of Santa Fe and hedging activities are reported to
the Santa Fe Board on a monthly basis.
Santa Fe's average realized price per ounce has exceeded the average annual
afternoon fixing prices for gold on the London Bullion Market (the "London P.M.
Fix") for each of the last five years, as summarized below.
<TABLE>
<CAPTION>
SANTA FE'S AVERAGE
AVERAGE ANNUAL
REALIZED LONDON
YEAR PRICE P.M. FIX
-------------------------------------------------------- ---------- --------
<S> <C> <C>
1996.................................................... $411 $388
1995.................................................... 406 384
1994.................................................... 398 384
1993.................................................... 387 360
1992.................................................... 394 344
</TABLE>
26
<PAGE> 32
Santa Fe's hedging strategy is designed to permit Santa Fe to sell
increasing quantities of gold in the forward market as the price of gold
increases above historical averages and to restrict forward sales of gold by
Santa Fe as the price of gold decreases relative to historical averages.
Santa Fe may employ a number of hedging techniques, including gold
borrowings, fixed forward sales contracts, forward sales contracts made on a
spot deferred basis ("spot deferred contracts") and purchased put and written
call option contracts in combination. Under normal circumstances, counterparties
under spot deferred contracts allow Santa Fe to defer delivery of gold to a
later date at the original contract price plus the prevailing premium. Various
factors influence the decision either to deliver gold on the original delivery
date or to defer delivery to a later date.
At September 30, 1996, Santa Fe had spot deferred contracts totalling
1,901,524 ounces of gold at a weighted average price of $414 per ounce. Santa Fe
also had written call options outstanding on 175,000 ounces for 1996 and 400,000
ounces for 1997 at weighted average prices of $428 and $464 per ounce,
respectively, as well as purchased put options outstanding on 225,000 ounces for
1996 and 1,200,000 ounces for 1997 at weighted average prices of $375 per ounce.
The call options for 1996 expire at rates of between 55,000 and 60,000 ounces
per month and the put options for 1996 expire at a rate of 75,000 ounces per
month. The call options and put options for 1997 expire at rates of
approximately 33,333 and 100,000 ounces per month, respectively.
Subsequent to the Combination, management expects to recommend to the
Homestake Board that the Combined Company hedge an amount of its future combined
gold production at least equal to what Homestake and Santa Fe have been hedging
separately.
Currency Fluctuations. Gold is sold throughout the world principally based
on the United States dollar price, but operating expenses for gold mining
companies are incurred principally in local currencies. Homestake's operations
principally are based in the United States, Canada and Australia. Homestake's
Canadian and Australian subsidiaries engage in currency hedging programs in
Canadian and Australian dollars to protect against significant currency
fluctuations relative to the United States dollar. Santa Fe has no production
operations outside of the United States and therefore has no currency hedging
program.
Regulation. Homestake's and Santa Fe's mining operations and exploration
activities are subject to extensive regulation governing development,
production, labor standards, occupational health, waste disposal, use of toxic
substances, environmental regulations, mine safety, and other matters in all
jurisdictions in which they operate. Changes in regulations can have material
impacts on anticipated levels of production, costs and profitability. There can
be no assurance that all required permits and government approvals can be
secured and maintained on an economic basis.
The Mining Law of 1872 (the "Mining Law") has been the subject of
substantial debate and proposals for change for several years. While changes in
the Mining Law may occur, neither Homestake nor Santa Fe can predict when or if
changes will occur, or the extent to which any new legislation will exempt or
otherwise "grandfather" existing mining operations, unpatented mining claims on
which commercial discoveries have been made or unpatented mining claims for
which first-half final certificates have been obtained. Under current law,
persons staking unpatented mining claims on United States federal government
property open to exploration (unpatented mining claims), upon the making and
documenting of a discovery of gold or silver in commercial quantities, are
entitled to mine the property without payment of royalties and to secure title
to the property (patented mining claims) at nominal cost. Under proposals made
in recent years to amend the Mining Law, the United States government would be
entitled to receive royalties based on either the gross or net value of
production from government-owned property. This would have only minimal impact
on Homestake's current operations, as substantially all of Homestake's current
operations in the United States are conducted on privately held land. However,
the Ruby Hill Mine currently under development is located on unpatented mining
claims without first-half final certificates. It is possible that Homestake may
be required to pay royalties on production from that property when it is placed
into production, which would increase the production cost over current
estimates, but the amount of the increase, if any, is not predictable. Expansion
at the Round Mountain Mine also may occur on government-owned property, as to
which royalties similarly might be payable. Approximately -- % of Santa Fe's
reserves as of December 31, 1996, were located on
27
<PAGE> 33
private mineral rights, approximately -- % were on unpatented mining claims
on federal lands with first-half final certificates and approximately -- %
were on unpatented mining claims without first-half final certificates. Should
the Mining Law be so amended, it could reduce the amount of future exploration
and development activity conducted by the Combined Company on federal
government-owned property in the United States.
Taxes. Homestake's operations are conducted in a number of jurisdictions,
with differing rates of taxation. Homestake's income and mining taxes were
higher in 1995, and can be expected to be higher in the future, as compared with
prior years, in part because a substantial part of Homestake's income is earned
in Canada, which has a combined income tax and mining tax rate which is
significantly higher than income tax rates in the United States and Australia.
Also, under current circumstances, there is only limited ability to utilize
foreign tax credits in calculating Homestake's United States income taxes.
Finally, foreign exploration expenses are not deductible expenses for United
States income tax purposes. No future income tax benefits can be recognized in
the absence of taxable income in the jurisdictions where such expenditures are
incurred.
Reserves. Reserves reported by Homestake and Santa Fe reflect estimated
quantities and grades of gold and silver in deposits and in stockpiles of mined
material that Homestake or Santa Fe believes can be mined, processed and sold at
prices sufficient to recover the estimated future cash costs of production,
remaining investment, and anticipated additional capital expenditures. Estimates
of cost of production are based on current and projected costs taking into
account past experience and expectations as to the future. Estimated mining
dilution is factored into reserve calculations.
Reserves are reported as general indicators of the life of mineral
deposits. Reserves should not be interpreted as assurances of mine lives or of
the profitability of current or future operations. Reserves are estimated for
each property based upon factors relevant to each deposit. Reserves are
estimates based upon drilling results, past experience with property, experience
of the persons making the reserve estimates and many other factors. Reserve
estimation is an interpretive process based upon available data, and the actual
quality and characteristics of ore deposits cannot be known until mining has
taken place.
Changes in reserves over time generally reflect (i) efforts to develop
additional reserves, (ii) depletion of existing reserves through production,
(iii) actual mining experience, (iv) continued testing and development of
additional information, and (v) price and cost forecasts. Grades of ore actually
processed may be different from the stated reserve grades because of geologic
variations in different areas mined, mining dilution, losses in processing and
other factors. Recovery rates vary with the metallurgical and other
characteristics and grade of ore processed.
Gold and silver reserve calculations for properties operated by Homestake
are prepared by Homestake. Gold and silver reserve calculations for properties
not operated by Homestake are based on information provided to Homestake by the
operator. Homestake periodically reviews such information but does not
independently confirm the information provided by these operators. Homestake
used a price of $375 per ounce of gold in the preparation of its reserve
estimates at December 31, 1995 and 1996.
A multi-disciplinary team of Santa Fe geologists, engineers, and
geostatisticians uses methods generally applied within the mining industry to
estimate Santa Fe's gold reserves. Due to the nature of the mineral deposits,
all reserves are calculated from drill-hole assay results. Representative
samples are collected from the drilling, including a significant amount of core
drilling in deposits where reverse-circulation drilling samples could be
contaminated or diluted. Assay results are analyzed to detect potential bias,
and check assays are completed on all ore-grade intercepts as a quality-control
procedure. Computer-generated ore deposit models are compared against the
results obtained from manual methods and, as mining progresses, against actual
mining results. Pit outlines generated from the models are based upon mining and
processing costs and processing recoveries and are tested against mining and
processing experience to yield estimates of reserves determined by optimum
economic mining limits. Reserves reported by Santa Fe are audited and verified
annually by an outside consulting firm that, among other things, reviews the
methods used to estimate the reserves and concurs that Santa Fe's reserve models
are prepared according to accepted engineering practice and that the reserves
satisfy the requirements for classification as proven and probable gold
reserves. Pincock, Allen & Holt, Inc. performed such functions with respect to
Santa Fe's reserves at December 31, 1995 and
28
<PAGE> 34
Independent Mining Consultants, Inc. performed such functions with respect to
Santa Fe's reserves at December 31, 1996. Santa Fe used a gold price of $400 per
ounce in the preparation of its reserve estimates at December 31, 1995 and 1996.
Homestake's sulfur reserves represent the quantity of sulfur in the Main
Pass 299 deposit for which geological, engineering and marketing data give
reasonable assurance of recovery and sale under projected economic and operating
conditions at prices sufficient to cover the estimated future cash costs of
production, the remaining investment and estimated future capital expenditures.
Homestake's proven oil reserves at Main Pass 299 are the estimated quantity of
crude oil and condensate which geological and engineering data give reasonable
assurance of recovery and sale under projected operating conditions at prices
sufficient to cover the estimated future cash costs of production, the remaining
investment, and estimated future capital expenditures. The estimates are based
on limited reservoir and engineering data. The reserve estimates are based on
information provided by the operator. The operator principally relies on oil
reserve estimations performed by third-party petroleum engineers. In response to
a weakening sulfur market, Main Pass 299 operations temporarily reduced
production and sales volumes during 1996. During the third quarter of 1996,
Homestake's realized sale price for sulfur decreased to $56 per ton from $64 per
ton in the second quarter of 1996 and $70 per ton during the third quarter of
1995. During the third quarter of 1996, Homestake's cash production costs were
$52 per ton of sulfur, and total production costs were $63 per ton of sulfur. At
December 31, 1995, based on reserve estimates, projected costs, sales prices and
production rates, the Main Pass 299 sulfur mine was estimated to have an
operating life in excess of 30 years. During calendar 1995, Homestake's average
realized price of sulfur was $68 per ton. During the past five years, sulfur
prices (Tampa market) averaged approximately $70 per ton, ranging from a low of
$51 per ton to a high of $90 per ton. Homestake will continue to evaluate the
$110 million carrying value of its investment in the Main Pass 299 sulfur mine
in light of the currently depressed market for sulfur.
29
<PAGE> 35
THE COMPANIES
HOMESTAKE
Background
Homestake Mining Company is a Delaware corporation incorporated in 1983 as
the parent holding company to a California corporation ("Homestake California"),
which has been engaged in the gold mining business since 1877. Homestake is one
of the largest North American-based gold mining companies. Operations of
Homestake include mineral exploration, extraction, processing and refining. Gold
bullion is Homestake's principal product. Homestake has significant operations
in the United States, Canada and Australia. Homestake also has operations in
Chile. Homestake is engaged in active exploration projects in the United States,
Canada, Australia, Venezuela, French Guiana, Brazil, Chile and the Andean region
of South America. Homestake is also participating in development projects in
Russia and Bulgaria.
Homestake California was founded to develop the Homestake Mine discovered
in the Black Hills of the Dakota Territory in 1876. Homestake was predominately
a gold mining company until its diversification into uranium mining and
production in the early 1950s and into lead and zinc in the 1960s. In 1990,
Homestake closed its last remaining uranium mine and sold its interest in its
base metals business.
In 1975, Homestake made its initial investment in the Kalgoorlie gold
district of western Australia (known as the "Golden Mile") when Homestake Gold
of Australia Limited ("HGAL") acquired a 48% interest in the Kalgoorlie Mining
Associates partnership. In 1987, Homestake sold 20% of its shares of HGAL to the
public. Subsequently, HGAL increased its interest in Kalgoorlie Mining
Associates to 50% and acquired a 50% interest in adjacent joint ventures and
properties. In late 1995 and early 1996, Homestake acquired the HGAL shares that
it did not then own.
In 1989, Homestake joined with two partners in the development of a major
sulfur discovery, Main Pass 299, in the Gulf of Mexico.
In 1992, Homestake acquired International Corona Corporation (now known as
Homestake Canada, Inc.) ("International Corona"), a large Canadian gold
producer. As a result of the acquisition, Homestake added approximately 600,000
ounces to its yearly production of gold and increased its gold reserves by more
than 5.4 million ounces. In addition, Homestake acquired an interest in the
high-grade Eskay Creek deposit in British Columbia. Commercial production at
Eskay Creek commenced in January 1995. Homestake now holds a 50.6% interest in
the Eskay Creek mine through its shareholding in Prime Resources Group Inc., a
British Columbia company ("Prime"). The common shares of Prime are listed on The
Toronto Stock Exchange.
Recent Developments
In April 1996, Prime increased its ownership in the Snip Mine to 100%.
In November 1996, mine development commenced at the Agua de la Falda Mine
in Chile, approximately 600 miles north of Santiago. Production is expected to
commence in approximately April 1997 at an annual rate of 35,000 ounces per year
(100% basis). Homestake has a 51% interest in the mine.
In December 1996, Homestake increased its interest in the Pinson Mining
Company partnership (the "Pinson Partnership") to 50% and became the operator of
the Pinson Partnership. The Pinson Partnership holds property rights in
approximately 23,000 acres in Nevada near Santa Fe's Twin Creeks mine. Homestake
and Barrick Gold Corporation, the other 50% partner, have announced plans to
conduct extensive deep drilling exploration on the Pinson properties.
Also in December 1996, Prime (50.6% owned by Homestake) announced its
intention to build a mill to produce concentrate from certain Eskay Creek ore,
both to improve profitability of certain ore that is shipped to third party
smelters, and to upgrade ore that is not economic to produce under the smelter
contracts.
Statistical Summary
The following table provides certain 1996 and 1995 information regarding
ownership of mines, production, costs, reserves and mineralized material of
Homestake's significant properties:
30
<PAGE> 36
Statistical Summary
<TABLE>
<CAPTION>
GOLD PRODUCTION PRODUCTION COSTS PER OUNCE(1)
......................................................... .................................
Interest Tons Processed Grade Recovery Ounces Operating Other
% (millions) (oz/ton) % Produced Cash(c) Cash(d) Noncash(e)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
1996
United
States
..................................................................................................................................
Homestake 100
McLaughlin 100
Round
Mountain(2) 25
Santa
Fe 100
Pinson(3,4) 50
Marigold(4) 33
Ruby
Hill 100
Canada
..................................................................................................................................
Eskay
Creek(5,6,7) 100
Williams 50
David
Bell(8) 50
Nickel
Plate 100
Snip(5,6,9) 100
George
Lake 74
Australia
..................................................................................................................................
Kalgoorlie(10) 50
Chile
..................................................................................................................................
El
Hueso(11) 100
Agua
de
la
Falda 51
..................................................................................................................................
Total
production
Minority
interests
..................................................................................................................................
Homestake's
share of
gold
- ----------------------------------------------------------------------------------------------------------------------------------
1995
United
States
..................................................................................................................................
Homestake 100 2.5 0.171 96 402,867 $ 292 $11 $ 32
McLaughlin 100 2.3 0.120 88 241,772 234 8 111
Round
Mountain(2) 25 7.8 0.018 71 86,109 231 23 74
Santa
Fe 100 -- -- -- 16,667 118 21 --
Pinson(4) 26 0.3 0.088 79 12,587 307 15 51
Marigold(4) 33 1.1 0.071 92 23,288 225 29 59
Ruby
Hill 100 -- -- -- -- -- -- --
Canada
..................................................................................................................................
Eskay
Creek(5,6,7) 100 0.1 3.357 95 331,300 182 3 45
Williams 50 1.3 0.163 95 202,561 214 8 38
David
Bell(8) 50 0.2 0.347 94 86,523 192 11 48
Nickel
Plate 100 1.5 0.077 81 91,365 379 -- 56
Snip(5,6) 40 0.1 0.751 91 51,310 175 -- 56
George
Lake 74 -- -- -- -- -- -- --
Australia
..................................................................................................................................
Kalgoorlie(10) 50 5.4 0.068 88 311,416 296 -- 46
Chile
..................................................................................................................................
El
Hueso(11) 100 0.6 0.047 68 19,564 403 -- 23
Manto
Agua
de
la
Falda 51 -- -- -- -- -- -- --
..................................................................................................................................
Total
production 1,877,329 $ 250 $ 7 $ 51
Minority
interests (245,652)
..................................................................................................................................
Homestake's
share of
gold 1,631,677
- ----------------------------------------------------------------------------------------------------------------------------------
Eskay
Creek -- Silver
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 37
<TABLE>
<CAPTION>
RESERVES(a) MINERALIZED MATERIAL(b)
........................................ ......................
Tons Grade Contained Ounces Tons Grade
(millions) (oz/ton) (thousands) (millions) (oz/ton)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
..............................................................................................
..............................................................................................
..............................................................................................
..............................................................................................
..............................................................................................
..............................................................................................
- -------------------------------------------------------------------------------------
..............................................................................................
26.0 0.197 5,119 24.8 0.168
19.3 0.068 1,315 -- --
127.2 0.020 2,500 19.6 0.020
-- -- -- -- --
1.1 0.073 78 -- --
4.8 0.036 176 -- --
7.6 0.099 755 9.2 0.067
..............................................................................................
0.6 1.875 1,067 0.1 0.879
18.4 0.150 2,749 4.3 0.121
3.0 0.300 911 -- --
0.9 0.079 74 -- --
0.1 0.776 60 -- 0.685
-- -- -- 2.6 0.322
..............................................................................................
92.1 0.072 6,591 82.1 0.064
..............................................................................................
-- -- -- -- --
0.5 0.181 95 -- --
..............................................................................................
..............................................................................................
301.6 21,490 142.7
- -------------------------------------------------------------------------------------
0.6 83.4 47,439 0.1 55.99
- -------------------------------------------------------------------------------------
</TABLE>
DEFINITIONS:
(a) A proven and probable RESERVE is that part of a mineral deposit which could
be extracted or produced economically and legally at the time of the reserve
determination.
(b) MINERALIZED MATERIAL is gold-bearing material that has been physically
delineated by one or more of a number of methods including drilling,
underground work, surface trenching and other types of sampling. This
material has been found to contain a sufficient amount of mineralization of
an average grade of metal or metals to have economic potential that warrants
further exploration evaluation. While this material is not currently or may
never be classified as reserves, it is reported as mineralized material only
if the potential exists for reclassification into the reserves category.
This material has established geologic continuity, but cannot be classified
in the reserves category until final technical, economic and legal factors
have been determined and the project containing the material has been
approved for development.
(c) OPERATING CASH COSTS are costs directly related to the physical activities
of producing gold; includes mining, milling, third-party smelting, and
in-mine exploration expenditures that are related to production.
(d) OTHER CASH COSTS are costs that are not directly related to, but may result
from, gold production; includes production taxes and royalties.
(e) NONCASH COSTS are costs that typically are accounted for ratably over the
life of an operation; includes depreciation, depletion, final reclamation
and the amortization of the economic cost of property acquisitions, but
excludes amortization of SFAS 109 deferred tax purchase adjustments relating
to property acquisitions.
NOTES:
(1) Effective January 1, 1996, Homestake adopted the "Gold Institute Production
Cost Standard" for reporting of per ounce production costs. All per ounce
production costs in this Statistical Summary are presented on this basis.
(2) Recovery relates to reusable pad at the Round Mountain Mine.
(3) Homestake increased its interest in the Pinson Mine to 50% in December 1996.
(4) Recovery and grade relate to ore milled at the Pinson and Marigold Mines.
(5) The Eskay Creek and (effective April 1996) Snip Mines are owned 100% by
Prime of which Homestake owns 50.6% of the stock outstanding. The ownership
interests and production amount shown are Homestake's interests without
reduction for the minority interest in Prime. Reserves and mineralized
material amounts shown as Homestake's interests after reduction for the
49.4% minority interest in Prime.
(6) Includes ounces of gold contained in ore or concentrates sold to smelters.
(7) Gold and silver are accounted for as co-products at Eskay Creek. Silver
production is converted into gold equivalent, using the ratio of the gold
market price to the silver market price. For the years ended December 31,
1996 and 1995, the ratio was -- and 73.8 ounces of silver equals one ounce
of gold production, respectively. Reserves and mineralized material relate
to gold only.
(8) Ounces produced includes -- and 7,140 ounces of gold production from the
Quarter Claim in 1996 and 1995, respectively. Reserves include a 25% net
profits interest in the Quarter Claim.
(9) Prime purchased the remaining 60% interest in the
Snip Mine in April 1996.
(10)Homestake completed the acquisition of the minority interest in Homestake
Gold of Australia Limited in early 1996, increasing its interest in
Kalgoorlie to 50%. All amounts shown for Kalgoorlie reflect the completion
of that acquisition.
(11)Recovery and grade relate to the higher-grade ore at the El Hueso Mine.
<PAGE> 38
SANTA FE
Background
Santa Fe Pacific Gold Corporation was incorporated in Delaware in 1983 and,
until 1994, was a wholly-owned subsidiary of Santa Fe Pacific Corporation
("SFP") or its predecessor corporation. On June 16, 1994, Santa Fe completed an
initial public offering of 14.6% of the Santa Fe Common Stock and on September
30, 1994, SFP distributed its remaining Santa Fe Common Stock to the SFP
stockholders.
Santa Fe is engaged in the mining and processing of gold ores and the
exploration and development of gold properties. It is one of the largest gold
mining enterprises in North America, as measured by reserves and gold
production, with a total of 17.9 million ounces of proven and probable gold
reserves as of December 31, 1995, and total 1995 gold production of 846,000
ounces. Santa Fe's Twin Creeks Mine, which Santa Fe estimates to be the third
largest primary gold mine in North America, and its Lone Tree Complex are
located in northern Nevada; and its Mesquite Mine is located in southern
California. Santa Fe also explores and evaluates precious metals properties and
prospects in the United States, elsewhere in North America, South America,
Central Asia, West Africa and the southwestern Pacific region.
Prior to 1984, Santa Fe's revenue and income were primarily derived from
rents and royalties from leasing its mineral rights holdings in New Mexico and
Arizona. In late 1984, Santa Fe began active mining operations when it opened
the Lee Ranch Mine in northwestern New Mexico and began the surface mining and
sale of coal. In 1987, Santa Fe acquired its first aggregates quarries from an
SFP affiliate. By 1992, Santa Fe operated six aggregates quarries in five states
in the West and Southwest.
In 1987 and 1989, Santa Fe announced the discoveries of gold that led to
the development and construction of the Rabbit Creek Mine and the Lone Tree
Mine, respectively. Gold production commenced at the Rabbit Creek Mine in August
1990, and at the Lone Tree Mine in August 1991.
On June 25, 1993, Santa Fe completed an asset exchange with Hanson Natural
Resources Company ("HNRC"), an affiliate of Hanson plc. In this exchange, HNRC's
gold assets, which included the Chimney Creek Mine in Nevada, the Mesquite Mine
in California, two advanced exploration projects in Nevada and Montana and other
gold prospects in North America and Chile, were exchanged for essentially all of
Santa Fe's coal and aggregates assets. Santa Fe thereafter consolidated the
operations of the Rabbit Creek Mine with those of the Chimney Creek Mine,
forming the Twin Creeks Mine.
Recent Developments
In late 1994, Santa Fe commenced an expansion project at the Twin Creeks
Mine for processing of refractory sulfide ores. The project includes the
addition of a new Sage Mill which will contain two 4,000 ton-per-day autoclaves
and other processing facilities. The first autoclave is expected to be
commissioned in the first quarter of 1997 and the second in late 1997. The
carbon-in-leach circuit of the Sage Mill commenced operation in September 1996
and oxide-ore processing commenced in November 1996. Commissioning of the
sulfide ore processing circuit of the Sage Mill is subject to approval of the
Plan of Operations, which is expected in early 1997.
In May 1995, Santa Fe commenced development of the Trenton Canyon Mine, a
conventional run-of-mine heap leach operation within the Lone Tree Complex.
Loading of ore onto heap leach pads commenced in October 1996 with first gold
production expected in early 1997.
In September 1996, Santa Fe entered into a 50/50 joint venture agreement
with Hecla Mining Company for the development of the Rosebud Mine, an
underground, high-grade oxide gold deposit located 50 miles west of Winnemucca,
Nevada. Construction of the surface facilities and infrastructure began in
August 1996 and production is expected to commence in mid-1997, subject to
securing required permits.
In October 1996, Santa Fe commenced mining operations at the Mule Canyon
Mine (also part of the Lone Tree Complex) upon receipt of approval of the Plan
of Operations. In early November 1996, Santa Fe commenced shipments of Mule
Canyon high grade ore to the Lone Tree Mine for processing in its mill and
pressure oxidation facility. On November 22, 1996, the first Mule Canyon gold
was included in gold dore
33
<PAGE> 39
poured at the Lone Tree Mine. A portion of Mule Canyon ore is expected to be
processed at the Twin Creeks Mine beginning in the first quarter of 1997 when
the sulfide ore processing circuit of Sage Mill is commissioned.
Statistical Summary
The following table provides certain 1996 and 1995 information regarding
ownership of production costs, reserves and mineralized material of Santa Fe's
significant properties.
34
<PAGE> 40
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
GOLD PRODUCTION
------------------------------------------- PRODUCTION COSTS PER OUNCE
TONS ---------------------------
OWNERSHIP PROCESSED GRADE RECOVERY OUNCES OPERATING OTHER
INTEREST% (MILLIONS) (OZ/TON) (%) PRODUCED CASH CASH NONCASH
---------- ---------- -------- -------- -------- --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
Twin Creeks
Mill...............................
Heap Leach.........................
----
Total............................
Lone Tree Complex
Mill...............................
Heap Leach.........................
----
Total............................
Mesquite
Heap Leach.........................
Rosebud
Mill...............................
--
---- ---- ----
Total................................
== ==== ====
1995
Twin Creeks
Mill............................... 2.4 0.087 89 185,355
Heap Leach......................... 17.0 0.020 -- 239,112
----
Total............................ 100 424,467 $ 175 $ 4 $ 75
Lone Tree Complex
Mill............................... 1.0 0.154 90 142,861
Heap Leach......................... 2.8 0.040 -- 85,107
----
Total............................ 100 227,968 210 4 75
Mesquite
Heap Leach......................... 100 13.8 0.022 -- 193,361 194 7 106
--
---- ---- ----
Total................................ 845,796 $ 189 $ 5 $ 82
==== == ==== ====
<CAPTION>
RESERVES MINERALIZED MATERIAL
-----------------------------------
CONTAINED ---------------------
TONS GRADE OUNCES TONS GRADE
TOTAL (MILLIONS) (OZ/TON) (THOUSANDS) (MILLIONS) (OZ/TON)
----- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1996
Twin Creeks
Mill...............................
Heap Leach.........................
Total............................
Lone Tree Complex
Mill...............................
Heap Leach.........................
Total............................
Mesquite
Heap Leach.........................
Rosebud
Mill...............................
----- ---
Total................................
===== ===
1995
Twin Creeks
Mill...............................
Heap Leach.........................
Total............................ $254 150.1 0.070 10,467 161 0.047
Lone Tree Complex
Mill...............................
Heap Leach.........................
Total............................ 289 89.9 0.070 6,271 33 0.042
Mesquite
Heap Leach......................... 307 52.8 0.021 1,132 54 0.021
----- ---
Total................................ $276 17,870
===== ===
</TABLE>
35
<PAGE> 41
THE COMBINATION
GENERAL
The Homestake Board and the Santa Fe Board have approved the Agreement,
which provides that, subject to the terms and conditions of the Agreement, and
in accordance with the Delaware General Corporation Law, as amended (the
"DGCL"), at the Effective Time, Homestake, Sub and Santa Fe will consummate the
Merger in which Sub will be merged with and into Santa Fe. Santa Fe will be the
surviving corporation in the Merger and will be a wholly-owned subsidiary of
Homestake. Each share of Santa Fe Common Stock outstanding will be converted
into the right to receive 1.115 shares of Homestake Common Stock. This section
of the Proxy Statement describes certain aspects of the proposed Combination,
including the Merger and certain terms of the Agreement. The description of the
Combination contained in this Proxy Statement does not purport to be complete
and is qualified in its entirety by reference to the Agreement, a copy of which
is attached hereto as Appendix A and which is incorporated herein by reference.
All stockholders of Homestake and Santa Fe are urged to read the Agreement
carefully in its entirety.
BACKGROUND OF THE COMBINATION
From time to time, commencing shortly after it became a public company in
1994, Santa Fe has considered its strategic alternatives for maximizing
stockholder value, including methods of increasing the multiples at which Santa
Fe Common Stock trades. An attractive acquisition or business combination was
regarded as a possible method.
Under applicable accounting rules, a company may not "initiate" a business
combination to be accounted for as a pooling of interests within two years of
the time that the company was a subsidiary of another company. Santa Fe ceased
being a subsidiary of SFP on September 30, 1994. Accordingly, prior to October
1, 1996, Santa Fe could not "initiate" a business combination to be accounted
for as a pooling of interests. Preliminary discussions are not generally
regarded as the "initiation" of a business combination. Santa Fe and the Santa
Fe Board were aware of, and were advised by Price Waterhouse regarding, these
rules. Throughout the consideration of strategic alternatives, the Santa Fe
Board was cognizant of acting in a manner designed to preserve the ability to
complete a pooling of interests transaction after September 1996. See "The
Combination--Anticipated Accounting Treatment."
In September 1995, Santa Fe was approached by an investment bank which
proposed that Santa Fe discuss a possible business combination with a major
international gold company ("Gold Company A").
On October 6, 1995, SBCW, which had acted as financial advisor to Santa Fe
in the past, made a presentation to Santa Fe's management regarding an overview
of strategic alternatives, including possible business combinations with certain
gold companies, including Gold Company A.
Later in October 1995, Santa Fe met with Gold Company A and each company
signed confidentiality agreements. Also in October 1995, another gold company
("Gold Company B") approached Santa Fe regarding a possible business
combination. In November 1995, Santa Fe, Gold Company A and Gold Company B held
discussions regarding a possible three-way business combination. Neither
Homestake nor Newmont was involved in this possible transaction.
On December 7, 1995, the Santa Fe Board met and discussed Santa Fe's
strategic alternatives, including the possible three-way business combination.
SBCW presented an analysis of the possible three-way business combination to the
Santa Fe Board. During the period from December 1995 through February 1996,
Santa Fe held various discussions with Gold Company A and Gold Company B
regarding the possible three-way business combination.
On January 19, 1996, Santa Fe retained SBCW to act as its financial advisor
with respect to defining and implementing certain strategic options, including a
possible acquisition or merger of equals. See "The
36
<PAGE> 42
Combination--Opinion of Santa Fe's Financial Advisor" for a description of the
terms of SBCW's engagement.
On January 25, 1996, and February 20, 1996, the Santa Fe Board met and
considered, among other things, the status of the possible three-way business
combination. SBCW made a presentation on the possible three-way combination to
the Santa Fe Board at the January 25, 1996, meeting.
Discussions and limited due diligence investigations regarding the possible
three-way business combination continued on an intermittent basis until late
spring 1996, at which time one of the other parties took certain corporate steps
not involving the three-way business combination and, accordingly, discussions
regarding such combination were terminated. Although it was contemplated that
such business combination would be a stock-for-stock transaction, the parties
never discussed possible exchange ratios.
On March 4, 1996, at a meeting initiated by Harry M. Conger, then Chairman
and Chief Executive Officer of Homestake, and Mr. Thompson, Mr. Conger and Mr.
Thompson advised Mr. James that Homestake believed that a combination of
Homestake and Santa Fe would be in the best interests of both companies. Because
the Santa Fe Board, although continuing to study Santa Fe's strategic options,
had made no determination to alter its course of operating as an independent
public company, Mr. James replied that Santa Fe believed its best interests
would at the time be served by remaining independent.
On March 28, 1996, the Santa Fe Board met and, among other things,
continued to review Santa Fe's strategic alternatives, including the possibility
of a business combination with certain gold companies (including Homestake and
Newmont), the acquisition of a gold company, the formation of a strategic
alliance or remaining an independent company. SBCW made a presentation to the
Santa Fe Board at this meeting regarding these matters.
During the period from April 1996 to August 1996, representatives of Santa
Fe held meetings with representatives of five other gold companies (none of
which is referred to above), to discuss the possibility of a business
combination.
On April 2, 1996, Ronald C. Cambre, Chairman and Chief Executive Officer of
Newmont, and Mr. James met at an industry conference. Mr. Cambre proposed that
Newmont and Santa Fe discuss a possible business combination. On April 29, 1996,
Mr. Cambre sent Mr. James a follow-up letter reiterating his interest in
commencing discussions regarding a business combination. On May 10, 1996, Mr.
James called Mr. Cambre to respond to this letter and suggested the possibility
of forming a technology joint venture with Newmont but deferred consideration of
a possible business combination.
On May 23, 1996, the Santa Fe Board met and continued its consideration of
possible business combinations and other strategic alternatives.
On July 17, 1996, Mr. Cambre sent a letter to Mr. James concerning the
possibility of a business combination between Newmont and Santa Fe.
On July 25, 1996, the Santa Fe Board met and continued its consideration of
possible business combinations and other strategic alternatives. As a result of
the previous discussions held with potential parties to business combinations
and discussions at this and previous board meetings, the Santa Fe Board decided
to focus its attention on Homestake, Newmont and Gold Company A as the most
favorable potential parties to a business combination. A few days later, in
response to an inquiry from Santa Fe, Gold Company A informed Santa Fe that it
was not interested in pursuing a business combination with Santa Fe.
In July 1996, as part of its ongoing review of strategic alternatives, the
management of Homestake concluded that it would be desirable to initiate
preliminary discussions with Santa Fe regarding a possible business combination
of the two companies. On July 26, 1996, at a meeting of the Homestake Board, Mr.
Thompson advised the Homestake Board of his and Mr. Conger's March 4, 1996,
meeting with Mr. James and of Santa Fe's expressed desire to remain independent.
At that meeting, the Homestake Board discussed the rationale for a business
combination with Santa Fe, and authorized management to initiate discussions of
a possible business combination with Santa Fe.
On August 2, 1996, at a meeting initiated by Mr. Thompson, Mr. Thompson
reiterated to Mr. James Homestake's interest in a business combination between
Santa Fe and Homestake. At this meeting,
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<PAGE> 43
Mr. Thompson discussed the possible benefits of a combination of the two
companies and Mr. Thompson presented Mr. James a letter which stated that Mr.
Thompson looked forward to the possibility of combining Homestake and Santa Fe.
On August 5, 1996, Mr. James called Mr. Cambre and said that Santa Fe would
likely entertain business combination proposals at some future time, but at the
present time Santa Fe was focused on internal development. On August 8, 1996,
Mr. Cambre sent a letter to Mr. James reiterating his interest in pursuing a
possible business combination between Santa Fe and Newmont.
On August 22, 1996, at a meeting of the Homestake Board, Mr. Thompson
advised the Homestake Board of his August 2, 1996, meeting with Mr. James.
In light of Santa Fe's focus at the time on a stand-alone business plan, on
August 22, 1996, Mr. James sent a letter to Mr. Cambre in which he stated that
Santa Fe did not believe that the time was right for Santa Fe to discuss a
potential business combination with Newmont. On September 13, 1996, Mr. James
called Mr. Thompson to advise him that Santa Fe was not interested in pursuing a
business combination with any company at that time.
On September 26, 1996, at a meeting of the Homestake Board, Mr. Thompson
advised the Homestake Board of Mr. James' advice that Santa Fe was not
interested in a business combination with any company at that time. Mr. Thompson
also advised the Homestake Board that Homestake's management would continue its
contacts with Santa Fe with the objective of demonstrating to Santa Fe the
advantages of a transaction with Homestake when Santa Fe was ready to consider
the matter of a possible business combination.
On September 26, 1996, the Santa Fe Board met and continued its
consideration of possible strategic alternatives, including to continue to
operate as an independent public company. SBCW made a presentation to the Santa
Fe Board at this meeting updating its analysis of possible strategic
alternatives. The Santa Fe Board then designated Mr. James and David H.
Batchelder, a director of Santa Fe, as Santa Fe's negotiating team and directed
Mr. James and Mr. Batchelder to commence discussions with Newmont as to a
possible business combination on or after October 1, 1996.
On October 1, 1996, at a meeting initiated by Mr. James, Mr. James and Mr.
Batchelder met with Mr. Cambre and Wayne Murdy, Chief Financial Officer of
Newmont, to discuss a possible business combination. Mr. James and Mr.
Batchelder said that the Santa Fe stockholders would have to receive a
significant premium for their shares in any such transaction. Mr. James and Mr.
Batchelder asked that Newmont make a written proposal which included a range of
proposed exchange ratios.
In response to such request, on October 9, 1996, Mr. Cambre sent Mr. James
a letter in which Newmont stated that, based on, among other things, the
information available to Newmont and projections of potential synergies, Newmont
would be prepared to offer Santa Fe stockholders 0.32 to 0.35 shares of Newmont
Common Stock per Santa Fe share in a tax-free business combination to be
accounted for as a pooling of interests. The range represented a premium of 23%
to 35% over the market price of the Santa Fe Common Stock on October 8, 1996.
Newmont's proposal was subject to due diligence and to Santa Fe agreeing to
negotiate exclusively with Newmont for 60 days. In the letter, Mr. Cambre said
that the merger agreement Newmont was prepared to enter into would include Santa
Fe granting Newmont an option to purchase 19.9% of Santa Fe's Common Stock and a
termination fee of a size consistent with standard practice. On October 17,
1996, at a meeting initiated by Mr. James, Mr. James and Mr. Batchelder
discussed the letter with Mr. Cambre. At this meeting, Mr. Batchelder advised
Mr. Cambre that the low end of Newmont's proposed range of values was
unacceptable, that an option to purchase Santa Fe Common Stock was not
acceptable because it would prevent a subsequent transaction with another party
from being accounted for as a pooling of interests, and that Santa Fe was not
prepared to negotiate exclusively with Newmont at that point. Mr. Cambre
responded that Newmont might be prepared to pay a premium of approximately 30%
to 35% to the market price of the Santa Fe Common Stock.
On October, 17, 1996, the Santa Fe Board held a telephonic briefing at
which Mr. James and Mr. Batchelder explained to the Santa Fe Board the status of
their discussions with Newmont.
On October 25, 1996, Santa Fe signed a confidentiality agreement with
Newmont.
38
<PAGE> 44
On November 6, 1996, Mr. Thompson sent a letter to Mr. James in which Mr.
Thompson stated that he was prepared to recommend to the Homestake Board a
business combination between Homestake and Santa Fe which would include a share
exchange ratio that would result in a premium for the Santa Fe stockholders, and
that would result in the respective Santa Fe and Homestake stockholders sharing
equally in the new, larger company.
On November 7, 1996, Mr. James and Bruce Hansen, Senior Vice
President--Corporate Development of Santa Fe, met with another gold company, at
the initiation of the other gold company, to discuss a possible business
combination. The other gold company discussed a possible stock-for-stock
transaction not involving a premium for the Santa Fe Common Stock. Mr. James
informed the members of the Santa Fe Board of this meeting and Santa Fe
determined that such transaction would not be as attractive to Santa Fe as a
transaction with Homestake or Newmont because it did not involve a premium.
On November 8 and 9, 1996, representatives of Santa Fe, including Mr. James
and Mr. Batchelder, and Newmont, including Mr. Cambre and Mr. Murdy, met to
conduct due diligence on each other and to discuss a possible business
combination. Mr. James and Mr. Batchelder advised Mr. Cambre and Mr. Murdy that
Newmont was not the only party with whom Santa Fe was discussing a possible
business combination and that Newmont should make its very best offer if Newmont
chose to make an offer.
On November 12, 1996, at a meeting initiated by Mr. James, Mr. James and
Mr. Thompson discussed Mr. Thompson's November 6 letter and Mr. Thompson's views
of the benefits of a business combination between Santa Fe and Homestake.
On November 13, 1996, at a telephonic briefing, the Santa Fe Board
discussed the status of Mr. James' and Mr. Batchelder's discussions with
Newmont. Mr. James also reported on his conversation with Mr. Thompson. The
Santa Fe Board then authorized Mr. James and Mr. Batchelder to determine on what
terms Homestake would be willing to proceed with a possible business
combination.
On November 13, 1996, Mr. James sent Mr. Cambre a letter stating that
Newmont should submit a business combination proposal to Santa Fe by November
20, 1996, if Newmont were interested in pursuing a business combination with
Santa Fe. The letter also set forth information that Santa Fe expected Newmont
to address as part of its proposal.
On November 13, 1996, Mr. James called Mr. Thompson to suggest that the
management of the two companies meet in Tucson, Arizona, on the weekend of
November 16 and 17, 1996, to discuss their companies and the possible benefits
of a business combination between them. Mr. James then advised Mr. Thompson that
Homestake should prepare a due diligence presentation if it wanted to be
considered by Santa Fe in a strategic transaction. Mr. James asked Mr. Thompson
to clarify the statement in Mr. Thompson's November 6, 1996 letter to the effect
that Santa Fe and Homestake stockholders would share equally in the new larger
company. Mr. Thompson said that he contemplated an exchange ratio of one share
of Homestake Common Stock for each share of Santa Fe Common Stock. Mr. James
said that such exchange ratio would be inadequate.
On November 17, 1996, Santa Fe signed a confidentiality agreement with
Homestake. On November 17 and 18, 1996, representatives of Santa Fe and
Homestake met in Tucson, Arizona, to make due diligence presentations to each
other and to discuss the benefits of a business combination.
On November 18, 1996, Mr. James gave Mr Thompson a letter stating that
Homestake should submit a proposal for a business combination to Santa Fe by
November 21, 1996, if Homestake was interested in pursuing a business
combination with Santa Fe. The letter also set forth information that Santa Fe
expected Homestake to address as part of its proposal.
On November 21, 1996, Mr. Cambre sent Mr. James a letter proposing a
business combination in which each share of Santa Fe Common Stock would be
converted into the right to receive 0.33 shares of Newmont Common Stock and
Santa Fe would receive three representatives of Newmont's choosing on Newmont's
ten-member Board of Directors.
On November 21, 1996, at a meeting of the Homestake Board, Homestake
management reviewed with the Homestake Board the results of its discussions with
Santa Fe and Homestake management's suggested
39
<PAGE> 45
principal terms of a business combination between Homestake and Santa Fe. At
this meeting, the Homestake Board authorized Homestake management to make a
proposal to Santa Fe for a business combination between Homestake and Santa Fe.
On November 22, 1996, Mr. Thompson sent Mr. James a letter proposing a
business combination in which each share of Santa Fe Common Stock would be
converted into the right to receive 1.115 shares of Homestake Common Stock and
each of Santa Fe and Homestake would be entitled to designate five members of
the Homestake Board, with those ten directors then choosing two additional
directors.
Both Newmont and Homestake proposed that their respective transactions
would be tax-free and accounted for as a pooling of interests. Both Newmont and
Homestake also proposed termination fees, $75 million in the case of Newmont and
mutual termination fees of $85 million in the case of Homestake. Homestake also
proposed mutual options to purchase common stock which would be exercisable upon
the occurrence of certain triggering events. Although both Newmont and Homestake
sought exclusivity as a condition to any further consideration of its proposal,
Santa Fe did not acquiesce to either party's condition and continued to deal
with both parties. Both Newmont and Homestake stated that they would need to
complete their due diligence investigation of Santa Fe.
During the period from November 22, 1996 through November 26, 1996, Santa
Fe held further discussions with both Newmont and Homestake seeking to, among
other things, increase the consideration offered, reduce the termination fees
and, in Homestake's case, eliminate the cross-options to purchase common stock.
Each party was advised by Santa Fe that it was not the only bidder and was
invited to submit its best and final proposal. Homestake was informed that
mutual stock options were not acceptable because they would prevent a subsequent
transaction with another party from being accounted for as a pooling of
interests and that $85 million was too large a termination fee. Homestake and
Newmont each modified the "no solicitation" and termination aspects of its
proposal and Homestake agreed to drop the cross-options, but neither of them
modified its proposed exchange ratio. Newmont offered to let Santa Fe nominate
six directors to Newmont's Board of Directors, from whom Newmont would choose
three.
On November 26, 1996, the Santa Fe Board met to consider both the Homestake
and the Newmont proposals. Following discussion and a presentation by SBCW, the
Santa Fe Board unanimously determined that the Homestake proposal represented a
more attractive alternative than the Newmont proposal. The Santa Fe Board
determined to proceed with Homestake on the condition that the termination fee
contemplated by the Homestake proposal be reduced to $65 million.
The Santa Fe Board's determination that the Homestake proposal represented
a more attractive alternative than the Newmont proposal was based, among other
things, on (i) the higher value of the Homestake proposal compared to the
Newmont proposal based on the exchange ratios proposed and recent market prices
of the Homestake Common Stock and the Newmont Common Stock (based on the closing
prices for the stocks on November 25, 1996, the Homestake proposal had a value
of $16.73 per Santa Fe share as compared to $15.96 per Santa Fe share for the
Newmont proposal), (ii) the financial condition, results of operations and cash
flow of Homestake and Newmont, both on an historical and a prospective basis,
(iii) the strategic fit between Santa Fe and each of Homestake and Newmont,
including the opportunities for synergies and cost savings, (iv) the ability of
the Santa Fe stockholders to participate in the potential benefits of each
transaction through the ownership of approximately 50% of the Homestake Common
Stock in the case of Homestake and the ownership of approximately 30% of the
Newmont Common Stock in the case of Newmont, (v) the post-transaction
composition of the Board of Directors of Homestake and Newmont, respectively,
contemplated by each proposal, (vi) that the Santa Fe stockholders would have
the opportunity for additional gain from the higher multiples which may be
accorded over time to the Homestake Common Stock following the consummation of a
business combination with Homestake, whereas Newmont presently trades at the
higher end of the range of multiples of gold mining stock (see item 12 under
"Santa Fe Reasons for the Combination; Recommendation of the Santa Fe Board")
and (vii) the location of Homestake's and Newmont's principal operating
properties and the political risk profiles related thereto. The Santa Fe Board
noted that each of Homestake and Newmont had been asked to provide its "best and
final" bid. In addition, the Santa Fe Board believed that the terms of
Homestake's proposal, including the proposed termination fee (assuming a
reduction to $65 million), would not deter a more attractive offer for Santa Fe.
40
<PAGE> 46
On November 26, 1996, Homestake agreed to reduce the termination fee
contemplated by its proposal to $65 million.
On November 27, 1996, Mr. James and Mr. Batchelder called Mr. Cambre to
advise him that Santa Fe was not pursuing Newmont's proposal.
Later that day, Santa Fe and Homestake negotiated and signed an exclusivity
agreement required by Homestake pursuant to which (i) neither party would
solicit or encourage a business combination with any third party prior to
December 12, 1996, and (ii) if a definitive agreement was not signed by December
12, 1996, and prior to such date a third party had made a business combination
proposal to Santa Fe, then Santa Fe would pay Homestake $5 million.
On the evening of November 27, 1996, Mr. Cambre called Mr. James to state
that Newmont had been friendly up to this point, but that there were other ways
to proceed with Newmont's interest in a business combination with Santa Fe.
During the period from November 27, 1996, through December 8, 1996, Santa
Fe and Homestake continued discussions of the terms of a possible business
combination and negotiated the terms of the Agreement.
On December 5, 1996, Mr. Cambre sent Mr. James, and also publicly
disclosed, a letter containing the Newmont Public Proposal. The Newmont Public
Proposal provided for a business combination with Santa Fe in which each share
of Santa Fe Common Stock would be converted into the right to receive 0.33
shares of Newmont Common Stock (the same exchange ratio which Santa Fe had
determined not to proceed with on November 26, 1996). Later that day, Santa Fe
publicly announced that it had received the Newmont Public Proposal and that it
had no further comment at that time. On the same day, the Santa Fe Board met and
considered, among other things, the Homestake proposal and unanimously
determined to proceed to a definitive merger agreement with Homestake and not to
proceed with Newmont.
On December 8, 1996, the Santa Fe Board met to consider the Agreement.
Following a discussion of the matter and a presentation by SBCW, including the
delivery of its fairness opinion (see "The Combination-- Santa Fe Reasons for
the Combination; Recommendations of the Santa Fe Board" and "The Combination--
Opinion of Santa Fe's Financial Advisor"), the Santa Fe Board unanimously
approved the Agreement.
On December 8, 1996, the Homestake Board met to consider the Agreement.
Following a discussion of the matter and a presentation by Dillon Read,
including delivery of its fairness opinion (see "The Combination--Homestake
Reasons for the Combination; Recommendations of the Homestake Board" and "The
Combination--Opinion of Homestake's Financial Advisor"), the Homestake Board
unanimously approved the Agreement.
On December 8, 1996, Homestake and Santa Fe signed the Agreement and issued
a joint press release announcing the Agreement. Santa Fe's approval and
execution of the Agreement, and the announcement of the Agreement, served as a
rejection of the Newmont Public Proposal.
HOMESTAKE REASONS FOR THE COMBINATION; RECOMMENDATION OF THE HOMESTAKE BOARD
At meetings held on November 21 and December 8, 1996, the Homestake Board
received and considered presentations from Homestake management and its legal
and financial advisors regarding the Combination. After careful consideration,
on December 8, 1996, the Homestake Board unanimously approved the Combination,
including the Agreement, the Homestake Charter Amendment and the Share Issuance,
as being fair to and in the best interests of the Homestake stockholders.
In reaching that decision, the Homestake Board considered a number of
factors, including those listed below. In view of the wide variety of factors
considered by the Homestake Board in connection with its evaluation of the
Combination, and the complexity of those matters, the Homestake Board did not
consider it practicable to, nor did it attempt to, quantify or otherwise assign
relative weights to the specific factors it considered in reaching its decision.
In addition, individual members of the Homestake Board may have given different
weight to different factors.
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General Industry Factors. The Homestake Board reviewed the generally
prevailing conditions in the gold industry in the United States and worldwide.
The combination of Homestake and Santa Fe will create the largest North
American-based gold mining company in terms of reserves. As of December 31,
1995, the Combined Company would have had 39.4 million ounces of gold reserves
(after reduction for minority interests). Combined 1996 production of 2.7
million gold-equivalent ounces is expected to increase to 3.2 million gold
equivalent ounces in 1998, with estimated cash production cost under $245 per
ounce in 1998. In addition, the Combined Company will control more than 1.7
million acres in Nevada, giving the Combined Company the largest land holding
position of any gold mining company in one of the world's most prospective
areas. The Combined Company will have the lowest political risk profile of any
major North American-based gold mining company and will also have a strong
balance sheet and greater cash flow. The Combined Company's total worldwide
property position will be approximately 21 million acres, including large land
positions in the United States, Canada, Australia, Brazil, Chile, Venezuela,
Ghana, Burkina Faso, Kazakstan and the Kyrgyz Republic. These factors should
permit the Combined Company to pursue aggressive acquisition, exploration and
development opportunities in the United States and throughout the world, and
will give the Combined Company the financial ability to compete more effectively
for the attractive opportunities available only to the largest competitors.
Business, Conditions and Prospects of Homestake and Santa Fe. In evaluating
the Combination, the Homestake Board considered information with respect to the
business, conditions and prospects of both Homestake and Santa Fe, including the
results of investigations conducted by Homestake management with respect to the
current operations, assets, financial condition, prospects and liabilities of
Santa Fe. Among other factors, the annual production of gold from Santa Fe mines
is expected to increase significantly over the next few years, making a major
contribution to the production growth of the Combined Company. Homestake's
strong balance sheet and cash flow will permit the Combined Company to manage
more easily Santa Fe's debt service requirements.
Pro Forma Impact of the Combination on the Stockholders of Homestake. The
Homestake Board considered presentations by Homestake management and Dillon Read
concerning the likely pro forma impact of the Combination on the current
stockholders of Homestake. The Combination is expected to be accretive to the
Homestake stockholders in 1997 (before one-time transaction and restructuring
costs of approximately $50 million) and over the next few years in terms of
earnings per share and cash flow from operations. In addition, based on a
sensitivity analysis prepared by Homestake management, the Combination also
would be accretive to the Homestake stockholders in 1997 and 1998 (before
estimated one-time transaction and restructuring costs of $50 million) even at
reduced gold prices, due in part to Santa Fe's gold hedging program. At the
Exchange Ratio of 1.115 to 1, the current Homestake stockholders will own
approximately 50% of the Combined Company.
Although the Combination initially will be dilutive to the Homestake
stockholders on the basis of both reserves per share of Homestake Common Stock
and production per share of Homestake Common Stock, the extent of the dilution
is expected to be reduced over time as a result of Santa Fe's expected higher
production growth rate and potential additions to Santa Fe's gold reserves. See
"Risk Factors; Certain Forward-Looking and Cautionary Statements" for a
discussion of risks and uncertainties associated with projections of earnings
and production.
Stock Market Considerations. The Homestake Board reviewed information
provided by Dillon Read concerning the comparative stock market performances of
the major North American gold mining companies. During the past few years, both
Homestake and Santa Fe shares have traded at multiples that were significantly
lower than those of other major North American producers, principally Barrick
Gold Corporation ("Barrick"), Newmont and Placer Dome Inc. ("Placer Dome"). The
Homestake Board believes that the Combined Company has a much greater
opportunity to trade at stock market multiples comparable to those accorded to
these larger producers.
Synergies and Cost Savings. In evaluating the Combination, the Homestake
Board considered the opportunities for synergies and cost savings that exist
between Homestake and Santa Fe. Homestake's metallurgical and underground mining
expertise should be of considerable value in the continued development of Santa
Fe's major mining properties in Nevada, while Homestake is expected to benefit
from the opportunity to use Santa Fe's metallurgical and ore processing
technology in its developing operations in Chile and elsewhere. There are
considerable opportunities for savings in the area of exploration costs.
Homestake's
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international exploration and operating experience will benefit the Santa Fe
exploration efforts. In addition, the Combined Company will have the opportunity
to refocus the combined exploration effort to become more efficient and cost
effective. There are also other opportunities for general and administrative
cost savings. It is believed that the Combined Company can achieve approximately
$30 million in annual savings by the end of 1997 by, among other things, closing
Santa Fe's Albuquerque office and relocating certain Santa Fe personnel to San
Francisco and Nevada, relocating certain Homestake operations and administrative
functions to Nevada, consolidating Nevada operations and administration,
focusing combined exploration efforts, reducing duplicative functions and
personnel, and taking advantage of the expertise and technology of each company
in the other company's operations. See "Risk Factors; Certain Forward-Looking
and Cautionary Statements" for a discussion of risks and uncertainties
associated with the achievement of these possible cost savings.
Accounting Treatment of the Combination. The Combination is expected to be
accounted for as a pooling of interests, whereby Homestake will record the
acquisition of the Santa Fe assets at Santa Fe's historical carrying values.
Terms of the Agreement. The Homestake Board carefully considered the terms
of the Agreement and their continuing impact on Homestake and Santa Fe during
the period through the date of the Special Meetings. The Homestake Board views
as particularly important those provisions of the Agreement that establish the
relative rights and obligations of Homestake and Santa Fe in the event of a
Takeover Proposal for either Homestake or Santa Fe. Both Homestake and Santa Fe
are restricted from soliciting or encouraging Takeover Proposals or, subject to
fiduciary duties, from negotiating with third parties with respect to Takeover
Proposals. See "The Agreement--Certain Actions with Respect to Takeover
Proposals." A Termination Fee of $65 million is payable to Homestake if the
Agreement is terminated when there is a Takeover Proposal for Santa Fe.
Similarly, a Termination Fee of $65 million is payable to Santa Fe if the
Agreement is terminated when there is a Takeover Proposal for Homestake. See
"The Agreement--Termination Fees." The Homestake Board particularly considered
the implications of these provisions in the light of the Newmont Public
Proposal. See "The Combination--Background of the Combination" for a discussion
of the Newmont Public Proposal.
Analysis and Opinion of Dillon Read. As a part of its deliberations, the
Homestake Board requested the advice of Dillon Read, its financial advisor,
regarding the Combination. Dillon Read provided oral and written analyses to the
Homestake Board at its meetings held on November 21 and December 8, 1996. Among
other factors, Dillon Read reviewed historical trading prices for Homestake and
Santa Fe Common Stock, recent acquisitions in the gold mining industry, and the
respective contributions of Homestake and Santa Fe to the Combined Company. In
its deliberations, the Homestake Board considered the opinion delivered by
Dillon Read to the effect that, based upon and subject to certain matters stated
therein, as of December 8, 1996, the Exchange Ratio is fair to the Homestake
stockholders from a financial point of view. See "The Combination--Opinion of
Homestake's Financial Advisor."
After considering the matter, including the factors described above, the
Homestake Board believes that the Combination is in the best interests of the
Homestake stockholders. Accordingly, THE HOMESTAKE BOARD UNANIMOUSLY RECOMMENDS
THAT THE HOMESTAKE STOCKHOLDERS VOTE "FOR" THE HOMESTAKE CHARTER AMENDMENT AND
"FOR" THE SHARE ISSUANCE.
OPINION OF HOMESTAKE'S FINANCIAL ADVISOR
Homestake retained Dillon Read to act as its financial advisor in
connection with the Combination.
On December 8, 1996, Dillon Read delivered its oral opinion, which was
confirmed by its written opinion dated December 8, 1996, to the Homestake Board
to the effect that, based upon and subject to certain matters stated therein, as
of the date of such opinion, the Exchange Ratio (referred to in the opinion as
the Conversion Number) is fair to the Homestake stockholders from a financial
point of view.
THE FULL TEXT OF DILLON READ'S OPINION DATED DECEMBER 8, 1996, WHICH SETS
FORTH A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO
AS APPENDIX B. DILLON READ'S OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE
EXCHANGE RATIO TO THE HOMESTAKE STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOMESTAKE STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE
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HOMESTAKE CHARTER AMENDMENT OR THE SHARE ISSUANCE. HOMESTAKE STOCKHOLDERS ARE
URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY, ESPECIALLY WITH REGARD TO
THE ASSUMPTIONS MADE AND MATTERS CONSIDERED BY DILLON READ. THE SUMMARY OF THE
OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Dillon Read reviewed, analyzed and considered
such financial and other factors as it deemed appropriate under the
circumstances, including, among other things: (i) reviewed certain publicly
available business and historical financial information relating to Homestake
and Santa Fe, (ii) reviewed certain financial information and other data
provided to Dillon Read by Homestake that is not publicly available relating to
the business and prospects of Homestake, including financial projections
prepared by the management of Homestake, (iii) reviewed certain financial
information and other data provided to Dillon Read by Santa Fe that is not
publicly available relating to the business and prospects of Santa Fe, including
financial projections prepared by the management of Santa Fe, (iv) conducted
discussions with members of the senior managements of Homestake and Santa Fe,
(v) reviewed the historical market prices and trading volumes of Homestake
Common Stock and Santa Fe Common Stock, (vi) considered certain pro forma
effects of the Combination on the financial results of Homestake and reviewed
certain estimates of synergies prepared by the managements of Homestake and
Santa Fe, (vii) reviewed publicly available financial and stock market data with
respect to certain other companies Dillon Read believes to be generally
comparable to Homestake and Santa Fe, (viii) compared the financial terms of the
Combination with the financial terms of certain other mergers and acquisitions
Dillon Read believes to be relevant, (ix) reviewed the Agreement, and (x)
conducted such other financial studies, analyses and investigations, and
considered such other information as Dillon Read deemed necessary or
appropriate, but none of which was, individually, material. Dillon Read's
opinion was necessarily based on economic, monetary and market conditions
existing on the date thereof.
In connection with its review, Dillon Read did not assume any
responsibility for independent verification of any of the foregoing information
and, with Homestake's consent, relied on such information as being complete and
accurate in all material respects. In addition, Dillon Read did not make any
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of Homestake or Santa Fe, nor was Dillon Read furnished with any such
evaluation or appraisal. With respect to the financial projections and estimates
of synergies referred to above, Dillon Read assumed, with Homestake's consent,
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgments of Homestake's and Santa Fe's managements as
to the future financial performance of each company. Dillon Read also assumed
that the Merger would be treated as tax-free to both Homestake and its
stockholders, and that the Combination would be accounted for as a pooling of
interests. In addition, although Dillon Read evaluated the Exchange Ratio from a
financial point of view, Dillon Read was not asked to and did not recommend the
specific consideration to be paid in the Combination. No other limits were
placed on Dillon Read with respect to the investigations made or procedures
followed by Dillon Read in rendering its opinion.
In arriving at its opinion, Dillon Read did not assign any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments based on its experience in providing such opinions and on then
existing economic, monetary and market conditions as to the significance and
relevance of each analysis and factor. Accordingly, Dillon Read believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion. In its analyses, Dillon Read made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond Homestake's or
Santa Fe's control. Any estimates contained in Dillon Read's analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of a business or securities
do not purport to be appraisals or to reflect the actual prices at which
businesses or securities might be sold.
Dillon Read is an internationally recognized investment banking firm which,
as a part of its investment banking business, regularly is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and
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unlisted securities, private placements and valuations for estate, corporate and
other purposes. The Homestake Board selected Dillon Read on the basis of its
experience and independence. In the past, Dillon Read has provided investment
banking services to Homestake and has received customary compensation for such
services. In the ordinary course of business, Dillon Read trades the securities
of Homestake and Santa Fe for its own account and the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
Pursuant to the engagement letter dated as of November 21, 1996, between
Homestake and Dillon Read, Homestake has agreed to pay Dillon Read a fee of
0.33% of the equity consideration in the Combination, subject to a maximum fee
of $6,500,000, for services provided in connection with the Combination. Of this
amount, $2,250,000 was paid upon the announcement by Homestake of the execution
of the Agreement; the payment of the balance is contingent upon the consummation
of the Combination. Homestake has also agreed to reimburse Dillon Read for the
expenses reasonably incurred by it in connection with its engagement (including
reasonable counsel fees) and to indemnify Dillon Read and its officers,
directors, employees, agents and controlling persons against certain expenses,
losses, claims, damages or liabilities in connection with its services,
including those arising under the federal securities laws.
The following paragraphs summarize the material quantitative analyses
performed by Dillon Read in arriving at the opinion dated December 8, 1996,
presented to the Homestake Board.
Summary of Recent Acquisition Transactions. Using publicly available
information, Dillon Read reviewed the purchase prices and multiples paid in
selected mergers and acquisitions involving gold mining companies which Dillon
Read deemed relevant in evaluating the Combination. Dillon Read reviewed the
acquisition of Hemlo Gold Mines Inc. ("Hemlo") by Battle Mountain Gold Company
("Battle Mountain"); the acquisition of Lac Minerals Ltd. ("LAC") by Barrick;
the acquisition of International Corona by Homestake; the acquisition of Bond
International Gold Inc. by LAC; and the acquisition of certain assets of
Freeport-McMoRan Copper & Gold, Inc. ("Freeport McMoRan") by Minorco S.A.
("Minorco").
Multiples of unlevered value of the transactions (consideration offered for
the equity plus the book value of debt less the cash and cash equivalents) to
the most recently published gold reserves prior to the transaction announcement
averaged $210 per ounce and ranged from $119 per ounce to $277 per ounce. The
multiples of reserve value (reserves multiplied by the gold price at the time of
the transaction) averaged 0.54x and ranged from 0.35x to 0.67x. The multiples of
reserve cash value (reserves multiplied by the gold price at the time of the
transaction less cash costs) averaged 1.42x and ranged from 0.80x to 1.95x. The
multiples of the latest 12 months gold production averaged $2,036 per ounce and
ranged from $1,368 per ounce to $2,887 per ounce. Dillon Read noted that, based
on the closing price of Homestake Common Stock on December 4, 1996, the implied
unlevered value for Santa Fe in the Combination based upon the Exchange Ratio
represented $146 per ounce of reserves, within the range for the transactions
considered; 0.39x reserve value, within the range for the transactions
considered; 0.98x reserve cash value, within the range for the transactions
considered; $3,056 per ounce of 1996 estimated production, above the range of
the latest 12 months gold production for the transactions considered; and $2,330
per ounce of 1997 estimated production, within the range of the latest 12 months
gold production for the transactions considered.
Dillon Read also reviewed the premiums paid in the Battle Mountain/Hemlo,
Barrick/LAC and Homestake/International Corona transactions. The premiums were
calculated for the periods of 60 days prior to acquisition announcement (which
ranged from 27.9% to 32.3%), 20 days prior to acquisition announcement (which
ranged from 28.0% to 39.4%), and one day prior to acquisition announcement
(which ranged from 20.4% to 50.0%). Dillon Read noted that, based on the closing
prices of Homestake Common Stock and Santa Fe Common Stock on the 60 trading
days prior to and including December 4, 1996, the 20 trading days prior to and
including December 4, 1996, and on December 4, 1996, the implied premium in the
Combination was 36.5% (above the range), 42.4% (above the range) and 44.4%
(within the range), respectively.
Analysis of Selected Publicly Traded Comparable Companies in the Gold
Mining Industry. Using publicly available information, Dillon Read reviewed the
stock prices and market multiples of common stocks of the following companies in
the gold mining industry: Barrick; Placer Dome; Newmont; Battle Mountain; and
Homestake. Dillon Read believes these companies are generally comparable to
Santa Fe. Dillon Read determined the unlevered value (defined as equity market
value plus the book value of debt less the cash and
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cash equivalents) for each of these comparable companies. Dillon Read calculated
a range of such unlevered values as a multiple of reserves, reserves plus
mineralized material and 1996 estimated production. Unlevered value as a
multiple of reserves averaged $200 per ounce and ranged from $107 per ounce to
$304 per ounce for these comparable companies. Unlevered value as a multiple of
reserves plus mineralized material averaged $127 per ounce and ranged from $69
per ounce to $257 per ounce. Unlevered value as a multiple of estimated
production averaged $2,349 per ounce and ranged from $1,217 per ounce to $3,574
per ounce. Dillon Read noted that, based on the closing price of Homestake
Common Stock on December 4, 1996, the implied unlevered value for Santa Fe in
the Combination based upon the Exchange Ratio represented $146 per ounce of
reserves, $89 per ounce of reserves plus mineralized material, and $3,056 per
ounce of production, all within the ranges for the comparable companies.
No company, transaction or business used in the analyses described under
"Opinion of Homestake's Financial Advisor--Summary of Recent Acquisition
Transactions" and "--Analysis of Selected Publicly Traded Comparable Companies
in the Gold Mining Industry" is identical to Homestake, Santa Fe or the
Combination. Accordingly, an analysis of the results thereof necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
transaction or the public trading or other values of the company or companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
acquisition or company data.
Discounted Cash Flow Analysis. Dillon Read performed a discounted cash
flow analysis of Homestake on a stand alone basis using a set of underlying
operating projections which were based upon the forecasts provided by management
of Homestake ("Homestake Projections"). Dillon Read also performed a discounted
cash flow analysis of Santa Fe on a stand alone basis using a set of underlying
operating projections which were based upon the forecasts provided by the
management of Santa Fe ("Santa Fe Projections"). As part of each analysis, no
value was attributed to exploration projects to which no reserves were
attributed. In addition, for each analysis no value was attributed to additional
exploration potential. As a result, all exploration costs were removed from the
Homestake Projections and the Santa Fe Projections. The purpose of the
discounted cash flow analyses was merely to determine the relative theoretical
contribution of the existing projects of each company and was not expected to
calculate the full present value of either company as an ongoing operation. The
unlevered after-tax discount rates utilized in the discounted cash flow analyses
ranged from 2.0% to 6.0%. After calculating the theoretical present value of
each company, each company's cash was added and debt subtracted to arrive at a
theoretical present value attributable to equity for each company. Using this
methodology, Homestake's contribution to the equity value of the Combined
Company ranged from 54% to 59%.
Contribution Analysis. Dillon Read analyzed the percentage of (i)
revenues, (ii) earnings before interest, taxes, depreciation, depletion and
amortization ("EBITDA"), (iii) EBITDA less capital expenditures, (iv) earnings
before interest and taxes, (v) net income, (vi) cash flow from operations
(defined as net income plus depreciation, depletion and amortization plus
deferred taxes) ("Cash Flow from Operations"), (vii) book value of equity,
(viii) net assets, (ix) reserves, (x) mineralized material, (xi) reserves plus
mineralized material, (xii) acreage, (xiii) production, (xiv) production on an
equity basis, and (xv) reserve cash value (at gold prices of both $400 per ounce
and $370 per ounce) that each of Homestake and Santa Fe would contribute to the
total of the Combined Company based upon latest 12 months data then available
and the Homestake Projections and Santa Fe Projections referred to above. Based
upon such latest 12 months data and the Homestake Projections and Santa Fe
Projections, Homestake's contribution to the Combined Company ranged from 14%
(for acreage) to 71% (for 1998 estimated EBITDA less capital expenditures).
Dillon Read noted that, based upon the Exchange Ratio, the current Homestake
stockholders would own approximately 50% of the Combined Company, within the
range of contribution based upon the statistics considered.
Pro Forma Impact. Dillon Read examined the impact of the Combination on
Homestake's earnings per share, Cash Flow from Operations per share, reserves
per share, reserves plus mineralized material per share and production per share
based on operating and financial projections for the two companies. The
projection of such earnings, Cash Flow from Operations, reserves, reserves plus
mineralized material and production was
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based upon operating projections provided by Homestake management for Homestake,
assuming the Combination did not take place, operating projections provided by
Santa Fe management for Santa Fe, assuming the Combination did not take place,
and the estimated cost savings and synergies expected to result from the
Combination. This analysis indicated that the Combination would be accretive to
Homestake earnings per share in the years 1996 through 2000 by percentages
ranging from 2.7% to 19.1%; dilutive to Homestake Cash Flow from Operations per
share in 1996 by 11.1%, and accretive to Homestake Cash Flow from Operations per
share in the years 1997 through 2000 by percentages ranging from 4.8% to 23.0%;
dilutive to 1995 Homestake reserves per share by 8.4%; dilutive to 1995
Homestake reserves plus mineralized material per share by 6.2%; and dilutive to
Homestake production per share in the years 1996 through 2000 by percentages
ranging from 7.8% to 27.4%.
Historical Trading Analysis. Dillon Read reviewed the recent historical
stock market performance of Homestake Common Stock and Santa Fe Common Stock in
relation to each other. This analysis indicated that between June 16, 1994, and
December 4, 1996, the ratio of the price of a share of Santa Fe Common Stock to
the price of a share of Homestake Common Stock ranged between 0.59 and 0.89 and
averaged 0.77. Dillon Read also noted that such ratio ranged from 0.59 to 0.89
and averaged 0.77 between December 4, 1994 and December 4, 1996, ranged from
0.73 to 0.89 and averaged 0.80 between December 4, 1995 and December 4, 1996,
and ranged from 0.73 to 0.89 and averaged 0.80 between January 1, 1996 and
December 4, 1996. Such ratio was 0.77 based on the closing prices on December 4,
1996, 0.78 based on the average of the closing prices for the 20 trading days
ended December 4, 1996, 0.82 based on the average of the closing prices for the
60 trading days ended December 4, 1996, and 0.80 based on the average of the
closing prices for the 90 trading days ended December 4, 1996.
SANTA FE REASONS FOR THE COMBINATION; RECOMMENDATION OF THE SANTA FE BOARD
The Santa Fe Board has unanimously concluded that the Combination is fair
to and in the best interests of the Santa Fe stockholders and, accordingly,
unanimously approved the Agreement and unanimously resolved to recommend that
the Santa Fe stockholders adopt the Agreement. The Santa Fe Board based such
conclusion upon consideration of a number of factors, including:
1. current industry, economic and market conditions;
2. presentations by SBCW to the Santa Fe Board, discussions between SBCW
and the Santa Fe Board and the opinion of SBCW to the effect that,
based upon and subject to the factors set forth therein, as of the date
of such opinion, the Exchange Ratio is fair, from a financial point of
view, to the Santa Fe stockholders (see "The Combination--Opinion of
Santa Fe's Financial Advisor");
3. the financial condition, results of operations and cash flow of Santa
Fe and Homestake, both on an historical and a prospective basis;
4. Santa Fe's investigations and analyses of strategic alternatives (see
"The Combination--Background of the Combination");
5. historical market prices and trading information with respect to Santa
Fe Common Stock and Homestake Common Stock, including that the
Combination represents a 44% premium to the market price of the Santa
Fe Common Stock on December 4, 1996, the last trading day prior to the
announcement of the Newmont Public Proposal;
6. the terms and conditions of the Agreement, including the requirement
for the Stockholder Approvals, and that the Agreement permits Santa Fe,
under certain circumstances, to furnish information to and participate
in substantive discussions and negotiations with third parties and to
terminate the Agreement to enter into a definitive agreement with a
third party upon the payment of the $65 million Termination Fee and the
fact that such provisions of the Agreement apply equally to Homestake
and Santa Fe (see "The Agreement"); and that the Santa Fe Board did not
believe that the provisions of the Agreement would deter a more
attractive offer for Santa Fe;
7. the strategic fit between Santa Fe and Homestake, including the
opportunity for significant synergies and cost savings (see
"Summary--Benefits of the Combination");
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8. the ability of the Santa Fe stockholders to participate in the
potential benefits of the Combination through the ownership of
approximately 50% of the Homestake Common Stock following the
Combination (see "Summary--Benefits of the Combination");
9. that the Homestake Board following the Combination would consist of 12
directors, five designated by Santa Fe from the current Santa Fe Board,
five designated by Homestake from the current Homestake Board and two
chosen by such ten directors;
10. the ability to consummate the Combination as a pooling of interests
under United States generally accepted accounting principles and as a
tax-free reorganization under the Code;
11. the Santa Fe Board's belief that the Combination will create a new
leading international gold company with the asset base, portfolio of
growth opportunities, balance sheet and operating skills to pursue an
aggressive growth strategy;
12. that Homestake and Santa Fe have historically traded at multiples that
were significantly lower than, in particular, Barrick, Newmont and
Placer Dome, and that following the Combination, Homestake Common Stock
will have the potential for benefiting over time from the higher stock
multiples accorded to those larger gold mining companies;
13. the low political risk profile of the Combined Company, as its holdings
will principally be in the United States, Australia and Canada; and
14. that the Combination was expected to be accretive to Santa Fe's
stockholders on the basis of (i) 1996 pro forma cash flow, earnings,
production, reserves, reserves and resources, and dividends, and (ii)
cash flow, production and dividends for 1997, before one-time
transaction and restructuring costs. See "Risk Factors; Certain
Forward-Looking and Cautionary Statements" and "The Combination--
Opinion of Santa Fe's Financial Advisor."
The Santa Fe Board considered the relative merits of the Combination and
the Newmont Public Proposal. The Santa Fe Board concluded that the Combination
would provide more value for the Santa Fe stockholders than the Newmont Public
Proposal due to, among other things, the factors considered by the Santa Fe
Board at its November 26, 1996 meeting at which the Santa Fe Board determined
that the Homestake proposal represented a more attractive alternative than the
Newmont proposal of November 21, 1996. The Santa Fe Board noted the following
additional factors subsequent to the November 26, 1996 meeting: (x) the
Combination had a higher value per share of Santa Fe Common Stock than the
Newmont Public Proposal based on closing prices on December 4, 1996, the last
trading day prior to the Newmont Public Proposal ($17.15 for the Combination
compared to $15.96 for the Newmont Public Proposal) and (y) Newmont had never
increased its proposed exchange ratio. See "The Combination--Background of the
Combination."
There can be no assurances that the expected benefits of the Combination
will be realized. See "Risk Factors; Certain Forward-Looking and Cautionary
Statements."
The Santa Fe Board did not assign relative weights to the foregoing factors
or determine that any one factor was of particular importance. Rather, the Santa
Fe Board viewed its determinations as being based on the totality of the
information presented to and considered by it.
THE SANTA FE BOARD UNANIMOUSLY RECOMMENDS THAT THE SANTA FE STOCKHOLDERS
VOTE "FOR" THE ADOPTION OF THE AGREEMENT.
OPINION OF SANTA FE'S FINANCIAL ADVISOR
At the December 8, 1996, meeting of the Santa Fe Board, SBCW delivered its
written opinion (the "SBCW Opinion") that, as of such date and based upon and
subject to various considerations set forth in the SBCW Opinion, the Exchange
Ratio was fair, from a financial point of view, to the Santa Fe stockholders.
The SBCW Opinion does not constitute an opinion as to the value of the shares of
Homestake Common Stock or the prices at any time at which the shares of
Homestake Common Stock will trade. No restrictions or limitations were imposed
by the Santa Fe Board with respect to the investigations made or the procedures
followed by SBCW in arriving at its opinion.
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A copy of the SBCW Opinion is attached hereto as Appendix C. The Santa Fe
stockholders are urged to read the SBCW Opinion in its entirety for assumptions
made, procedures followed, other matters considered and the limits of the review
by SBCW. The SBCW Opinion was prepared for the Santa Fe Board and is directed
only to the fairness of the Exchange Ratio, from a financial point of view, to
the Santa Fe stockholders and does not constitute a recommendation to any Santa
Fe stockholder as to how to vote at the Santa Fe Special Meeting. The summary of
the opinion set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion.
In delivering its opinion, SBCW reviewed, among other things, certain
publicly available business and financial information relating to Santa Fe and
Homestake, and reviewed a draft of the Agreement substantially in the form that
was executed on December 8, 1996. SBCW also reviewed, among other things,
certain other information, including financial forecasts and life of mine plans,
provided to SBCW by Santa Fe and Homestake, and met with the managements of both
companies to discuss the business and prospects of Santa Fe and Homestake,
respectively. SBCW also considered, among other things, certain financial and
stock market data of Santa Fe and Homestake, compared that data with similar
data for other publicly held companies in businesses similar to those of Santa
Fe and Homestake and considered the financial terms of certain other business
combinations and other transactions which have recently been effected. In
addition, SBCW conducted such other financial studies, analyses and
investigations as it deemed appropriate.
In connection with its review and opinion, SBCW did not assume any
responsibility for independent verification of any of the information reviewed
or considered and assumed and relied on its being complete and accurate in all
respects. With respect to the financial forecasts, reserve estimates and life of
mine plans, SBCW assumed that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the management of Santa
Fe and Homestake as to the future financial performance of Santa Fe and
Homestake, respectively. In addition, SBCW did not make an independent
evaluation or appraisal of the assets of Santa Fe or Homestake, nor was SBCW
furnished with any such evaluations or appraisals. The SBCW Opinion was
necessarily based upon financial, economic, market and other conditions as they
existed on December 8, 1996. It should be understood that, although subsequent
developments may affect the SBCW Opinion, SBCW does not have any obligation to
update, revise or reaffirm the opinion. In connection with the SBCW Opinion,
SBCW did not express any opinion as to what the value of the Homestake Common
Stock actually will be when issued pursuant to the Agreement or the prices at
which such share will trade subsequent to the Merger. SBCW relied on advice of
counsel to Santa Fe as to all legal matters regarding the structure and tax
implications of the Combination and related matters, and on the advice of Santa
Fe's independent accountants as to accounting matters pertaining to the
Combination. Based on such advice, SBCW assumed that the Combination will be
accounted for financial reporting purposes as a pooling of interests under
United States generally accepted accounting principles and that the Combination
will result in a tax-free rollover of basis for United States stockholders of
Santa Fe.
SBCW is an internationally recognized investment banking firm that provides
financial services in connection with a wide range of business transactions. As
part of its business, SBCW regularly engages in the valuation of companies and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and other transactions. Santa Fe
retained SBCW based upon SBCW's expertise in the valuation of companies, as well
as its familiarity with Santa Fe and other gold mining companies. In the
ordinary course of its business, SBCW trades the equity and debt securities of
both Santa Fe and Homestake for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Additionally, SBCW has previously provided investment banking
and financial advisory services to Santa Fe for which it has received
compensation. In 1993, SBCW provided investment banking services to Homestake
for which SBCW received compensation.
Pursuant to a letter agreement dated January 19, 1996, as amended by a
supplementary letter agreement dated December 3, 1996, Santa Fe agreed to pay
SBCW (i) an initial fee of $50,000 upon signing the January 1996 letter
agreement, (ii) a retainer fee of $50,000 per month for an initial period of 12
months commencing January 19, 1996, (iii) a fee of $2,250,000 upon announcement
of the Combination, and (iv) a fee of $12,750,000 upon consummation of the
Combination. The fees payable under subparagraphs (i) and (ii)
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above are offsettable against the fee payable under subparagraph (iv) above.
Santa Fe has also agreed to reimburse SBCW for its out-of-pocket expenses
including the reasonable fees and disbursements of counsel and to indemnify SBCW
and certain other persons against certain liabilities in connection with the
engagement of SBCW, including certain liabilities under federal securities laws.
The following is a brief summary of the analyses performed by SBCW in
preparation of the SBCW Opinion. In this connection, SBCW performed certain
procedures, including each of the financial analyses described below, and
reviewed with management of Santa Fe the assumptions on which such analyses were
based and other factors, including the current and projected financial results
of Santa Fe and Homestake.
Stock Trading History. To provide contextual and comparative market data,
SBCW reviewed the stock trading histories of Santa Fe and Homestake and their
relative relationship during certain periods ended December 4, 1996 (the last
trading day before the announcement of the Newmont Public Proposal), including,
among other periods, the preceding (i) one month, (ii) three months, (iii) six
months, (iv) one year, (v) two years, and (vi) the period since Santa Fe's
initial public offering in June 1994. The exchange ratios between the average
share prices of Santa Fe and Homestake Common Stock over these periods were (i)
0.779, (ii) 0.812, (iii) 0.801, (iv) 0.801, (v) 0.766, and (vi) 0.769. The
Exchange Ratio of 1.115 represents a premium to the average exchange ratios over
these periods of (i) 43.1%, (ii) 37.3%, (iii) 39.2%, (iv) 39.2%, (v) 45.6%, and
(vi) 45.0%, respectively. At the closing market price of Homestake Common Stock
of $15.375 on December 4, 1996, the Exchange Ratio of 1.115 to 1 represents a
premium of 44.4% to the Santa Fe Common Stock closing stock price of $11.875 on
December 4, 1996, a premium of 54.1% to the low Santa Fe Common Stock price over
the preceding twelve months and a discount of 6.1% to the high Santa Fe Common
Stock price over the preceding twelve months.
Comparable company analysis. SBCW also compared selected historical share
price and operating and financial ratios for Santa Fe to the corresponding data
and ratios of the following publicly traded companies: (i) Barrick, (ii)
Newmont, (iii) Placer Dome, (iv) Battle Mountain, (v) TVX Gold Inc., (vi) Echo
Bay Mines Ltd., (vii) Homestake and (viii) Cambior Inc. Although these companies
were selected for purposes of comparison, none of them is identical to Santa Fe.
The analysis considered, among other things, ratios of market value plus
debt less cash ("Enterprise Value") to 1996 and 1997 estimated production;
Enterprise Value to ounces of reserves, and to reserves and disclosed
mineralized material at December 31, 1995, as updated by public announcements
since that time ("Reserves" and "Reserves and Resources," respectively);
Enterprise Value to 1996 and 1997 estimated EBITDA; and market value to 1996 and
1997 estimated cash flow (defined as net income plus deferred taxes plus
depreciation, depletion and amortization). Data were obtained from publicly
available sources including press releases and market estimates published by
independent analysts. The analysis indicated that the high, low and median
values of Enterprise Value as a multiple of (i) 1996 and 1997 estimated
production, (ii) Reserves, (iii) Reserves and Resources, (iv) 1996 and 1997
estimated EBITDA, and (v) the ratio of market value to 1996 and 1997 estimated
cash flow were (i) $3,293/oz., $924/oz. and $2,367/oz.; and $3,279/oz.,
$1,093/oz. and $1,993/oz., (ii) $285/oz., $68/oz. and $132/oz., (iii) $242/oz.,
$38/oz. and $95/oz., (iv) 29.3x, 8.1x and 14.0x; and 17.5x, 7.8x and 12.5x, and
(v) 31.1x, 11.9x and 22.8x; and 20.1x, 10.2x and 14.4x, respectively. These
compared to Santa Fe's pre-transaction ratios as of December 4, 1996 (the last
trading day before the announcement of the Newmont Public Proposal), of (i)
$2,246/oz. and $1,575/oz., (ii) $106/oz., (iii) $65/oz., (iv) 16.0x and 10.5x,
and (v) 15.7x and 10.0x, respectively. Santa Fe's implied post-transaction
multiples as of December 4, 1996, were (i) $3,057/oz. and $2,143/oz., (ii)
$144/oz., (iii) $89/oz., (iv) 21.6x and 14.2x, and (v) 22.6x and 14.4x,
respectively.
Precedent transaction analysis. SBCW reviewed publicly available
information for six completed or announced transactions involving North American
gold producers in the period from 1990 to the present. These transactions did
not constitute the complete list of gold mining transactions which occurred in
such period. None of the selected transactions was considered directly
comparable. The transactions considered involved the following companies
(acquiror and target, respectively): (i) Pegasus Gold Inc. and Dayton Mining
Corporation, (ii) Barrick and Arequipa Resources Ltd., (iii) Battle Mountain and
Hemlo, (iv) Barrick and LAC, (v) Homestake and International Corona, and (vi)
Minorco and Freeport-McMoRan.
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The analysis considered the percentage premiums of the offer prices (taking
the share price of the offering company multiplied by the exchange ratio in the
case of stock-for-stock transactions) compared to the target company's share
price, among other periods, (i) one day and (ii) one month prior to the
announcement date of the relevant transaction. The high, low and median premiums
for such transactions for the respective periods were (i) 50.0%, 19.5% and
26.1%, and (ii) 52.1%, 16.7% and 26.1%, respectively. The relevant implied
premiums for the Combination, based on the Santa Fe Common Stock and the
Homestake Common Stock closing market prices on December 4, 1996, of $11.88 and
$15.38, respectively, and the Santa Fe Common Stock closing market price on
November 5, 1996, of $11.63 were (i) 44.4% and (ii) 47.5%, respectively. SBCW
also examined selected stock-for-stock transactions over the preceding five
years, none of which was deemed directly comparable to the Combination. The
analysis indicated that for the company issuing stock in these selected
transactions, the median premium paid over the market price one day prior to
announcement was 20.6% and the median premium paid over the market price four
weeks prior to announcement was 32.0%. The mean pro forma ownership percentage
of the target companies' shareholders was 30.5%.
SBCW also reviewed certain multiples implied by these transactions,
including ratios of (i) Enterprise Value to Reserves, (ii) Enterprise Value to
Reserves and Resources, (iii) Enterprise Value to production over the latest
reported twelve months ("LTM"), (iv) Enterprise Value to LTM EBITDA, and (v)
market value to LTM cash flow. The high, low and median multiples for such
ratios for the selected transactions were (i) $318/oz., $148/oz. and $261/oz.,
(ii) $175/oz., $92/oz. and $154/oz., (iii) $4,004/oz., $1,219/oz. and
$2,847/oz., (iv) 25.6x, 8.3x and 20.8x, and (v) 31.4x, 7.2x and 27.3x. These
compared to the implied multiples for the Combination of (i) $144/oz., (ii)
$89/oz., (iii) $3,227/oz., (iv) 24.3x, and (v) 23.3x, respectively.
In using such transactions to value Santa Fe, an analysis of the results
was not simply mathematical nor necessarily precise; rather, it involved complex
considerations and judgments concerning differences in financial and operating
characteristics of each of the constituent companies for each transaction and
other factors that affect public trading values.
Discounted cash flow analysis. SBCW prepared a discounted cash flow
analysis for the mines and certain development projects of Santa Fe and
Homestake based on life of mine plans and corporate projections provided by each
company. The analysis attributed no value to exploration potential of either
company and, accordingly, all exploration costs were excluded from the cash
flows subject to the analysis. The analysis was designed to provide relative
valuation evidence and was not expected to establish the full net present value
of either company as a going concern. Assuming no inflation, gold prices of
$380/oz., $400/oz. and $420/oz., and a discount rate range of 4% to 6%, and
adjusting for net debt and certain other balance sheet items, the relative
contribution of Santa Fe to the net present value of the Combined Company was in
a range of 35% to 41%. This compares to an implied equity ownership percentage
of approximately 50% for the Santa Fe stockholders as a result of the
Combination.
Contribution analysis. SBCW examined the relative contribution of Santa Fe
and Homestake to the Combined Company on a number of different bases. Measures
considered, among others, were (i) net present value, (ii) net book value, (iii)
1996, 1997, and 1998 estimated cash flow, (iv) 1996, 1997 and 1998 estimated
production, (v) 1996, 1997 and 1998 estimated EBITDA, (vi) Reserves, and (vii)
Reserves and Resources. This analysis indicated that Santa Fe would contribute
(i) 35% to 41% (as noted above), (ii) 43%, (iii) 40%, 55% and 51%, (iv) 25%, 33%
and 37%, (v) 29%, 43% and 41%, (vi) 39%, and (vii) 40%, respectively. These
compare to an implied equity ownership percentage of approximately 50% for the
Santa Fe stockholders as a result of the Combination. The results of the
contribution analysis are not necessarily indicative of the contribution that
the respective businesses may have in the future.
Pro forma merger analysis. SBCW analyzed the pro forma consequences of the
Combination upon the Santa Fe stockholders on a Santa Fe equivalent per share
basis. The analyses were based on projected financial information provided by
the management of Santa Fe and the management of Homestake and upon certain
assumptions described in the foregoing paragraphs. The pro forma impacts on
estimated results indicated that on the basis of cash flow per share, earnings
per share, dividends per share, production per share, Reserves per share, and
Reserves and Resources per share, the Combination would be accretive for the
Santa Fe stockholders in 1996. In 1997, the transaction would be accretive for
the Santa Fe stockholders on the basis
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of cash flow per share, dividends per share and production per share, but
dilutive on the basis of earnings per share. In 1998, the transaction would be
accretive for the Santa Fe stockholders on the basis of production per share and
dividends per share, neither accretive nor dilutive on the basis of cash flow
per share and dilutive on the basis of earnings per share. The pro forma results
assume that general and administrative and exploration costs on a combined
basis, as projected by management, would be reduced by pretax cost savings of
$30 million. Effects are stated before one-time transaction costs.
SBCW also considered the capitalization of the Combined Company as compared
to that of Santa Fe. On a stand alone basis, the estimated ratio of net debt to
net book capitalization for Santa Fe as of December 31, 1996, would have been
43%. The estimated ratio of net debt to net book capitalization for the Combined
Company as of December 31, 1996, would have been 23%, excluding cash
attributable to minority interests in Prime and before one-time transaction
costs. The results of the pro forma merger analysis are not necessarily
indicative of the future results or financial performance of the Combined
Company.
The foregoing is a summary of certain analyses prepared by SBCW in
connection with providing the SBCW Opinion. The preparation of a fairness
opinion is a complex process and involves various judgments and determinations
as to the most appropriate and relevant assumptions and financial analyses and
the application of these methods to the particular circumstances involved. Such
an opinion is therefore not readily susceptible to partial analysis or summary
description and taking portions of the analyses set out above, without
considering the analysis as a whole, would, in the opinion of SBCW, create an
incomplete and misleading picture of the processes underlying the analyses
considered in delivering the opinion. SBCW did not form an opinion as to whether
any individual analysis, considered in isolation, supported or failed to support
the SBCW Opinion. The SBCW Opinion necessarily involved making complex
considerations and judgments concerning differences in the potential financial
and operating characteristics of the comparable companies and precedent
transactions and of other factors in relation to the trading and acquisition
values of the comparable companies. In arriving at its opinion, SBCW considered
the results of all such analyses and did not attribute particular weight to any
one analysis or factor considered by it. No other company used in the comparable
company analysis is identical to Santa Fe or Homestake and no transaction used
in the precedent transaction analysis summarized above is identical to the
Combination. The analyses performed by SBCW, particularly those based on
forecasts, are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of SBCW's analysis of
the fairness of the Exchange Ratio, from a financial point of view, to the Santa
Fe stockholders. In performing its analyses, SBCW made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Santa Fe and Homestake.
The foregoing summary does not purport to be a complete description of the
analyses prepared by SBCW.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following describes the principal United States federal income tax
consequences of the Merger under the Code, assuming that the Merger is
consummated as contemplated herein. This discussion is based on current laws of
the United States and interpretations thereof, which are subject to change. The
discussion assumes that the Santa Fe Common Stock is held as a capital asset and
does not take account of rules that may apply to holders thereof that are
subject to special treatment under the Code (including foreign persons,
insurance companies, dealers in securities, certain retirement plans, financial
institutions, tax-exempt organizations or stockholders who acquired shares
pursuant to the exercise of an employee stock option or otherwise as
compensation). Also, the discussion does not address state, local or foreign tax
consequences. Consequently, each holder of Santa Fe Common Stock should consult
its own tax advisor as to the specific tax consequences of the Merger to that
holder. Neither Homestake nor Santa Fe has requested or will request an advance
ruling from the Internal Revenue Service as to the federal income tax
consequences of the Merger.
The obligation of Homestake to consummate the Merger is subject to its
receipt of an opinion of Cravath, Swaine & Moore, counsel to Homestake, dated as
of the Closing Date, in form and substance reasonably satisfactory to Homestake,
to the effect that the Merger will be treated for federal income tax purposes as
a "reorganization" within the meaning of Section 368(a) of the Code. The
obligation of Santa Fe to consummate the Merger is subject to its receipt of an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
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counsel to Santa Fe, dated as of the Closing Date, in form and substance
reasonably satisfactory to Santa Fe, to the effect that the Merger will be
treated for federal income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Code. Based on these opinions, no gain or loss will be
recognized for federal income tax purposes by either Homestake or Santa Fe as a
result of the Merger, and no gain or loss will be recognized for federal income
tax purposes by the holders of Santa Fe Common Stock upon the conversion of
Santa Fe Common Stock into shares of Homestake Common Stock pursuant to the
Agreement (except to the extent of any cash received in lieu of fractional
shares). The tax basis of the shares of Homestake Common Stock received by the
Santa Fe stockholders will be the same as the tax basis of their Santa Fe Common
Stock converted in the Merger (reduced by any amount allocable to a fractional
share interest for which cash is received). The holding period of the Homestake
Common Stock in the hands of the Santa Fe stockholders will include the holding
period of their Santa Fe Common Stock converted in the Merger.
A Santa Fe stockholder who receives cash in lieu of a fractional share
interest in Homestake Common Stock will be treated for federal income tax
purposes as receiving such fractional share interest in the Merger and then
selling it for cash. Such a stockholder will recognize gain or loss in an amount
equal to the difference between the amount of cash received and the portion of
such stockholder's adjusted tax basis in the shares of Santa Fe Common Stock
allocable to the fractional share interest. Any gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the holding period
for the Santa Fe Common Stock converted into the fractional share interest is
more than one year.
ANTICIPATED ACCOUNTING TREATMENT
The Combination is expected to be accounted for as a pooling of interests
in accordance with United States generally accepted accounting principles. Under
this method of accounting, after addressing any conformity issues (i) the
recorded assets and liabilities of Santa Fe will be carried forward to Homestake
at their recorded amounts, (ii) income of Homestake will include income of
Homestake and Santa Fe for the entire fiscal year in which the Combination
occurs, and (iii) the reported income of the separate companies for prior
periods will be combined and restated as income of Homestake. The Agreement
provides that a condition to the consummation of the Merger is the receipt of
letters from Coopers and Price Waterhouse to the effect that the Combination
qualifies for pooling of interests accounting treatment. See "The
Agreement--Conditions to the Consummation of the Merger."
In connection with the Combination, one-time transaction costs are
estimated at $25 million and one-time restructuring costs, primarily for
severance, lease termination and relocation charges are estimated at $25
million. The majority of these costs will be incurred and expensed during 1997.
In addition, in connection with the preparation of the pro forma information
included elsewhere in this Proxy Statement, management of Homestake and Santa Fe
have conformed certain differences in accounting practice. See "Unaudited Pro
Forma Condensed Financial Information."
REGULATORY MATTERS
The HSR Act and the rules and regulations promulgated thereunder provide
that certain transactions (including the Combination) may not be consummated
until certain information has been submitted to the Antitrust Division and the
FTC and specified HSR Act waiting period requirements have been satisfied. On
December 19, 1996, Homestake and Santa Fe filed all required notification and
report forms with the Antitrust Division and the FTC. On January 18, 1997, the
waiting period under the HSR Act will expire unless Homestake and Santa Fe
receive a request from the Antitrust Division or the FTC for additional
information relating to the Combination, in which case the Combination may not
be consummated until 20 days after Homestake and Santa Fe have substantially
complied with such request. The expiration of the HSR Act waiting period does
not preclude the Antitrust Division or the FTC from challenging the Combination
on antitrust grounds. Neither Homestake nor Santa Fe believes the Combination
will violate federal antitrust laws.
ABSENCE OF APPRAISAL RIGHTS
Under the DGCL, the Santa Fe stockholders are not entitled to appraisal or
dissenters' rights in connection with the Combination because the Santa Fe
Common Stock is listed on a national securities
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exchange and the consideration which such stockholders will be entitled to
receive in the Combination will consist solely of Homestake Common Stock, which
will also be listed on a national securities exchange, and cash in lieu of
fractional shares. The Homestake stockholders are not entitled to appraisal or
dissenters' rights in connection with the Combination.
INTERESTS OF CERTAIN PERSONS IN THE COMBINATION
Homestake
General. Certain members of Homestake management and the Homestake Board
may be deemed to have certain interests in the Combination that are in addition
to their interests as Homestake stockholders generally. The Homestake Board was
aware of these interests and considered them, among other matters, in approving
the Combination.
Interests of Certain Homestake Directors. At the Effective Time, five
members of the Homestake Board will continue as directors of Homestake. The
other eight members of the Homestake Board will voluntarily resign as directors
of Homestake.
The five continuing directors of Homestake will continue to receive the
benefits otherwise available to directors of Homestake under its normal director
compensation and benefit plans and programs, and will not receive additional
benefits or acceleration of any rights.
The eight directors of Homestake who voluntarily resign will receive the
following benefits in addition to those benefits in which they are already
vested:
1. Homestake's outside directors annually are granted director share rights
entitling such directors to receive a number of shares of Homestake Common Stock
for no consideration. The number of share rights so granted are determined by
dividing 10% of the prior year's compensation for service as a director by the
average fair market value of Homestake Common Stock for the third through
seventh business days following the annual release of Homestake's earnings for
the preceding year. Share rights normally vest three years after the date of
grant, and are forfeited if the director ceases to act as a director prior to
the end of the three-year vesting period, other than by reason of death,
disability, retirement at age 70, termination within one year following a
"change of control" (as defined), or termination following a "corporate
transaction" (as defined). The Combination will constitute a "corporate
transaction" for purposes of the director share rights. As a result, the eight
Homestake directors who resign in connection with the Combination will be fully
vested in a total of -- otherwise unvested Homestake director share rights
(plus those additional shares rights to be granted to those directors in
February 1997 following the announcement by Homestake of its earnings for 1996),
and will receive all of the shares of Homestake Common Stock subject to those
rights following the Combination.
2. Homestake's outside directors who do not have a fully vested interest
under any Homestake tax-qualified retirement plan are eligible to receive
retirement benefits under Homestake's Retirement Plan for Outside Directors. The
retirement benefit is an amount equal to the annual retainer payable to an
outside director at the time of retirement (presently $16,000 per year),
multiplied by the number of years of service (or part thereof) as an outside
director. Outside directors must have a minimum of five years service as a
director to qualify for benefits under the Plan. On December 8, 1996, the
Homestake Board amended such Plan to waive the five-year minimum service
requirement for those outside directors who will be voluntarily resigning in
connection with the Combination. As a result, -- directors who have not served
for at least five years will vest in retirement benefits in the total amount of
$ -- . That amount will be payable in monthly installments over a period equal
to the period during which they served as directors.
Interests of Homestake Management. The Agreement provides that at the
Effective Time, Mr. Thompson, Homestake's President and Chief Executive Officer
will become Homestake's Chairman of the Board and Chief Executive Officer.
A total of ten Homestake management personnel, including Messrs. Thompson,
Elam, Kirk, Leathley and Lindqvist, have severance agreements with Homestake
under which they are entitled to receive benefits in the event of a change of
control followed by certain events. The Combination is a change of control for
purposes of these severance agreements. Under the severance agreements,
entitlement to benefits arises if,
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within three years following the consummation of the Combination, such person's
employment is terminated or such person elects to terminate his or her
employment following (i) a reduction in salary or certain benefits, (ii) a
change in location of employment, (iii) a change in position, duties,
responsibilities or status inconsistent with such person's prior position, or
(iv) a reduction in responsibilities, title or office as in effect just before
the consummation of the Combination. Benefits consist of (i) a lump sum payment
equal to two times such person's highest annual salary and bonus (including
deferred compensation) during the three years prior to termination, (ii)
continuation of participation in insurance and certain other fringe benefits for
two years, (iii) continued vesting of stock options, and (iv) relocation
assistance. Such benefits are in lieu of severance benefits otherwise payable
under Homestake's general severance policy.
The same ten management personnel are also participants in Homestake's
Executive Supplemental Retirement Plan (the "Homestake ESRP"). The Homestake
ESRP provides that participating employees accrue retirement benefits at the
rate of 4 1/3% times years of service up to a maximum of 15 years. Service
credit is then multiplied by average monthly compensation during the 36
consecutive months of highest compensation (salary and bonus) to determine a
monthly retirement benefit. Benefits are payable on retirement at age 62 after
10 continuous years of service, with provision for early retirement between ages
55 and 62. Within two years following the Combination, if any participant's
employment is terminated by Homestake or by the participant for any reason, such
participant will fully vest in the maximum benefits payable under the Homestake
ESRP to the extent such participant is not already fully vested, and will be
entitled to commence receiving such benefits at age 55. Benefits payable under
the Homestake ESRP are reduced to the extent of retirement benefits otherwise
payable under any other Homestake retirement plan (except the Homestake Mining
Company Savings Plan).
Homestake has a deferred compensation plan under which 23 eligible
employees and the directors are entitled to defer receipt of compensation.
Deferred compensation earns interest at rates determined under the plan, with a
higher rate equal to 120% of the regular rate (the "Preferred Rate") for persons
who have been participants for more than five years. Under the deferred
compensation plan, following the Combination, all deferred compensation will
earn interest at the Preferred Rate.
Santa Fe
General. Certain members of Santa Fe management and the Santa Fe Board may
be deemed to have certain interests in the Combination that are in addition to
their interests as stockholders of Santa Fe generally. The Santa Fe Board was
aware of these interests of management and considered them, among other matters,
in approving the Combination.
Directors and Management of Homestake after the Combination. At the
Effective Time, the Homestake Board will include five members of the current
Santa Fe Board.
The Agreement provides that at the Effective Time, Mr. James, Santa Fe's
Chairman, President and Chief Executive Officer, will become Homestake's
President and Chief Operating Officer.
Directors and Officers Insurance; Limitation of Liability of Santa Fe
Directors and Officers. The Agreement provides that Homestake will, to the
fullest extent permitted by law, cause Santa Fe to honor all of its obligations
to indemnify (including any obligations to advance funds for expenses) the
current or former directors or officers of Santa Fe for acts or omissions by
such directors and officers occurring prior to the Effective Time to the extent
that such obligations of Santa Fe existed on the date of the Agreement. The
Agreement also provides that for a period of five years after the Effective
Time, Homestake will cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Santa Fe (provided
that Homestake may substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
or related to facts or events which occurred at or before the Effective Time;
provided, however, that Homestake will not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 200% of the
annual premiums paid as of the date of the Agreement by Santa Fe for such
insurance (such 200% amount, the "Maximum Premium"). The Agreement provides that
if such insurance coverage cannot be obtained at all, or can only be obtained at
an annual
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premium in excess of the Maximum Premium, Homestake will maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Premium.
Santa Fe Employee Benefit Plans after the Combination. The Agreement
provides that for a period of one year after the Effective Time, Homestake will
(i) either (A) maintain or cause Santa Fe (or in the case of a transfer of all
or substantially all the assets and business of Santa Fe, its successors and
assigns) to maintain Santa Fe's benefit plans (other than medical plans and
plans providing for the issuance of Santa Fe capital stock or based on the value
of Santa Fe capital stock) at the benefit levels in effect on the date of the
Agreement or (B) provide or cause Santa Fe (or, in such case, its successors or
assigns) to provide benefits (other than medical benefits) to employees of Santa
Fe and Santa Fe's subsidiaries that, taken as a whole, are not materially less
favorable in the aggregate to such employees than those provided to similarly
situated employees of Homestake and (ii) make available plans providing for the
issuance of Homestake capital stock or based on the value of Homestake capital
stock, and provide or cause to be provided medical benefits, to employees of
Santa Fe and Santa Fe's subsidiaries that are substantially equivalent to those
provided to similarly situated employees of Homestake. From and after the
Effective Time, Homestake will, and will cause Santa Fe to honor in accordance
with their respective terms (as in effect on the date of the Agreement), Santa
Fe's employment, severance and termination agreements with Santa Fe employees.
The Agreement provides that with respect to any "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), maintained by Homestake or any Homestake subsidiary (including any
severance plan), for all purposes, including determining eligibility to
participate, level of benefits and vesting, service with Santa Fe or any Santa
Fe subsidiary will be treated as service with Homestake or the Homestake
subsidiaries; provided, however, that such service need not be recognized to the
extent that such recognition would result in any duplication of benefits.
The consummation of the Merger will constitute a change in control for
purposes of certain of the Santa Fe benefit plans. Accordingly, provisions of
certain of the Santa Fe benefit plans may cause the acceleration of vesting
and/or the payment, potential payment or funding of certain equity-based and
cash-based incentives and supplemental retirement benefits.
Santa Fe Rabbi Trust Agreement. Santa Fe maintains a rabbi trust (the
"Santa Fe Rabbi Trust") providing that in the event of a "potential change in
control" (as defined), Santa Fe must contribute an amount equal to its estimated
liabilities under each of the Santa Fe Supplemental Retirement Plan, Santa Fe
Supplemental Retirement and Savings Plan, certain executive deferred
compensation arrangements and the Santa Fe Severance Agreements (as defined
below). Since a "potential change in control" occurred for purposes of the Santa
Fe Rabbi Trust when Santa Fe executed the Agreement, Santa Fe was required to
and did contribute the following estimated amounts to the Santa Fe Rabbi Trust
in respect of such plans and arrangements for the benefit of, among others, the
Santa Fe executive officers named in the Santa Fe Summary Compensation Table
(the "Santa Fe Named Executive Officers"): Mr. James, $ -- ; Mr. Wilkes,
$ -- ; Mr. Smith, $ -- ; Mr. Hogan, $ -- and Mr. Jarke,
$ -- . Additional payments will be required at a subsequent time in the
event that such estimated payments are insufficient to fund the applicable
liabilities.
Santa Fe Change in Control Severance Agreements. Santa Fe has in effect
severance agreements with 26 current executives and key employees, including the
Santa Fe Named Executive Officers (the "Santa Fe Severance Agreements"). Santa
Fe's obligations under each Santa Fe Severance Agreement are triggered if such
person's employment is terminated within 36 months following a change in
control. The consummation of the Merger will constitute a change in control for
purposes of the Santa Fe Severance Agreements. Under each Santa Fe Severance
Agreement, a terminated person would receive a cash severance payment equal to
the sum of (a) two times the sum of (i) the highest level of such person's
annual base salary in effect currently or in the past twenty-four 24 months and
(ii) the highest level of annual incentive compensation paid to such person in
the fiscal year during which either such person is terminated or an event
constituting good reason (as defined) occurs and (b) the maximum amount to which
such person would have been entitled in the current performance period assuming
attainment of certain corporate performance levels (as specified) under the
incentive bonus plans in which such person was participating. The Santa Fe
Severance Agreements also provide for the continuation of health care and life
insurance and also provide for certain
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other benefits such as outplacement services and relocation benefits.
Notwithstanding the foregoing, the benefits payable under the Santa Fe Severance
Agreements will be reduced to the extent necessary to assure that Santa Fe will
not lose its ability to deduct any such payments for federal tax purposes by
virtue of Section 280G of the Code. The Santa Fe Severance Agreements also
provide that such person may elect to receive severance benefits over an
extended period of time (without interest), rather than in a lump sum payment,
in accordance with the following options (the "Extended Payments"): (i) in equal
monthly installments over a period not to exceed 36 months; (ii) if such person
has reached age 55 and accrued 10 years of pension vesting service at the time
of termination, over a period of time ending on the earliest to occur of (A) the
date such person commences receiving benefits under Santa Fe's qualified pension
plan, (B) attainment of age 65 and (C) attainment of age 62 and accrual of 30
years of pension vesting service; and (iii) if such person has reached age 40
and the sum of such person's age and number of years of pension vesting service
equals or exceeds 50 at the time of termination, over a period of time ending on
the date such person commences receiving benefits under Santa Fe's qualified
pension plan. Any such person electing to receive Extended Payments will be
entitled to receive continued health and welfare coverage and will continue to
accrue service credit under Santa Fe's Supplemental Retirement Plan so long as
the Extended Payments continue.
Santa Fe Equity Based Incentive Awards. The provisions of the Agreement
relating to the stock options outstanding under Santa Fe's Long Term Incentive
Stock Plan (the "Santa Fe LTISP") are described under "The Agreement--Certain
Other Covenants." Pursuant to the terms of the Santa Fe LTISP, vesting is
accelerated upon a change in control. Accordingly, following the consummation of
the Merger, each Santa Fe Stock Option will become immediately exercisable in
full. The following table sets forth, with respect to the Santa Fe Named
Executive Officers (i) the number of shares of Santa Fe Common Stock subject to
Santa Fe Stock Options held by such persons that will become exercisable due to
accelerated vesting upon the consummation of the Merger, (ii) the weighted
average exercise price for such exercisable Santa Fe Stock Options held by such
persons, and (iii) the aggregate value of such exercisable Santa Fe Stock
Options based upon the application of the provisions of the Agreement in respect
of such Santa Fe Stock Options (before deduction for applicable withholding
taxes), assuming that the Exchange Ratio will result in a market value
equivalence of $ -- per share of Santa Fe Common Stock (i.e., total stock
value less the exercise price).
<TABLE>
<CAPTION>
SANTA FE STOCK
OPTIONS WHICH BECOME
EXERCISABLE DUE TO
THE AGGREGATE VALUE
CONSUMMATION OF THE WEIGHTED AVERAGE OF SANTA FE
MERGER EXERCISE PRICE PER SHARE STOCK OPTIONS
-------------------- ------------------------ ---------------
<S> <C> <C> <C>
Mr. James...........................
Mr. Wilkes..........................
Mr. Smith...........................
Mr. Hogan...........................
Mr. Jarke...........................
</TABLE>
The Santa Fe Named Executive Officers hold shares of restricted Santa Fe
Common Stock under the Santa Fe LTISP. Such restricted stock will become fully
vested and all restrictions thereon will lapse upon the consummation of the
Merger. The Santa Fe Named Executive Officers hold the following numbers of
shares of restricted Santa Fe Common Stock: Mr. James, -- ; Mr. Wilkes,
-- ; Mr. Smith, -- ; Mr. Hogan, -- and Mr. Jarke -- .
See "Beneficial Ownership -- Ownership of Common Stock by Management; Santa
Fe" for additional information regarding beneficial ownership of Santa Fe and
Homestake Common Stock by directors and officers of Santa Fe.
Payments to David H. Batchelder. Pursuant to a resolution of the Santa Fe
Board on December 5, 1996, Santa Fe will pay to David H. Batchelder, a director
of Santa Fe, $1,050,000 for certain advisory services Mr. Batchelder has
provided and will provide to Santa Fe in connection with its consideration of
strategic alternatives. Such amount is payable in quarterly installments of
$87,500. The first such installment was paid in December 1996.
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Options Granted to Peter Steen. In 1996, Mr. Steen, a director of Santa
Fe, received a stock option under Santa Fe's Directors' Stock Compensation Plan
for 50,000 shares of Santa Fe Common Stock as compensation for his position as
Chairman of the Executive and Policy Committee. The exercise price is $15.38.
The option, which does not accelerate as a result of the Merger, will vest as to
50% of the underlying shares of Santa Fe Common Stock on each of March 1, 1997
and March 1, 1998.
RESALE OF HOMESTAKE COMMON STOCK
The Homestake Common Stock issued pursuant to the Agreement will not be
subject to any restrictions on transfer arising under the Securities Act, except
for shares issued to any Santa Fe stockholder who may be deemed to be an
"affiliate" of Homestake or Santa Fe for purposes of Rule 145 under the
Securities Act or for purposes of qualifying the Combination for pooling of
interests accounting treatment. It is expected that each such affiliate will
enter into an agreement with Homestake providing that such affiliate will not
transfer any Homestake Common Stock received in the Merger except in compliance
with the Securities Act. In addition, it is expected that each such affiliate
will agree not to make any such disposition either during the 30 day period
prior to the Effective Time or thereafter until after such time as financial
results covering at least 30 days of combined operations of Homestake and Santa
Fe after the Merger have been published. Pursuant to the Agreement, Homestake
has agreed to publish such financial results as promptly as practicable, and in
any event within 30 days following the end of the first full calendar month
following the Merger. This Proxy Statement does not cover resales of Homestake
Common Stock received by any person who may be deemed to be such an affiliate of
Homestake or Santa Fe.
CERTAIN LITIGATION
On December 6, 1996, a Santa Fe stockholder filed a shareholder's class
action complaint (McKewon v. Batchelder, C.A. No. 15406) against Santa Fe and
the Santa Fe Board (collectively, the "Defendants") in the Court of Chancery of
the State of Delaware (the "Court of Chancery"). The same day, two other Santa
Fe stockholders filed two separate, but similar, class action complaints against
Santa Fe and its directors in the Court of Chancery, and on December 9 1996,
three more Santa Fe stockholders (collectively with the three previously
mentioned stockholders the "Plaintiffs") filed three additional separate, but
similar, class action complaints against Santa Fe and its directors in the Court
of Chancery (Seiner v. James, C.A. No. 15407; Arthur v. Batchelder, C.A. No.
15409; Fieldon v. James, C.A. No. 15411; Bronzaft v. James, C.A. No. 15412; and
Burt v. James, C.A. No. 15413). As of January 3, 1997, the Defendants have been
served only with the McKewon complaint. On December 30, 1996, the Plaintiffs
filed with the Court of Chancery a proposed form of Order of Consolidation, to
which the Defendants have not objected. The proposed form of Order of
Consolidation states that the Plaintiffs shall file a consolidated amended
complaint as soon as practicable.
The McKewon complaint alleges, among other things, that the members of the
Santa Fe Board breached their fiduciary duties to the Santa Fe stockholders by
failing to fully consider the Newmont Public Proposal. The other complaints
filed on December 6, 1996 and December 9, 1996, against Santa Fe make similar
allegations. The Fielden and Burt complaints also allege that the members of the
Santa Fe Board approved the Homestake transaction in order to ensure that
certain of the Defendants would retain their positions. The McKewon action
seeks, among other things, to have the Court of Chancery order the Defendants to
take various actions to cooperate with any entity or person interested in
proposing a transaction with Santa Fe and to act to maximize shareholder value,
and seeks unspecified damages.
Santa Fe intends to defend vigorously against the Plaintiffs' allegations.
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THE AGREEMENT
GENERAL
This section of the Proxy Statement describes certain terms of the
Agreement. The description of the Agreement does not purport to be complete and
is qualified in its entirety by reference to the Agreement, a copy of which is
attached hereto as Appendix A and which is incorporated herein by reference. All
stockholders of Homestake and Santa Fe are urged to carefully read the Agreement
in its entirety.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Santa Fe Common Stock into the right to receive Homestake
Common Stock will occur automatically at the Effective Time. As soon as
reasonably practicable after the Effective Time, The First National Bank of
Boston, or such other bank or trust company as may be designated by Homestake
and Santa Fe, in its capacity as Exchange Agent (the "Exchange Agent"), will
mail a transmittal letter to each former Santa Fe stockholder. The transmittal
letter will contain instructions with respect to the surrender of certificates
previously representing Santa Fe Common Stock to be exchanged for Homestake
Common Stock.
SANTA FE STOCKHOLDERS SHOULD NOT FORWARD SANTA FE STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. SANTA FE
STOCKHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the Effective Time, each certificate that previously represented
shares of Santa Fe Common Stock will represent only the right to receive, upon
surrender of such certificate, certificates representing the Homestake Common
Stock into which shares were converted in the Merger and cash in lieu of
fractional shares of Homestake Common Stock to the extent described below.
Holders of certificates previously representing Santa Fe Common Stock will
not be paid dividends or distributions on the Homestake Common Stock into which
such shares have been converted with a record date after the Effective Time, and
will not be paid cash in lieu of fractional shares of Homestake Common Stock,
until such certificates are surrendered to the Exchange Agent for exchange. When
such certificates are surrendered, any unpaid dividends and any cash in lieu of
fractional shares of Homestake Common Stock payable as described below will be
paid without interest.
In the event of a transfer of ownership of Santa Fe Common Stock which is
not registered in the transfer records of Santa Fe, a certificate representing
the proper number of shares of Homestake Common Stock may be issued to a person
other than the person in whose name the certificate so surrendered is
registered, if such certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such issuance shall pay any
transfer or other taxes required by reason of the issuance of shares of
Homestake Common Stock to a person other than the registered holder of such
certificate or establish to the satisfaction of Homestake that such tax has been
paid or is not applicable.
All shares of Homestake Common Stock issued upon the surrender for exchange
of shares of Santa Fe Common Stock (including any cash paid in lieu of any
fractional shares of Homestake Common Stock), will be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to such shares of Santa
Fe Common Stock, subject, however, to Santa Fe's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
that may have been declared or made by Santa Fe on such shares of Santa Fe
Common Stock in accordance with the Agreement or prior to the date of the
Agreement and which remain unpaid at the Effective Time.
No fractional shares of Homestake Common Stock will be issued to any Santa
Fe stockholder in connection with the consummation of the Merger. In lieu of any
such fractional shares, each holder of Santa Fe Common Stock who otherwise would
be entitled to receive a fractional share of Homestake Common Stock pursuant to
the Merger will be paid an amount in cash equal to such holder's proportionate
interest in the net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate fractional
shares of Homestake Common Stock (the "Excess Shares"), if any, that
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would have been issued in the Merger. As soon as practicable following the
Effective Time, the Exchange Agent will determine the number of Excess Shares,
if any, and the Exchange Agent, as agent of such holders, will sell any such
Excess Shares at the then prevailing prices on the NYSE. The sale of the Excess
Shares by the Exchange Agent will be executed on the NYSE through one or more
member firms of the NYSE and will be executed in round lots to the extent
practicable. The proceeds from such sale or sales available for distribution to
such holders will be reduced by the compensation payable to the Exchange Agent
and the expenses incurred by the Exchange Agent, in each case, in connection
with such sale or sales of the Excess Shares, including all related commissions,
transfer taxes and other out-of-pocket transaction costs. Until the net proceeds
of such sale or sales have been distributed to such holders, the Exchange Agent
will hold such proceeds in trust for such holders. As soon as practicable after
the determination of the amount of cash, if any, to be paid to such holders in
lieu of any fractional shares of Homestake Common Stock, the Exchange Agent will
make available such amounts, without interest, to such holders who have
surrendered their certificates.
REPRESENTATIONS AND WARRANTIES
The Agreement contains customary mutual representations and warranties
relating to, among other things, (i) corporate organization and similar
corporate matters, (ii) subsidiaries, (iii) the capital structure of each of
Santa Fe and Homestake, (iv) authorization, execution, delivery, performance and
enforceability of, and required consents, approvals, orders and authorizations
of governmental authorities relating to, the Agreement and related matters, (v)
documents filed by each of Santa Fe and Homestake with the Commission ("SEC
Documents"), the accuracy of information contained therein and the absence of
undisclosed liabilities or obligations of each of Santa Fe and Homestake, (vi)
the accuracy of information supplied by each of Santa Fe and Homestake in
connection with the Registration Statement and this Proxy Statement, (vii) the
absence of certain changes or events with respect to each of Santa Fe and
Homestake, (viii) the absence of certain litigation, (ix) retirement and other
employee plans and matters relating to ERISA, (x) required stockholder votes,
(xi) engagement and payment of fees of brokers, investment bankers, finders and
financial advisors, (xii) receipt of fairness opinions, (xiii) filing of tax
returns and payment of taxes, (xiv) compliance with laws, (xv) the payment of
any excess parachute payments, (xvi) the absence of actions that would prevent
using the pooling of interests method to account for the Combination, (xvii)
environmental matters, (xviii) the inapplicability of certain state takeover
statutes requirements, (xix) the taking of all necessary action to render
inapplicable to the Combination the Homestake Rights Agreement and the Santa Fe
Rights Agreement, (xx) dispositions of personal or real property or interests
and rights in real property, (xxi) the absence of material reductions in
reserves and mineralized material, and (xxii) the estimated production
capacities and costs of certain development projects.
CONDUCT OF BUSINESS PENDING THE COMBINATION
Pursuant to the Agreement, Homestake and Santa Fe each has agreed to carry
on their respective businesses in the usual, regular and ordinary course in
substantially the same manner as conducted prior to the execution of the
Agreement. In addition, Homestake and Santa Fe each has agreed that, among other
things and subject to certain exceptions, neither it nor any of its subsidiaries
may:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly-owned subsidiary to its
parent and, in the case of Homestake, regular quarterly cash dividends with
respect to the Homestake Common Stock in an amount not in excess of $0.05
per share per quarter and, in the case of Santa Fe, regular annual cash
dividends with respect to the Santa Fe Common Stock in an amount not in
excess of $0.05 per share per annum, (y) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire any shares of
its capital stock or its subsidiaries' capital stock or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) in the case of Santa Fe and its subsidiaries, issue, deliver,
sell, grant, pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into, any
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rights, warrants or options to acquire, any such shares, voting securities
or convertible securities, any phantom stock options under Santa Fe's
Phantom Stock Option Plan, or any restricted stock, performance units,
performance shares, stock appreciation rights ("SARs") or limited stock
appreciation rights ("LSARs") under the Santa Fe LTISP (other than (x) the
issuance of shares of Santa Fe Stock and associated Santa Fe Rights upon
the exercise of Santa Fe Stock Options outstanding on the date of the
Agreement and in accordance with their present terms, (y) the issuance of
Santa Fe capital stock pursuant to the Santa Fe Rights Agreement and (z)
the grant of additional employee stock options, phantom stock options, SARs
and LSARs in the ordinary course of business consistent with past practice
to employees of Santa Fe and its subsidiaries covering not more than an
aggregate of 600,000 shares of Santa Fe Common Stock and equivalents and,
in the case of employee stock options, the issuance of Santa Fe Common
Stock (and associated Santa Fe Rights) upon the exercise thereof, but only
if and to the extent that the terms of such employee stock options, phantom
stock options, SARs and LSARs provide that the consummation by Santa Fe of
the transactions contemplated by the Agreement will not result in the
acceleration of vesting or the exercisability of such employee stock
options, phantom stock options, SARs and LSARs);
(iii) in the case of Homestake and its subsidiaries, issue, deliver,
sell, grant, pledge or otherwise encumber any shares of its capital stock,
any other voting securities or any securities convertible into, any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or any SARs or share rights under Homestake's 1996
Stock Option and Share Rights Plan (other than (w) the issuance of shares
of Homestake Common Stock (and associated Homestake Rights) in connection
with directors' share rights and upon the exercise of employee stock
options outstanding on the date of the Agreement and in accordance with
their present terms, (x) the issuance of shares of Homestake Common Stock
(and associated Homestake Rights) upon conversion of Homestake's 5.5%
Convertible Subordinated Notes due June 23, 2000, (y) the issuance of
Homestake capital stock pursuant to the Homestake Rights Agreement and (z)
the grant of additional employee stock options in the ordinary course of
business consistent with past practice to employees of Homestake and its
subsidiaries covering not more than 600,000 shares of Homestake Common
Stock and the issuance of Homestake Common Stock (and associated Homestake
Rights) upon the exercise thereof, but only if and to the extent that the
terms of such employee stock options provide that the consummation by
Homestake of the transactions contemplated by the Agreement will not result
in the acceleration of vesting or the exercisability of such employee stock
options);
(iv) amend its Certificate of Incorporation, By-laws or other
comparable charter or organizational documents, except for such amendments
to its Certificate of Incorporation, By-laws and other comparable charter
or organizational documents that do not have an adverse effect on the
transactions contemplated by the Agreement;
(v) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other business organization or
division thereof or (y) any assets that are material, individually or in
the aggregate, to it or its subsidiaries taken as a whole;
(vi) sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any personal or real property or
interests or rights in real property other than (A) sales and dispositions
of interests or rights with respect to real property having an aggregate
fair market value on the date of the Agreement of less than $20,000,000,
raw materials, obsolete equipment, mine output and other inventories, in
each case only if in the ordinary course of business consistent with past
practice, and (B) encumbrances and liens that are incurred in the ordinary
course of business consistent with past practice;
(vii) (y) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of it or any of its
subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the
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ordinary course of business consistent with past practice, or (z) make any
loans, advances (other than any advances to employees in the ordinary
course of business consistent with prior practice) or capital contributions
to, or investments in, any other person, other than to it or any of its
direct or indirect wholly-owned subsidiaries;
(viii) make or agree to make any new capital expenditure or
expenditures that, in the aggregate, are in excess of $25,000,000 above the
aggregate amount it has currently budgeted;
(ix) make any material tax election or settle or compromise any
material tax liability or refund, except to the extent already disclosed in
its SEC Documents;
(x) except pursuant to existing employment agreements or as required
by applicable laws, (A) increase the compensation payable or to become
payable to its executive officers or employees, (B) grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any of its or its subsidiaries' directors, executive officers or
employees (other than in accordance with benefit plans as in effect on the
date of the Agreement) or (C) establish, adopt, enter into or amend in any
material respect or take any action to accelerate any rights or benefits
under any collective bargaining agreement or benefit plan;
(xi) without limiting the generality of clause (x) above, make any
amendment to any employee stock plan as a result of the Agreement or in
contemplation of the Combination;
(xii) terminate or amend on terms less favorable to it any agreement
filed as an exhibit to any of its SEC Documents; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
In addition to the foregoing, each of Homestake and Santa Fe has covenanted
in the Agreement not to take any action and not to fail to take any action which
action or failure to act would prevent, or would be likely to prevent, (i) the
Combination from qualifying for pooling of interests accounting treatment or
(ii) the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
CERTAIN ACTIONS WITH RESPECT TO TAKEOVER PROPOSALS
The Agreement provides that each of Homestake and Santa Fe shall not, nor
shall they permit any of their respective subsidiaries to, nor shall they
authorize or permit any of their respective officers, directors or employees of
or any of their respective investment bankers, attorneys, accountants or other
advisors or representatives to, (i) solicit, initiate or encourage the
submission of any Takeover Proposal (as defined below), (ii) enter into any
agreement with respect to any Takeover Proposal or (iii) provide any non-public
information regarding itself to any third party or engage in any negotiations or
substantive discussions in connection with any Takeover Proposal; provided,
however, that (A) each of Homestake and Santa Fe may, prior to receipt of their
respective Stockholder Approval and in response to a Takeover Proposal that was
not solicited by it and that did not otherwise result from a breach of this
covenant, provide any non-public information regarding itself to any third party
or engage in any negotiations or substantive discussions with such person
regarding any Takeover Proposal, in each case only if its board of directors
determines in good faith, after consultation with counsel and its financial
advisors, that failing to take such action would create a reasonable possibility
of a breach of the fiduciary duties of its board of directors, and (B) nothing
contained in the Agreement shall prevent such party or its board of directors
from complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a Takeover Proposal or prevent its board of directors from taking any action
permitted by the covenant described in the second succeeding paragraph. A
"Takeover Proposal" means any proposal for a merger, consolidation or other
business combination involving Homestake or Santa Fe, as the case may be, or a
significant subsidiary of such party or any proposal or offer to acquire in any
manner, directly or indirectly, more than 30% of any class of voting securities
of such party or of a significant subsidiary of such party (other than where
such significant subsidiary's securities directly or indirectly represent an
economic interest in less than 30% of the assets of such party and such party's
subsidiaries, taken as a whole), including any proposal or offer relating to the
acquisition by such party or a significant subsidiary of such party in any
manner, directly or indirectly, of any securities or assets of another person in
consideration
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for the issuance of more than 30% of any class of voting securities of such
party or of a significant subsidiary of such party (other than where such
significant subsidiary's securities directly or indirectly represent an economic
interest in less than 30% of the assets of such party and such party's
subsidiaries, taken as a whole), or assets representing a substantial portion of
the assets of such party and such party's subsidiaries, taken as a whole, other
than the transactions contemplated by the Agreement. The Agreement provides that
any proposal or offer to acquire in any manner, directly or indirectly, any of
the voting securities of Prime not owned by Homestake or any subsidiary of
Homestake shall not constitute a Takeover Proposal. The Agreement also provides
that any action taken by Santa Fe, any Santa Fe subsidiary or any officer,
director or employee of or any investment banker, attorney, accountant or other
advisor or representative of, Santa Fe or any Santa Fe subsidiary with or with
respect to any such party on or prior to November 28, 1996, shall be deemed not
to constitute a violation of this covenant and shall not in and of itself
constitute the solicitation of a Takeover Proposal even if such actions result
in any such party making a Takeover Proposal after the date of the Agreement.
The Agreement provides that Homestake and Santa Fe promptly shall advise
the other party orally and in writing of the receipt of any Takeover Proposal
and of the receipt of any inquiry with respect to or which it reasonably
believes could lead to any Takeover Proposal. Each party promptly shall advise
the other party orally and in writing of the identity of the person making any
such Takeover Proposal or inquiry and of the material terms of any such Takeover
Proposal and of any changes thereto; provided, however, that such party's board
of directors shall have determined in good faith, after consultation with
counsel, that taking such action would not create a reasonable possibility of a
breach of the fiduciary duties of such party's board of directors, except that
in all events prior to exercising its right of termination described in clause
(ii)(f) under "The Agreement--Termination," such party shall endeavor to provide
the other party with a reasonable opportunity to respond to any Takeover
Proposal which such party otherwise may wish to accept.
The Agreement provides that subject to the covenant described in this
paragraph, neither the Homestake Board nor the Santa Fe Board, nor any committee
thereof, shall (i) withdraw or adversely modify, or propose to withdraw or
adversely modify, the adoption and approval by such board of directors or any
such committee of the Agreement or the Combination or (ii) approve or recommend,
or propose to approve or recommend, any Takeover Proposal. The Agreement permits
the Homestake Board and the Santa Fe Board to (i) not recommend to its
stockholders that they give the relevant Stockholder Approval or (ii) withdraw
or adversely modify such recommendation, but only if and to the extent that (x)
a Takeover Proposal is pending at the time such board of directors determines to
take any such action or inaction and such Takeover Proposal was not the result
of an intentional breach of the covenant described in the second preceding
paragraph by such board of directors and (y) such board of directors determines
in good faith, after consultation with counsel and its financial advisors, and
after considering among other things whether such Takeover Proposal is more
favorable to its stockholders than the transactions contemplated by the
Agreement (taking into account all relevant material terms of such Takeover
Proposal and the Agreement, including all such conditions, and any changes to
the Agreement proposed by the other party in response to such Takeover Proposal)
that failing to take any such action would create a reasonable possibility of a
breach of the fiduciary duties of such party's board of directors.
CERTAIN OTHER COVENANTS
Benefit Plans. The Combination will not result in any change in the terms
of the outstanding Homestake employee stock options granted under Homestake's
employee stock option plans. The Combination also will not result in any
acceleration of vesting of the outstanding Homestake share rights granted under
Homestake's employee stock option plans that are held by directors of Homestake
who will continue as members of the Homestake Board after the Effective Time.
The Agreement provides that Santa Fe will adjust the terms of all
outstanding Santa Fe Stock Options granted under Santa Fe's employee stock
option plans and the terms of such employee stock option plans, to provide that
at the Effective Time, each Santa Fe Stock Option outstanding immediately prior
to the Effective Time will be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Santa Fe Stock Option,
the same number of shares of Homestake Common Stock as the holder of such Santa
Fe Stock Option would have been entitled to receive pursuant to the Merger had
such holder
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exercised such Santa Fe Stock Option in full immediately prior to the Effective
Time, at a price per share equal to (x) the aggregate exercise price for the
shares of Santa Fe Common Stock otherwise purchasable pursuant to such Santa Fe
Stock Option divided by (z) the number of shares of Homestake Common Stock
deemed purchasable pursuant to such Santa Fe Stock Option; provided, however,
that in the case of any Santa Fe Stock Option to which Section 421 of the Code
applies by reason of its qualification under either Section 422 or 423 of the
Code ("qualified stock options"), the option price, the number of shares
purchasable pursuant to such Santa Fe Option and the terms and conditions of
exercise of such Santa Fe Stock Option shall be determined in order to comply
with Section 424(a) of the Code.
The Agreement provides that Santa Fe will adjust the terms of all
outstanding phantom stock options, SARs and LSARs granted under Santa Fe's stock
option plans to provide that, at the Effective Time, (x) each holder of a
phantom stock option, SAR or LSAR shall be entitled to that number of phantom
stock options, SARs or LSARs with respect to Homestake Common Stock equal to the
number of phantom stock options, SARs or LSARs, as the case may be, held by such
holder immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (z) the share value on the grant date with respect to each Homestake phantom
stock option, SAR or LSAR, as the case may be, shall be equal to the share value
on the grant date in effect with respect to the corresponding Santa Fe phantom
stock option, SAR or LSAR, as the case may be, immediately prior to the
Effective Time, divided by the Exchange Ratio.
The Agreement provides that as soon as practicable after the Effective
Time, Homestake will deliver to the holders of Santa Fe Stock Options, phantom
stock options, SARs and LSARs appropriate notices setting forth such holders'
rights pursuant to the respective Santa Fe employee stock option plans and the
agreements evidencing the grants of such Santa Fe Stock Options, phantom stock
options, SARs and LSARs will continue in effect on the same terms and conditions
(subject to the adjustments required by the Agreement after giving effect to the
Merger). The Agreement provides that Homestake will comply with the terms of
Santa Fe's employee stock option plans and ensure, to the extent required by,
and subject to the provisions of, such employee stock option plans, that Santa
Fe Stock Options which qualified as qualified stock options prior to the
Effective Time continue to qualify as qualified stock options after the
Effective Time.
The Agreement provides that Homestake will take all corporate action
necessary to reserve for issuance a sufficient number of shares of Homestake
Common Stock for delivery upon exercise of Santa Fe Stock Options assumed by
Homestake pursuant to the Agreement. As soon as reasonably practicable after the
Effective Time, Homestake will file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to the shares of Homestake
Common Stock subject to such Santa Fe Stock Options and will use reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Santa Fe Stock Options
remain outstanding. With respect to those individuals who subsequent to the
Combination are subject to the reporting requirements under Section 16(a) of the
Exchange Act, where applicable, Homestake will administer Santa Fe's employee
stock option plans assumed by Homestake pursuant to the Agreement in a manner
that complies with Rule 16b-3 promulgated under the Exchange Act to the extent
the applicable Santa Fe employee stock option plan complied with such rule prior
to the Combination.
The Agreement provides that for a period of one year after the Effective
Time, Homestake will (i) either (A) maintain or cause Santa Fe (or in the case
of a transfer of all or substantially all the assets and business of Santa Fe,
its successors and assigns) to maintain Santa Fe's benefit plans (other than
medical plans and plans providing for the issuance of Santa Fe capital stock or
based on the value of Santa Fe capital stock) at the benefit levels in effect on
the date of the Agreement or (B) provide or cause Santa Fe (or, in such case,
its successors or assigns) to provide benefits (other than medical benefits) to
employees of Santa Fe and Santa Fe's subsidiaries that, taken as a whole, are
not materially less favorable in the aggregate to such employees than those
provided to similarly situated employees of Homestake and (ii) make available
plans providing for the issuance of Homestake capital stock or based on the
value of Homestake capital stock, and provide or cause to be provided medical
benefits, to employees of Santa Fe and Santa Fe's subsidiaries that are
substantially equivalent to those provided to similarly situated employees of
Homestake. From and after the Effective Time, Homestake will, and will cause
Santa Fe to honor in accordance with their respective terms
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<PAGE> 70
(as in effect on the date of the Agreement), Santa Fe's employment, severance
and termination agreements with Santa Fe employees.
The Agreement provides that with respect to any "employee benefit plan", as
defined in Section 3(3) of ERISA, maintained by Homestake or any Homestake
subsidiary (including any severance plan), for all purposes, including
determining eligibility to participate, level of benefits and vesting, service
with Santa Fe or any Santa Fe subsidiary will be treated as service with
Homestake or the Homestake subsidiaries; provided, however, that such service
need not be recognized to the extent that such recognition would result in any
duplication of benefits.
Indemnification and Insurance. The Agreement provides that Homestake will,
to the fullest extent permitted by law, cause Santa Fe to honor all of its
obligations to indemnify (including any obligations to advance funds for
expenses) the current or former directors or officers of Santa Fe for acts or
omissions by such directors and officers occurring prior to the Effective Time
to the extent that such obligations of Santa Fe existed on the date of the
Agreement. The Agreement also provides that for a period of five years after the
Effective Time, Homestake will cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Santa Fe
(provided that Homestake may substitute therefor policies with reputable and
financially sound carriers of at least the same coverage and amounts containing
terms and conditions which are no less advantageous) with respect to claims
arising from or related to facts or events which occurred at or before the
Effective Time; provided, however, that Homestake will not be obligated to make
annual premium payments for such insurance to the extent such premiums exceed
the Maximum Premium. The Agreement provides that if such insurance coverage
cannot be obtained at all, or can only be obtained at an annual premium in
excess of the Maximum Premium, Homestake will maintain the most advantageous
policies of directors' and officers' insurance obtainable for an annual premium
equal to the Maximum Premium.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Homestake's and Santa Fe's respective obligation to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of various
conditions which include, in addition to other customary closing conditions, the
following:
(i) the Stockholder Approvals shall have been obtained;
(ii) the shares of Homestake Common Stock issuable to the Santa Fe
stockholders and employees in connection with the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance;
(iii) the waiting periods (and any extensions thereof) with respect to
the Combination under the HSR Act shall have been terminated or shall have
expired;
(iv) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Merger shall be in effect;
(v) the Registration Statement shall have become effective and shall
not be the subject of any stop order or proceedings seeking a stop order;
(vi) Homestake and Santa Fe shall each have received a letter dated as
of the Closing Date from Coopers and Price Waterhouse, respectively, to the
effect that the Combination will qualify for pooling of interests
accounting treatment; and
(vii) there shall not be pending any suit, action or proceeding by any
governmental entity (a) challenging the acquisition by Homestake or Sub of
any shares of Santa Fe Common Stock, seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
the Agreement or seeking to obtain from Santa Fe, Homestake or Sub any
damages that are material in relation to Santa Fe and its subsidiaries
taken as a whole, (b) seeking to prohibit or limit the ownership or
operation by Santa Fe, Homestake or any of their respective significant
subsidiaries of any material
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<PAGE> 71
portion of the business or assets of Santa Fe, Homestake or any of their
respective significant subsidiaries or to compel Santa Fe, Homestake or any
of their respective significant subsidiaries to dispose of or hold separate
any material portion of the business or assets of Santa Fe, Homestake or
any of their respective significant subsidiaries, as a result of the
Combination, (c) seeking to impose limitations on the ability of Homestake
or Sub to acquire or hold, or exercise full rights of ownership of, any
shares of capital stock of Santa Fe, including the right to vote such
capital stock on all matters properly presented to the stockholders of
Santa Fe, (d) seeking to prohibit Homestake or any of its subsidiaries from
effectively controlling in any material respect the business or operations
of Santa Fe or its significant subsidiaries or (e) which otherwise is
reasonably likely to have a material adverse effect on Santa Fe or
Homestake.
In addition, Homestake's and Santa Fe's respective obligation to effect the
Merger is subject to certain additional conditions (any of which may be waived
by such party), including the following:
(i) the representations and warranties of the other party set forth in
the Agreement that are qualified as to materiality shall be true and
correct, and the representations and warranties of such other party set
forth in the Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of the Agreement and
as of the Closing Date as though made on and as of the Closing Date, except
to the extent any such representation or warranty expressly relates to an
earlier date (in which case as of such date);
(ii) the other party to the Agreement shall have performed in all
material respects all obligations required to be performed by it under the
Agreement at or prior to the Closing Date;
(iii) such party shall have received from its counsel an opinion dated
the Closing Date stating that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of
the Code; and
(iv) there shall not have occurred since the date of the Agreement any
material adverse change relating to the other party.
TERMINATION
The Agreement may be terminated at any time prior to the Effective Time,
whether or not the Stockholder Approvals have been obtained: (i) by mutual
written consent of Homestake, Sub and Santa Fe or (ii) by either Homestake or
Santa Fe (a) if any Stockholder Approval has not been obtained at a Special
Meeting; (b) if the Merger has not been consummated on or before June 30, 1997,
unless the failure to consummate the Merger is the result of a wilful, material
breach of the Agreement by the party seeking to terminate the Agreement; (c) if
any court of competent jurisdiction or other governmental entity shall have
issued a final and non-appealable order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Combination; (d) in the event that the other party has breached any
representation, warranty, covenant or other agreement contained in the
Agreement, which breach would give rise to the failure of a condition described
in clauses (i) or (ii) of the second paragraph under "The Agreement--Conditions
to the Consummation of the Merger" and cannot be or has not been cured within 30
days after the giving of written notice of such breach (provided that the
terminating party is not then in similar breach); (e) in the event that any of
the conditions described in clause (vi) of the first paragraph under "The
Agreement--Conditions to the Consummation of the Merger" or clauses (i) through
(iv) of the second paragraph under "The Agreement--Conditions to the
Consummation of the Merger" is not capable of being satisfied prior to June 30,
1997; (f) if its board of directors shall have approved, and it shall
concurrently with such termination enter into, a definitive agreement providing
for the implementation of the transactions contemplated by a Takeover Proposal;
provided, however, that (x) such Takeover Proposal was not solicited by it and
did not otherwise result from a breach of the covenant described in the first
paragraph described under "The Agreement--Certain Actions with Respect to
Takeover Proposals," (y) its board of directors shall have complied with the
exception to the proviso to the covenant described in the second paragraph under
"The Agreement--Certain Actions with Respect to Takeover Proposals" in
connection with such Takeover Proposal and (z) it shall have simultaneously paid
the $65 million Termination Fee; and (g) if the board of directors of the other
party shall have (1) failed to recommend to its stockholders that they give the
relevant
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<PAGE> 72
Stockholder Approval (2) withdrawn or adversely modified such recommendation or
(3) failed to reaffirm such recommendation within 14 days after the other party
has made a written request to do so (which written request may be made at any
time after the public disclosure of a Takeover Proposal).
TERMINATION FEES
In the event that (i) any person shall make a Takeover Proposal for Santa
Fe that shall not have been withdrawn on the date of the Santa Fe Special
Meeting and thereafter the Agreement is terminated by Santa Fe or Homestake
pursuant to clause (ii)(a) of "The Agreement--Termination" because the Santa Fe
Stockholder Approval is not obtained, (ii) the Agreement is terminated by Santa
Fe as described in clause (ii)(f) of "The Agreement--Termination" or (iii) the
Agreement is terminated by Homestake as described in clause (ii)(g) of "The
Agreement--Termination," then Santa Fe shall pay to Homestake the $65 million
Termination Fee, unless Homestake is in material breach of its representations,
warranties or covenants under the Agreement.
In the event that (i) any person shall make a Takeover Proposal for
Homestake that shall not have been withdrawn on the date of the Homestake
Special Meeting and thereafter the Agreement is terminated by Homestake or Santa
Fe pursuant to clause (ii)(a) of "The Agreement--Termination" because the
Homestake Stockholder Approval is not obtained, (ii) the Agreement is terminated
by Homestake as described in clause (ii)(f) of "The Agreement--Termination" or
(iii) the Agreement is terminated by Santa Fe as described in clause (ii)(g) of
"The Agreement--Termination," then Homestake shall pay to Santa Fe the $65
million Termination Fee, unless Santa Fe is in material breach of its
representations, warranties or covenants under the Agreement.
In the event that the Agreement is terminated as a result of the failure to
obtain the Santa Fe Stockholder Approval (except in the circumstances described
in the second preceding paragraph) or is terminated by Homestake pursuant to
clause (ii)(d) under "The Agreement--Termination," Santa Fe will reimburse
Homestake for all its reasonable out-of-pocket expenses (up to $5,000,000)
actually incurred in connection with the Combination, unless Homestake is in
material breach of its representations, warranties or covenants under the
Agreement.
In the event that the Agreement is terminated as a result of the failure to
obtain the Homestake Stockholder Approval (except in the circumstances described
in the second preceding paragraph) or is terminated by Santa Fe pursuant to
clause (ii)(d) under "The Agreement--Termination," then Homestake will reimburse
Santa Fe for all its reasonable out-of-pocket expenses (up to $5,000,000)
actually incurred in connection with the Combination, unless Santa Fe is in
material breach of its representations, warranties or covenants under the
Agreement.
In the event of termination of the Agreement by either Homestake or Santa
Fe as described above, the Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of Homestake, Sub or
Santa Fe (other than certain provisions of the Agreement relating to fees and
expenses and confidentiality), except to the extent that such termination
results from a wilful, material breach by a party of any of its representations,
warranties, covenants or other agreements set forth in the Agreement which has
not been cured prior to the time of such termination.
AMENDMENT AND WAIVER
Subject to applicable law, (i) the Agreement may be amended by an
instrument in writing signed on behalf of each party at any time (except that
after the receipt of the Santa Fe Stockholder Approval or the Homestake
Stockholder Approval, no amendment may be entered into which requires further
approval by such stockholders unless such further approval is obtained) and (ii)
at any time prior to the Effective Time, the parties may, by written instrument
signed on behalf of each party, (a) extend the time for performance of any of
the obligations or other acts of the other parties to the Agreement, (b) waive
any inaccuracies in the representations and warranties contained in the
Agreement or in any document delivered pursuant thereto or (c) waive (subject to
the parenthetical in clause (i) above) compliance with any of the covenants or
conditions contained in the Agreement.
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FEES AND EXPENSES
Except as described under "The Agreement--Termination Fees," all fees and
expenses, including any fees payable to any broker, investment banker or
financial advisor, incurred in connection with the Combination will be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that expenses incurred in connection with printing and
mailing this Proxy Statement and the Registration Statement and the fees and
expenses of D.F. King will be shared equally by Homestake and Santa Fe.
AMENDMENTS TO RIGHTS AGREEMENTS
On December 8, 1996, Santa Fe amended its Rights Agreement, dated as of
January 26, 1995, between Santa Fe and Harris Trust and Savings Bank, as trustee
(the "Santa Fe Rights Agreement"), in order to render the Rights issued
thereunder (the "Santa Fe Rights") inapplicable to the Combination.
Homestake has not amended the Homestake Rights Agreement because the
Homestake Rights do not apply to the Combination.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Balance Sheet and
Unaudited Condensed Combined Statements of Income (collectively, the "Pro Forma
Financial Statements") were prepared by Homestake to illustrate the estimated
effects of the Combination, accounted for as a pooling of interests (see
"Anticipated Accounting Treatment"). Accordingly, the financial information of
Homestake and Santa Fe has been combined for all prior periods. The Pro Forma
Financial Statements give effect to differences between Homestake's and Santa
Fe's accounting policies which are expected to have a material impact on the
combined financial statements. The Pro Forma Financial Statements do not purport
to represent what the combined financial position or results of operations
actually would have been if the Combination had occurred at the beginning of the
periods or to project the combined financial position or results of operations
for any future date or period. The Pro Forma Condensed Combined Balance Sheet
gives effect to the Combination as if it had occurred on September 30, 1996. Pro
Forma Condensed Combined Statements of Income are presented for the nine months
ended September 30, 1996 and 1995 and for the years ended December 31, 1995,
1994 and 1993, giving effect to the Combination as if it had occurred at the
beginning of the earliest period presented.
The Pro Forma Financial Statements should be read in conjunction with the
historical consolidated financial statements, including the notes thereto, of
Homestake and Santa Fe. See "Incorporation of Certain Documents by Reference."
The Pro Forma Financial Statements are presented utilizing the
pooling-of-interests method of accounting whereby the recorded assets,
liabilities, shareholders' equity and net income of Homestake and Santa Fe
become the combined assets, liabilities, shareholders' equity and net income.
The Pro Forma Financial Statements also include pro forma adjustments which are
based upon available information and certain assumptions that Homestake believes
are reasonable under the circumstances. Such pro forma adjustments reflect the
effects of (i) the exchange of each share of Santa Fe Common Stock for 1.115
shares of Homestake Common Stock, and (ii) conforming Santa Fe's financial
information to Homestake's basis of accounting.
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<PAGE> 75
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HOMESTAKE SANTA FE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents...................... $ 64,709 $ 38,790 $ 103,499
Short-term investments.................... 164,457 164,457
Receivables............................... 43,750 860 44,610
Inventories............................... 85,503 42,716 $ 69,715(A) 197,934
Deferred income and mining taxes.......... 20,521 (20,521)(B)
Current portion of deferred mining
costs.................................. 100,465 (100,465)(A)
Other..................................... 6,947 5,363 12,310
---------- ---------- --------- ----------
Total current assets................... 385,887 188,194 (51,271) 522,810
---------- ---------- --------- ----------
Property, plant and equipment -- net........ 1,018,807 886,308 178,792(A) 2,083,907
---------- ---------- --------- ----------
Other assets
Deferred mining costs..................... 148,042 (148,042)(A)
Noncurrent investments.................... 35,797 35,797
Other assets.............................. 57,720 6,049 63,769
---------- ---------- --------- ----------
Total other assets..................... 93,517 154,091 (148,042) 99,566
---------- ---------- --------- ----------
Total Assets...................... $1,498,211 $1,228,593 $ (20,521) $2,706,283
========== ========== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities......................... $ 106,160 $ 83,077 $ (20,521)(B) $
25,000(C) 193,716
---------- ---------- --------- ----------
Long-term liabilities
Long-term debt............................ 185,000 394,866 579,866
Other long-term obligations............... 109,920 67,630 177,550
---------- ---------- --------- ----------
Total long-term liabilities............ 294,920 462,496 757,416
---------- ---------- --------- ----------
Deferred income and mining taxes............ 241,975 118,545 360,520
---------- ---------- --------- ----------
Minority interests in consolidated
subsidiaries.............................. 91,229 91,229
---------- ---------- --------- ----------
Shareholders' equity
Capital stock............................. 146,672 1,315 145,270(D) 293,257
Additional paid-in capital................ 477,883 327,279 (145,270)(D) 659,892
Retained earnings......................... 114,994 235,881 (25,000)(C) 325,875
Accumulated currency translation
adjustments............................ 28,160 28,160
Other..................................... (3,782) (3,782)
---------- ---------- --------- ----------
Total shareholders' equity............. 763,927 564,475 (25,000) 1,303,402
---------- ---------- --------- ----------
Total Liabilities and
Shareholders' Equity............ $1,498,211 $1,228,593 $ (20,521) $2,706,283
========== ========== ========= ==========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE SANTA FE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales................................... $564,696 $ 238,253 $ 802,949
Interest income................................. 11,246 $ 1,406(E) 12,652
Other income.................................... 12,041 5,983 (1,406)(E) 16,618
-------- -------- -------- --------
587,983 244,236 -- 832,219
-------- -------- -------- --------
Costs and Expenses
Production costs................................ 361,504 129,999 491,503
Depreciation, depletion and amortization........ 83,539 46,979 342(E) 130,860
Administrative and general expense.............. 27,804 12,436 (342)(E) 39,898
Exploration expense............................. 29,527 23,257 52,784
Interest expense................................ 7,974 9,628 17,602
Other expense................................... 1,304 1,304
-------- -------- -------- --------
511,652 222,299 -- 733,951
-------- -------- -------- --------
Income Before Taxes and Minority Interests........ 76,331 21,937 98,268
Income and Mining Taxes........................... (37,709) (6,363) (44,072)
Minority Interests................................ (10,766) (10,766)
-------- -------- -------- --------
Net Income........................................ $ 27,856 $ 15,574 $ -- $ 43,430
======== ======== ======== ========
Net Income Per Share.............................. $ 0.19 $ 0.15
======== ========
Average Shares Used in the Computation............ 146,190 292,772
======== ========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE SANTA FE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
Product sales.............................. $534,002 $ 254,685 $ 788,687
Interest income............................ 12,686 $ 1,381(E) 14,067
Other income............................... 10,262 5,719 (1,381)(E) 14,600
--------- ---------- ----------- ----------
556,950 260,404 -- 817,354
--------- ---------- ----------- ----------
Costs and Expenses
Production costs........................... 355,625 121,284 476,909
Depreciation, depletion and amortization... 73,866 49,870 665(E) 124,401
Administrative and general expense......... 28,977 11,752 (665)(E) 40,064
Exploration expense........................ 19,387 24,246 43,633
Interest expense........................... 8,324 7,114 15,438
Other expense.............................. 2,155 -- 2,155
--------- ---------- ----------- ----------
488,334 214,266 -- 702,600
--------- ---------- ----------- ----------
Income Before Taxes and Minority Interests... 68,616 46,138 114,754
Income and Mining Taxes...................... (33,091) (13,869) (46,960)
Minority Interests........................... (12,841) -- (12,841)
--------- ---------- ----------- ----------
Net Income................................... $ 22,684 $ 32,269 $ -- $ 54,953
======== ======== ========= =========
Net Income Per Share......................... $ 0.16 $ 0.19
======== =========
Average Shares Used in the Computation....... 137,891 284,388
======== =========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
72
<PAGE> 78
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE SANTA FE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
Product sales.............................. $715,842 $ 345,421 $1,061,263
Interest income............................ 16,737 $ 2,246(E) 18,983
Other income............................... 13,786 8,212 (2,246)(E) 19,752
--------- ---------- ----------- ----------
746,365 353,633 -- 1,099,998
--------- ---------- ----------- ----------
Costs and Expenses
Production costs........................... 481,886 166,989 648,875
Depreciation, depletion and amortization... 99,602 67,451 1,010(E) 168,063
Administrative and general expense......... 37,283 20,652 (1,010)(E) 56,925
Exploration expense........................ 27,541 31,213 58,754
Interest expense........................... 11,297 10,684 21,981
Other expense.............................. 3,290 3,290
--------- ---------- ----------- ----------
660,899 296,989 -- 957,888
--------- ---------- ----------- ----------
Income Before Taxes and Minority Interests... 85,466 56,644 142,110
Income and Mining Taxes...................... (39,141) (16,832) (55,973)
Minority Interests........................... (15,998) (15,998)
--------- ---------- ----------- ----------
Net Income................................... $ 30,327 $ 39,812 $ -- $ 70,139
======== ======== ========= =========
Net Income Per Share......................... $ 0.22 $ 0.25
======== =========
Average Shares Used in the Computation....... 138,117 284,631
======== =========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
73
<PAGE> 79
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE SANTA FE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
Product sales.............................. $656,056 $ 370,175 $1,026,231
Interest income............................ 9,762 $ 991(E) 10,753
Gain on issuance of stock by subsidiary.... 11,224 11,224
Other income............................... 28,445 7,409 (991)(E) 34,863
--
-------- -------- ----------
705,487 377,584 -- 1,083,071
--
-------- -------- ----------
Costs and Expenses
Production costs........................... 447,129 169,655 616,784
Depreciation, depletion and amortization... 76,171 75,726 816(E) 152,713
Administrative and general expense......... 38,159 18,155 (816)(E) 55,498
Exploration expense........................ 21,347 28,587 49,934
Interest expense........................... 10,124 8,765 18,889
Other expense.............................. 6,744 6,744
--
-------- -------- ----------
599,674 300,888 -- 900,562
--
-------- -------- ----------
Income Before Taxes and Minority Interests... 105,813 76,696 182,509
Income and Mining Taxes...................... (18,880) (19,995) (38,875)
Minority Interests........................... (8,917) (8,917)
--
-------- -------- ----------
Net Income................................... $ 78,016 $ 56,701 $ -- $ 134,717
======== ======== == ==========
Net Income Per Share......................... $ 0.57 $ 0.49
======== ==========
Average Shares Used in the Computation....... 137,733 274,508
======== ==========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
74
<PAGE> 80
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HOMESTAKE SANTA FE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales................................ $703,505 $ 228,744 $ 932,249
Interest income.............................. 4,832 $ 1,136(E) 5,968
Other income................................. 13,891 6,181 (1,136)(E) 18,936
--
-------- -------- --------
722,228 234,925 -- 957,153
--
-------- -------- --------
Costs and Expenses
Production costs............................. 454,623 104,372 558,995
Depreciation, depletion and amortization..... 103,377 43,150 1,025(E) 147,552
Administrative and general expense........... 40,553 12,748 (1,025)(E) 52,276
Exploration expense.......................... 17,457 21,864 39,321
Interest expense............................. 9,147 11,754 20,901
Other expense................................ 4,492 4,492
Write-downs of mining properties and
restructuring
and business combination expenses......... 24,183 24,183
--
-------- -------- --------
653,832 193,888 -- 847,720
--
-------- -------- --------
Income from Continuing Operations
Before Taxes and Minority Interests.......... 68,396 41,037 109,433
Income and Mining Taxes........................ (12,775) (13,369) (26,144)
Minority Interests............................. (3,127) (3,127)
--
-------- -------- --------
Income from Continuing Operations.............. $ 52,494 $ 27,668 -- $ 80,162
======== ======== == ========
Income Per Share from Continuing Operations.... $ 0.38 $ 0.31
======== ========
Average Shares Used in the Computation......... 137,046 262,149
======== ========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements.
75
<PAGE> 81
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS)
(A) To conform Santa Fe's presentation of deferred mining costs to Homestake's
presentation. Homestake includes deferred mining costs in property, plant,
and equipment as part of mining properties and development costs. In
addition, Homestake allocates deferred mining costs to ore in-process and
stockpiled ore inventories. Santa Fe does not allocate deferred mining costs
between each stage of processing in the balance sheet. Santa Fe's deferred
mining costs have been reclassified to conform with Homestake's presentation
as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE) SEPTEMBER 30, 1996
------------------------------------------------------------------------ ------------------
<S> <C> <C>
Inventories
69,715
Property, plant and equipment - net
178,792
Current portion of deferred mining costs
(100,465)
Deferred mining costs
(148,042)
</TABLE>
(B) Reflects reclassification of current deferred income and mining taxes to
conform to the Combined Company's presentation. At September 30, 1996
Homestake had a current deferred income and mining tax asset of $20.5
million and Santa Fe had a current deferred income tax liability (included
in current liabilities) of $27.6 million.
(C) Homestake and Santa Fe estimate that they will incur approximately $25
million of transaction costs, consisting primarily of investment bankers
fees, attorneys, accountants, financial printing and other related charges,
and $25 million of one-time severance, lease termination and relocation
charges. These estimates of merger-related expenses are preliminary and
therefore are subject to change. These nonrecurring expenses will be charged
to operations as incurred.
The Pro Forma Condensed Combined Balance Sheet gives effect to the $25
million transaction costs as if they had been incurred as of September 30,
1996. However, the Pro Forma Condensed Combined Statements of Income do not
give effect to any merger-related expenses.
(D) Reflects a reclassification from additional paid-in capital to capital stock
(par value $1 per share) related to the exchange of each Santa Fe common
share for 1.115 shares of Homestake Common Stock.
(E) Reflects reclassifications to conform to Homestake's presentation as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- -------------------------
INCREASE (DECREASE) 1996 1995 1995 1994 1993
------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Interest Income..............................
$ 1,406 $ 1,381 $ 2,246 $ 991 $ 1,136
Other Income.................................
(1,406) (1,381) (2,246) (991) (1,136)
Depreciation, depletion and amortization.....
342 665 1,010 816 1,025
Administrative and general expense...........
(342) (665) (1,010) (816) (1,025)
</TABLE>
(F) Historically, Homestake has not hedged or otherwise sold significant
portions of its future gold production. Therefore, in projecting future
income streams for the purpose of determining deferred tax valuation
allowances, Homestake assumes gold prices which are Homestake's best
estimate of the future spot prices of gold. Homestake assumed a real dollar
gold price of $375 per ounce in projecting its future U.S. revenue streams
at December 31, 1995. This resulted in Homestake establishing and/or
maintaining deferred tax valuation allowances for certain U.S. tax assets at
December 31, 1995. Homestake currently anticipates using a similar price
when projecting its future U.S. revenue streams at December 31, 1996. This
is expected to result in Homestake establishing and/or maintaining deferred
tax valuation allowances for certain of its U.S. tax assets at December 31,
1996. Santa Fe did not require any deferred tax valuation allowances at
December 31, 1995 and does not expect to require any deferred tax valuation
allowances at December 31, 1996.
76
<PAGE> 82
Historically, Santa Fe sells and/or hedges significant portions of its
future gold production and consistently has been able to achieve prices in
excess of the spot price for its gold production. The pro forma condensed
consolidated financial statements assume that management will recommend to
the new Board of Directors of the post-merger Combined Company that the
Combined Company continue to hedge an amount of its future combined gold
production at least equal to what Homestake and Santa Fe have been hedging
separately. In the absence of any definitive post-merger strategies to
minimize tax, preliminary Combined Company projected future U.S. revenue
streams, assuming the Combined Company hedges an amount of its combined gold
production equal to what Homestake and Santa Fe have been hedging
separately, result in no material change to the historical combined or
projected deferred tax valuation allowances. It should be noted that a
variation in this Combined Company hedging policy or the development of
alternate post-merger strategies to minimize tax could have a significant
impact on deferred tax valuation allowances. Any such change in deferred tax
valuation allowances would be included in earnings at the time of the
change. See "Risk Factors; Certain Forward-Looking and Cautionary
Statements; Price Fluctuations; Forward Sales and Hedging."
77
<PAGE> 83
DIRECTORS AND MANAGEMENT OF HOMESTAKE AFTER THE COMBINATION
BOARD OF DIRECTORS OF HOMESTAKE AFTER THE COMBINATION
The Homestake Board has adopted resolutions providing that at the Effective
Time, Homestake's By-laws will be amended to reduce the number of Homestake
directors from 13 to 12 (comprised of three classes of four directors each). In
addition, the Agreement provides that at the Effective Time, the Homestake Board
will consist of (i) five individuals designated by Homestake from the current
Homestake Board, with Mr. Thompson to be the Chairman of the Homestake Board;
(ii) five individuals designated by Santa Fe from the current Santa Fe Board;
and (iii) two directors chosen by those ten individuals.
The Homestake Charter provides for the Homestake Board to be divided into
three classes. Each class of directors elected at an annual meeting of
stockholders will be elected for a three-year term. The expected composition of
the Homestake Board after the Combination is as follows:
--
The Homestake Board has six committees: the Executive Committee, the
Finance Committee, the Audit Committee, the Compensation Committee, the
Nominating Committee and the Environmental, Health and Safety Committee. The
members of each of the six committees will be selected by the new Homestake
Board after the Effective Time.
The Executive Committee has authority to exercise most of the powers of the
Homestake Board. It is intended to function on a standby basis.
The Finance Committee reviews and makes recommendations to the Homestake
Board about proposed dividends, investments and financial matters, and oversees
pension and savings plan investments.
The Audit Committee recommends to the Homestake Board appointment of the
firm of independent accountants to audit and report to stockholders on the
consolidated financial statements of Homestake, and receives and considers the
reports of the independent accountants. The Committee also oversees Homestake's
internal auditing.
The Compensation Committee evaluates and recommends to the full Homestake
Board the levels of compensation and benefits for officers and key employees.
The Compensation Committee also administers Homestake's stock option plans and
its Deferred Compensation Plan and Executive Supplemental Retirement Plan.
The Nominating Committee reviews and evaluates candidates for director,
including nominees recommended by stockholders, and makes recommendations on
candidates to the Homestake Board. Applications and communications relating to
candidates for director may be sent to the Secretary of Homestake at the
corporate offices in San Francisco.
The Environment, Health and Safety Committee oversees Homestake's
compliance with environmental, health and safety laws and policies.
MANAGEMENT
The Agreement provides that after the Combination, Mr. Thompson, the
President and Chief Executive Officer of Homestake, will be Homestake's Chairman
and Chief Executive Officer and Mr. James, the Chairman, President and Chief
Executive Officer of Santa Fe, will be Homestake's President and Chief Operating
Officer.
Homestake has commissioned Coopers as a consultant to assist in the
development of the management structure of the Combined Company. It is
anticipated that Coopers will recommend an organizational structure and numbers
of management positions, and will also make recommendations regarding the
appropriate locations of certain operations and administrative functions,
including whether to relocate to Nevada certain operations and administrative
functions now being performed in the San Francisco office of
78
<PAGE> 84
Homestake. It is also anticipated that Coopers will assist Messrs. Thompson and
James in evaluating members of senior management of both Homestake and Santa Fe.
It is anticipated that based upon the report of Coopers and their own
evaluation, Messrs. Thompson and James will submit recommendations to the new
Homestake Board with respect to the administrative reorganization of Homestake
and with respect to the identity of Homestake senior management following the
Combination. Based on such report and recommendation, the Homestake Board will
elect the continuing officers of Homestake and take other appropriate action to
implement the administrative reorganization.
79
<PAGE> 85
EXECUTIVE COMPENSATION
HOMESTAKE COMPENSATION
Homestake Summary Compensation Table
The following table discloses, for the years indicated, compensation
received by Homestake's executive officers named therein (the "Homestake Named
Executive Officers") for the fiscal years ended December 31, 1996, 1995 and
1994. Such officers served as Chief Executive Officer or were one of the four
most highly compensated executive officers (other than the Chief Executive
Officer) for the fiscal year ended
December 31, 1996. Harry M. Conger retired in May 1996 as the Chief Executive
Officer of Homestake. He continued as the non-executive Chairman of the Board of
Directors following his retirement.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------
-------------------------------
OTHER AWARDS
ANNUAL ---------- PAYOUTS
COMPEN- SECURITIES -------
NAME AND SATION UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS(#) PAYOUTS COMPENSATION
- ------------------------- ----- --------- -------- ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harry M. Conger 1996 $ 202,500 $ 0 $32,243(3) 66,400 $ 0 $212,252(4)
Chairman of the 1995 517,500 105,000 66,953(5) 59,900 0 9,000
Board(2) 1994 500,000 225,000 14,900(6) 49,200 0 6,750
Jack E. Thompson 1996 422,452 225,000 25,212(8) 56,100 0 12,044(9)
President and Chief 1995 336,000 68,000 29,146(10) 31,100 0 9,174
Executive Officer(7) 1994 263,575 146,250 157,438(11) 29,700 0 6,750
Gene G. Elam 1996 272,000 95,700 23,620(12) 17,900 0 11,546(13)
Vice President, 1995 261,000 41,000 8,150(14) 16,100 0 9,010
Finance and Chief 1994 252,000 88,200 8,100(15) 13,200 0 6,750
Financial Officer
Wayne Kirk 1996 340,000 121,400 563(16) 22,300 0 10,908(17)
Vice President, 1995 326,000 52,000 0 20,100 0 9,010
General Counsel 1994 315,000 110,250 0 16,500 0 6,750
and Corporate Secretary
Gil J. Leathley 1996 208,000 71,700 18,995(19) 15,400 0 10,438(20)
Vice President, 1995 198,088 30,000 49,571(21) 21,500 0 10,655
Operations(18) 1994 171,740 55,600 692(22) 9,700 0 9,623
William F. Lindqvist 1996 224,000 77,300 19,731(24) 16,500 0 10,916(25)
Vice President, 1995 91,667 12,000 125,525(26) 30,000 0 3,663
Exploration(23) 1994 n/a n/a n/a n/a n/a n/a
</TABLE>
- ------------
(1) In accordance with the rules of the Commission, Homestake is not required
to report the value of personal benefits for any year unless the aggregate
dollar value exceeds the lesser of 10 percent of the executive officer's
salary and bonus or $50,000.
(2) Mr. Conger also served as Chief Executive Officer until May 1996.
(3) Consists of $23,543 (financial planning) and $8,700 (directors fees).
(4) Consists of $51,241 (accrued vacation paid on retirement), $3,375 (matching
contribution to savings plan), $10,745 (imputed income on split dollar life
insurance), $9,434 (tax gross-up related to split dollar life insurance),
$12,843 (reimbursement for spousal travel expense and related tax
gross-up), $112,500 (consulting fees following retirement) and $12,114
(office expense reimbursement).
(5) Consists of $49,453 (financial planning) and $17,500 (directors' fees).
(6) Directors' fees.
(7) Mr. Thompson served as President and Chief Operating Officer until May
1996, when he was appointed President and Chief Executive Officer.
(8) Consists of $6,012 (financial planning) and $19,200 (directors' fees).
80
<PAGE> 86
(9) Consists of $9,000 (matching contribution to savings plan), $1,422 (imputed
income on split dollar life insurance), $1,248 (tax gross-up related to
split dollar life insurance) and $374 (above market component of interest
paid on deferred compensation plan).
(10) Consists of $17,500 (directors' fees), $11,030 (financial planning) and
$616 (tax gross-up for payment made in connection with the sale of Mr.
Thompson's Canadian residence in 1994).
(11) Consists of $53,844 (cost-of-living adjustment in connection with Mr.
Thompson's foreign assignment), $47,700 (payment to Mr. Thompson in
connection with sale of residence in Canada), $45,131 (tax gross-up for
payment made in connection with sale of residence), $7,263 (financial
planning) and $3,500 (directors' fees). In connection with his appointment
as President, Mr. Thompson relocated from Canada to the San Francisco,
California area.
(12) Consists of $1,620 (financial planning) and $22,000 (directors' fees paid
by publicly held subsidiary).
(13) Consists of $9,000 (matching contributions to savings plan), $1,297
(imputed income on split dollar life insurance), $1,138 (tax gross-up
related to split dollar life insurance) and $111 (above market component of
interest paid on deferred compensation plan).
(14) Consists of $7,200 (directors' fees paid by publicly held subsidiary) and
$950 (financial planning).
(15) Directors' fees paid by publicly held subsidiary.
(16) Directors' fees paid by publicly held subsidiary.
(17) Consists of $9,000 (matching contribution to savings plan), $995 (imputed
income on split dollar life insurance), $873 (tax gross-up related to split
dollar life insurance), and $40 (above market component of interest paid on
deferred compensation plan).
(18) Mr. Leathley served as Vice President, Canadian Operations during a portion
of 1995, and during all of 1994, and was resident in Vancouver.
Accordingly, a portion of Mr. Leathley's Annual Compensation and All Other
Compensation was paid in Canadian dollars during such time periods. The
following conversion rates were used to convert such amounts: 1995-0.7324
and 1994-0.7128. Mr. Leathley became Vice President, Operations, of
Homestake in May 1995.
(19) Consists of $4,967 (financial planning), $563 (directors' fees paid by
publicly held subsidiary), $10,000 (forgiveness of relocation expenses) and
$3,465 (tax gross-up related to loan forgiveness).
(20) Consists of $9,000 (matching contribution to savings plan), $248
(reimbursement for spousal travel expense and related tax gross-up), $619
(above market component of interest paid on deferred compensation plan),
and $571 (interest on Canadian retirement account).
(21) Consists of $717 (premiums paid on life and accidental death and
dismemberment policy), $39,600 (relocation expenses paid by or on behalf of
Mr. Leathley) and $9,254 (tax gross-up for relocation expenses). In
connection with his appointment as Vice President, Operations, Mr. Leathley
relocated from Canada to the San Francisco area.
(22) Premiums paid on life and accidental death and dismemberment policy.
(23) Mr. Lindqvist became an employee of Homestake on June 30, 1995.
(24) Consists of $6,497 (financial planning), $10,000 (forgiveness of relocation
expense) and $3,234 (tax gross-up related to loan forgiveness).
(25) Consists of $9,000 (matching contribution to savings plan), $721 (imputed
income on split dollar life insurance), $633 (tax gross-up related to split
dollar life insurance), and $562 (above market component of interest paid
on deferred compensation plan).
(26) Consists of $91,394 (relocation expenses for move from Australia to San
Francisco, California area) and $34,131 (tax gross-up related to relocation
expenses).
81
<PAGE> 87
Homestake Option Grants
The following table sets forth certain information with respect to options
to acquire common stock that were granted during 1996 to each Homestake Named
Executive Officer under Homestake's stock option plans.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NO. OF OPTIONS EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO OR PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED(1) YEAR ($/SH) DATE 5%(2) 10%(2)
- ------------------------------- ---------- -------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Harry M. Conger 66,400 14.27 $ 19.125 Feb. 27, 2006 $ 812,153.11 $2,045,421.61
Jack E. Thompson 46,100 9.91 19.125 Feb. 27, 2006 563,859.31 1,420,089.40
10,000(3) 2.15 19.725 May 28, 2006 127,510.87 319,877.40
Gene G. Elam 17,900 3.85 19.125 Feb. 27, 2006 218,938.87 551,401.31
Wayne Kirk 22,300 4.80 19.125 Feb. 27, 2006 272,756.24 686,941.29
Gil J. Leathley 15,400 3.31 19.125 Feb. 27, 2006 188,360.81 474,389.95
William F. Lindqvist 16,500 3.55 19.125 Feb. 27, 2006 201,815.16 508,274.95
</TABLE>
- ------------
(1) Granted at fair market value. Granted on February 27, 1996 (except as
otherwise noted), and vest in 25 percent increments on the first through
fourth anniversaries of the grant date. Vesting of options is accelerated in
specified circumstances, including upon certain reorganizations and the
commencement of certain tender offers.
(2) Compounded annually.
(3) Granted on May 28, 1996.
Homestake Option Exercises and Fiscal Year-End Values
The following table sets forth certain information with respect to options
exercised during 1996 by each Homestake Named Executive Officer.
AGGREGATED OPTION EXERCISES IN 1996
AND OPTION VALUES AT 1996 YEAR END
<TABLE>
<CAPTION>
NO. OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NO. OF AT YEAR END AT YEAR END
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------- -------- ------------------- --------------------
<S> <C> <C> <C> <C>
Harry M. Conger 31,816 $234,643 596,800/0 $ 196,263/$0
Jack E. Thompson 9,550 73,279 82,950/101,325 39,848/14,629
Gene G. Elam 0 0 78,700/42,750 53,008/12,813
Wayne Kirk 8,250 67,634 50,350/53,500 47,966/16,341
Gil J. Leathley 8,750 57,359 33,517/41,000 17,691/9,597
William F. Lindqvist 0 0 61,300/31,500 0/0
</TABLE>
Homestake's stock option plans permit optionees designated by the Homestake
Compensation Committee to pay part of the option price by delivering to
Homestake a promissory note. Each note bears interest and is secured by a pledge
of Homestake Common Stock with an aggregate market value at the time of delivery
of the note at least equal to the principal amount of the note. In 1996, no
optionee under Homestake stock option plans had indebtedness to Homestake in
respect of stock options.
82
<PAGE> 88
Homestake Retirement Plan
In general, all full-time, non-union U.S. employees of Homestake
(approximately 615 persons) participate in the Homestake Retirement Plan, a
noncontributory defined benefit plan ("Homestake Retirement Plan").
Under the Homestake Retirement Plan, participants accrue benefits at the
rate of two percent per year of service during the first 25 years and one-half
percent for each year of service thereafter. Normal retirement age under the
Homestake Retirement Plan is 65. Early retirement, with reduced benefits, is
permitted after age 55 with five years of service. The Homestake Retirement Plan
is integrated with Social Security. For a participant who retires at age 65 with
25 years of service, the monthly benefit payable will be 50 percent of the
average monthly compensation during the 60 consecutive months of highest
compensation (salary and bonus), less one-half of the participant's Social
Security benefits. Benefits paid upon retirement are subject to a cost-of-living
increase, up to a maximum of three percent per year. Vesting requires five years
of service. Homestake makes annual actuarially determined contributions to the
Homestake Retirement Plan to provide the benefits to retirees. Funding
contributions are not segregated as to individual employees.
The following table shows selected estimated annual benefits payable upon
retirement at age 65 under the Homestake Retirement Plan for persons having
specified years of service and the indicated remuneration. The table includes
amounts that may be payable under the Supplemental Retirement Plan described
below ("Homestake SRP"). Amounts shown are calculated on a straight life annuity
basis and are shown before deduction for one-half of Social Security benefits.
For purposes of the Homestake Retirement Plan and the Homestake SRP, the years
of service as of December 31, 1996, for Messrs. Elam, Kirk, Leathley, Lindqvist
and Thompson are 6 years, 4 years, 10 years, 4 years and 15 years, respectively.
For purposes of these plans, earnings include salary and bonus but exclude
directors' fees and other benefits that are included in the Homestake Summary
Compensation Table. Mr. Conger retired in May 1996 and is receiving his benefits
under the Retirement Plan.
YEARS OF SERVICE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL EARNINGS
(60 CONSECUTIVE
HIGHEST MONTHS) 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 150,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 78,750 $ 82,500
200,000 40,000 60,000 80,000 100,000 105,000 110,000
250,000 50,000 75,000 100,000 125,000 131,250 137,500
300,000 60,000 90,000 120,000 150,000 157,500 165,000
350,000 70,000 105,000 140,000 175,000 183,750 192,500
400,000 80,000 120,000 160,000 200,000 210,000 220,000
450,000 90,000 135,000 180,000 225,000 236,250 247,500
500,000 100,000 150,000 200,000 250,000 262,500 275,000
550,000 110,000 165,000 220,000 275,000 288,750 302,500
600,000 120,000 180,000 240,000 300,000 315,000 330,000
</TABLE>
Homestake Supplemental Retirement Plan
The Code imposes a maximum limit on annual retirement benefits payable
under qualified retirement plans. For 1996, that annual limit was $120,000. In
addition, the Code limits the amount of annual compensation that may be
considered under qualified retirement plans. In 1996, that annual limit was
$150,000. Under the Homestake SRP, executive officers and key employees selected
by the Homestake Compensation Committee will be entitled to a supplemental
retirement benefit equal to the difference between the full amount of their
pension benefits determined under the Homestake Retirement Plan and the maximum
amount permitted to be paid under ERISA and the Code. The Homestake SRP is
funded by Homestake contributions into a "rabbi trust." All of the officers
identified in the Homestake Summary Compensation Table are participants in the
Homestake SRP.
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<PAGE> 89
Homestake Executive Supplemental Retirement Plan
Homestake has established the Homestake ESRP for executive officers and key
employees selected by the Compensation Committee. Under the Homestake ESRP,
participants accrue benefits under the following formula. Service credit is
determined by multiplying 4 1/3 percent by years of service, up to a maximum of
15 years. Service credit is then multiplied by average monthly compensation
during the 36 consecutive months of highest compensation (salary and bonus) to
determine a monthly retirement benefit. The monthly benefit is reduced by
benefits payable under all other Homestake retirement plans and, commencing at
age 65, by one-half of Social Security and comparable foreign social security
plan benefits. Retirement is permitted at age 62 after 10 continuous years of
service, although a participant who has attained age 55 and 10 years of service
may elect early retirement and receive a reduced benefit if approved by the
Homestake Compensation Committee. The Homestake ESRP is funded by Homestake
contributions into a "rabbi trust." The following table shows selected estimated
annual benefits payable under the Homestake ESRP, calculated on a straight life
annuity basis, assuming retirement at age 62, to persons having specified years
of service and the indicated average earnings before reductions for integration
with Social Security and comparable foreign plans, and also before reduction for
other Homestake retirement plans (except the Homestake Mining Company Savings
Plan). Payments under the Homestake ESRP are not limited by ERISA or the Code.
All of the officers identified in the Homestake Summary Compensation Table are
participants in the Homestake ESRP. For purposes of the Homestake ESRP, the
years of service as of December 31, 1996, for Messrs. Elam, Kirk, Leathley and
Thompson are 10 years, 4 years, 10 years and 15 years, respectively. Mr. Conger
retired in 1996 and is fully vested in his benefits with 15 years of service.
Mr. Lindqvist was previously employed by Homestake and following Homestake's
1992 acquisition of International Corona, Mr. Lindqvist was fully vested in his
benefits under the Homestake ESRP with 15 years of deemed service. In connection
with his reemployment by Homestake in 1995, Homestake agreed to recalculate Mr.
Lindqvist's Homestake ESRP benefits based on the 36 consecutive months of
highest compensation following the date of reemployment, subject however to his
completing five years of service from the date of reemployment, unless his
employment is terminated by Homestake for reasons other than cause.
YEARS OF SERVICE
<TABLE>
<CAPTION>
AVERAGE
ANNUAL EARNINGS
(36 CONSECUTIVE
HIGHEST MONTHS) 10 YEARS 13 YEARS 15 YEARS
- --------------- -------- -------- --------
<S> <C> <C> <C>
$ 150,000 $ 65,000 $ 84,500 $ 97,500
200,000 86,667 112,667 130,000
250,000 108,333 140,833 162,500
300,000 130,000 169,000 195,000
350,000 151,667 197,167 227,500
400,000 173,333 225,333 260,000
450,000 195,000 253,500 292,500
500,000 216,667 281,667 325,000
550,000 238,333 309,833 357,500
600,000 260,000 338,000 390,000
</TABLE>
84
<PAGE> 90
Homestake Severance Agreements
Homestake has entered into certain severance agreements covering ten
employees of Homestake. See "The Combination--Interests of Certain Persons in
the Combination; Homestake; Interests of Homestake Management" for a description
of the Homestake Severance Agreements.
SANTA FE COMPENSATION
Santa Fe Summary Compensation Table
The following table summarizes, for the years indicated, compensation
received by the Santa Fe Named Executive Officers for fiscal year ended December
31, 1996. Such officers served as Chief Executive Officer or were one of four
most highly compensated executive officers (other than the Chief Executive
Officer) for the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- UNDERLYING
OTHER ANNUAL RESTRICTED OPTIONS/ ALL OTHER
BONUS COMPENSATION STOCK SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY (1) (2) AWARDS (#)(5) (6)
- ------------------------------- ---- ---------- -------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Patrick M. James............... 1996 $ -- $ -- $ -- $ -- -- $ --
Chairman, President and 1995 300,000 54,690 0 0(3) 75,840 25,356
Chief Executive Officer 1994 202,627 106,801 25,036 160,202(4) 0 7,327
LeRoy E. Wilkes................ 1996 -- -- -- -- -- --
Executive Vice President 1995 -- -- -- -- -- --
and Chief Operating Officer 1994 -- -- -- -- -- --
David A. Smith................. 1996 -- -- -- -- -- --
Vice President and 1995 156,925 23,915 0 0(3) 22,970 22,156
Chief Financial Officer 1994 107,165 42,335 8,189 63,503(4) 20,593 17,481
David K. Hogan................. 1996 -- -- -- -- -- --
Vice President 1995 162,025 7,421 0 0(3) 20,230 12,363
Engineering & 1994 153,707 92,015 22,013 34,506(4) 0 5,816
Development
Wayne Jarke.................... 1996 -- -- -- -- -- --
General Counsel 1995
and Secretary 1994
</TABLE>
- ---------------
(1) For the years 1994 and 1995, the Santa Fe Named Executive Officers
exchanged up to 50% of their annual incentive bonus for Restricted
Stock awards pursuant to Santa Fe's Bonus Stock Program under the Santa
Fe LTISP. Each award of Restricted Stock was the number of shares
having a market value (as defined in the Santa Fe Bonus Stock Program)
at the date of grant equal to 1.5 times the amount of annual incentive
bonus exchanged. For 1994, Mr. James exchanged $106,801 for 15,630
shares of Santa Fe Common Stock; Mr. Wilkes exchanged $-- for --
shares; Mr. Smith exchanged $42,335 for 6,195 shares; Mr. Hogan
exchanged $23,004 for 3,366 shares; and Mr. Jarke exchanged $-- for --
shares; all based on a market value of $10.25 per share on the grant
date, February 15, 1995. For 1995, Mr. James exchanged $54,690 for
5,027 shares; Mr. Wilkes exchanged $-- for -- shares; Mr. Smith
exchanged $23,915 for 2,198 shares; Mr. Hogan exchanged $7,421 for 682
shares; and Mr. Jarke exchanged $-- for -- shares; all based on a
market value of $16.32 per share on the grant date, February 15, 1996.
As of January 7, 1997, the Santa Fe Named Executive Officers have not
exchanged any 1996 annual incentive bonus for Restricted Stock awards.
The amounts shown in this column for the Santa Fe Named Executive
Officers who participated in the Santa Fe Bonus Stock Program for 1994
and 1995 represent cash received.
(2) Net value of options for common stock of SFP, the former parent of
Santa Fe, exercised during 1994. Includes tax adjustments for certain
relocation and club membership expense. Includes amounts deferred under
SFP's retirement and savings plan and supplemental retirement and
savings plan maintained by SFP during 1994. Includes amounts deferred
under the Santa Fe Retirement and
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<PAGE> 91
Savings Plan and the Santa Fe Supplemental Retirement and Savings Plan
during 1994, 1995 and 1996.
(3) Restricted Stock awards for the portion of 1995 annual incentive bonus
exchanged by the Santa Fe Named Executive Officers were made on
February 15, 1996, in the following amounts: Mr. James, 5,027 shares;
Mr. Wilkes, -- shares; Mr. Smith, 2,198 shares; Mr. Hogan, 682 shares;
and Mr. Jarke, -- shares. The market value used in making the awards
was $16.32 per share, adjusted as described in footnote (1) above.
(4) On December 31, 1995, the Santa Fe Named Executive Officers held the
following numbers of shares of Restricted Stock which had the following
aggregate value on such date based on the NYSE closing price of Santa
Fe Common Stock on the last trading day of 1995 of $12.125 per share:
Mr. James, 15,630 shares worth $189,514; Mr. Wilkes, -- shares worth
$--; Mr. Smith, 6,195 shares worth $75,114; Mr. Hogan, 3,366 shares
worth $40,813; and Mr. Jarke, -- shares worth $--.
(5) Represents number of options granted under Santa Fe's Phantom Stock
Plan in 1994 (in the case of Mr. Smith) and the Santa Fe LTISP in 1995
and 1996.
(6) Includes matching contributions made by SFP and earnings on
contributions pursuant to SFP's retirement and savings plan and
supplemental retirement and savings plan during 1993 and 1994. Includes
matching contributions made by Santa Fe and earnings on contributions
pursuant to the Santa Fe Retirement and Savings Plan and the Santa Fe
Supplemental Retirement and Savings Plan during 1994. Includes
relocation payments to Mr. Smith in 1994.
All Other Compensation for 1996, the last fiscal year, includes the
amounts shown in the following table for the Santa Fe Named Executive Officers.
<TABLE>
<CAPTION>
MR. MR. MR. MR. MR.
JAMES WILKES SMITH HOGAN JARKE
------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Matching contributions to the Santa Fe Retirement
and Saving Plan.................................
Matching contributions to the Santa Fe
Supplemental Retirement and Savings Plan........
Payments associated with relocation expenses......
Outside Director's fees...........................
Above-market earnings on contributions to the
Santa Fe Supplemental Retirement and Savings
Plan............................................
Payments pursuant to the Santa Fe Supplemental
Retirement Plan.................................
Total...........................................
</TABLE>
86
<PAGE> 92
OPTION/SAR GRANTS IN 1996
Santa Fe Option Grants
The following table sets forth certain information with respect to options
to acquire Santa Fe Common Stock that were granted during 1996 to each Santa Fe
Named Executive Officer under Santa Fe's stock options plans.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NO. OF OPTIONS EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO OR PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED YEAR ($/SH) DATE 5% 10%
- ------------------------------------ ---------- -------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Patrick M. James.........
LeRoy E. Wilkes..........
David A. Smith...........
David K. Hogan...........
Wayne Jarke..............
</TABLE>
Santa Fe Option/SAR Exercises and Fiscal Year-End Values
The following table sets forth information with respect to the individuals
named in the Santa Fe Summary Compensation Table concerning unexercised options
under the Santa Fe LTISP and the Santa Fe Phantom Stock Plan held as of the end
of 1996.
AGGREGATED STOCK OPTION/SAR EXERCISES IN 1996 AND YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NO. OF NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE AT YEAR END AT YEAR END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------- ------------ ------------ ------------------------------- -------------------------
<S> <C> <C> <C> <C>
Patrick M. James...
LeRoy E. Wilkes....
David A. Smith.....
David K. Hogan.....
Wayne Jarke........
</TABLE>
- ---------------
87
<PAGE> 93
Santa Fe Retirement Plans
Santa Fe maintains a Retirement Plan and a Supplemental Retirement Plan.
The following table shows the estimated annual benefits payable to a covered
participant at normal retirement age (age 65) under the Santa Fe Retirement
Plan, as supplemented by the Santa Fe Supplemental Retirement Plan, for various
levels of compensation and years of service. Benefit figures shown are amounts
payable based on a straight-line annuity assuming retirement by the participant
at the normal retirement age of 65 without a joint survivorship provision and
are not subject to any offsets for Social Security.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE SHOWN
------------------------------------------------------------
REMUNERATION(1) 15 20 25 30 35
- ------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000............................ $ 27,667 $ 36,890 $ 46,112 $ 55,334 $ 64,557
150,000............................ 33,667 44,890 56,112 67,334 78,557
175,000............................ 39,667 52,890 66,112 79,334 92,557
200,000............................ 45,667 60,890 76,112 91,334 106,557
225,000............................ 51,667 68,890 86,112 103,334 120,557
250,000............................ 57,667 76,890 96,112 115,334 134,557
300,000............................ 69,667 92,890 116,112 139,334 162,557
400,000............................ 93,667 124,890 156,112 187,334 218,557
450,000............................ 105,667 140,890 176,112 211,334 246,557
500,000............................ 117,667 156,890 196,112 235,334 274,557
</TABLE>
- ---------------
(1) Compensation is equal to the highest yearly average compensation for any 60
consecutive months in the past 10 years. Compensation for purposes of the
Santa Fe Retirement Plan and the Santa Fe Supplemental Retirement Plan
includes salary and bonus as set forth in the Santa Fe Summary Compensation
Table.
The 1996 compensation taken into account for purposes of determining the
aggregate pension benefit under both retirement plans was $ -- for Mr.
James, $ -- for Mr. Wilkes; -- for Mr. Smith, $ -- for Mr. Hogan
and $ -- for Mr. Jarke. As of December 31, 1995, Messrs. James, Wilkes,
Smith, Hogan and Jarke had approximately 16, -- , 22, 5, and -- years of
benefit service, respectively.
Employment Contracts and Change in Control Arrangements
Santa Fe Severance Agreements. Santa Fe has entered into certain severance
agreements covering 26 employees of Santa Fe. See "The Combination--Interests of
Certain Persons in the Combination" for a description of the Santa Fe Severance
Agreements.
Santa Fe Severance Program. Santa Fe has a severance program (the "Santa
Fe Severance Program") for all full-time, salaried employees who are terminated
or constructively terminated by Santa Fe or by an acquiring company, other than
for Cause (as defined in the Santa Fe Severance Program). However, following a
Change in Control (as defined in the Santa Fe Severance Agreements), an employee
who has entered into a Santa Fe Severance Agreement is not eligible to receive
duplicate benefits under both a Santa Fe Severance Agreement and the Santa Fe
Severance Program. A participant in the Santa Fe Severance Program is generally
entitled to an amount of up to one year's pay based upon the participant's age,
length of service and current salary, or in certain circumstances, early
retirement supplemental payments, provided that the aggregate of such payments
does not exceed two years' salary for the year preceding the year in which
termination occurs. In addition, a participant is entitled to continuation of
health and life insurance benefits for two years or for the duration of
severance payments, whichever is longer. Each January 1, the term of the Santa
Fe Severance Program is automatically extended for an additional one-year
period, unless by September 30 of the prior year Santa Fe has given notice that
the Santa Fe Severance Program will not be so extended. Following a Change in
Control, the Santa Fe Severance Program may not be modified or
88
<PAGE> 94
terminated for 24 months. The payments and benefits provided by the Santa Fe
Severance Program are subject to the Parachute Payment Limit (as defined in the
Santa Fe Severance Program). The consummation of the Merger will constitute a
Change in Control under the Santa Fe Severance Program.
BENEFICIAL OWNERSHIP OF SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Homestake. As of the date of this Proxy Statement, no person was known to
Homestake to own 5% or more of the outstanding Homestake Common Stock.
Santa Fe. The following table contains certain information regarding
persons who Santa Fe has been advised are beneficial owners of 5% or more of
Santa Fe Common Stock as of the dates indicated in the footnotes to the table.
<TABLE>
<CAPTION>
% OF SANTA FE
NAME & ADDRESS OF NO. OF COMMON STOCK
BENEFICIAL OWNER SHARES HELD BENEFICIALLY OWNED(3)
--------------------------------------------- ----------------- ----------------------
<S> <C> <C>
College Retirement Equities Fund 6,623,339 shares(1) 5.04%
730 Third Avenue
New York, NY 10017-3206
FMR Corp. 10,622,313 shares(2) 8.08%
Edward C. Johnson, 3rd.
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(1) A report on Schedule 13G, dated February 1, 1996, disclosed that College
Retirement Equities Fund had sole power to vote or to direct the vote of
6,623,339 shares of Santa Fe Common Stock, shared voting power over no
shares of Santa Fe Common Stock, had sole dispositive power over 6,623,339
shares and shared dispositive power over no shares of Santa Fe Common Stock.
(2) A report on Schedule 13G, dated February 14, 1996, disclosed that FMR Corp.
had sole power to vote or to direct the vote of 161,053 shares of Santa Fe
Common Stock, shared voting power over no shares of Santa Fe Common Stock,
had sole dispositive power over 10,622,313 shares of Santa Fe Common Stock
and shared dispositive power over no shares of Santa Fe Common Stock.
(3) Percentages are based on the 131,449,002 shares of Santa Fe Common Stock
outstanding as of December 31, 1995.
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<PAGE> 95
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
Homestake
The following table shows: (i) the number of shares of Homestake Common
Stock beneficially owned by directors and the five highest paid executive
officers, and all directors and executive officers as a group, as of December
31, 1996 (excluding shares which such persons have the right to acquire within
60 days of December 31, 1996 but do not actually own), (ii) the number of shares
of Homestake Common Stock which such persons have the right to acquire within 60
days of December 31, 1996, but do not actually own and (iii) the total number of
shares of Homestake Common Stock which such persons own and have the right to
acquire within 60 days of December 31, 1996. The shares so shown include shares
held in Homestake's Savings Plan for the accounts of executive officers and
directors share rights granted under the Homestake Employees' Stock Option and
Share Rights Plan--1988, which entitle outside directors to receive shares on
the date of ceasing to serve as a director. Including the shares held by Case,
Pomeroy & Company, Inc. (described in footnote 2 below) and the shares which the
identified persons have the right to acquire but do not own, the shares of
Homestake Common Stock beneficially owned by all directors, nominees and
executive officers as a group represent approximately 5.51 percent of the total
number of shares of Homestake Common Stock outstanding.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED RIGHT TO TOTAL
AS OF ACQUIRE SHARES NUMBER
DECEMBER 31, 1996, WITHIN OF SHARES
EXCLUDING RIGHT TO 60 DAYS OF BENEFICIALLY
NAME ACQUIRE SHARES(1) DECEMBER 31, 1996 OWNED
- ----------------------------------------------- ------------------ ------------------ ----------
<S> <C> <C> <C>
M. Norman Anderson............................. 2,529 5,914 8,443
Robert H. Clark, Jr.(2)........................ 6,461,776 1,736 6,463,776
Harry M. Conger(3)............................. 175,963 596,800 772,763
G. Robert Durham............................... 5,000 1,295 6,295
Douglas W. Fuerstenau.......................... 1,478 1,728 3,206
Henry G. Grundstedt............................ 1,000 866 1,866
William A. Humphrey............................ 61,230 110,946 172,176
Robert K. Jaedicke............................. 400 1,715 2,115
John Neerhout, Jr. ............................ 1,000 1,254 2,254
Stuart T. Peeler............................... 8,500 1,885 10,385
Carol A. Rae................................... 500 142 642
Berne A. Schepman.............................. 3,524 1,749 5,273
Jack E. Thompson............................... 25,978 98,150 124,128
Gene G. Elam................................... 9,156 86,475 95,631
Wayne Kirk(4).................................. 6,300 60,050 66,350
Gil J. Leathley................................ 2,753 39,792 42,545
William F. Lindqvist........................... 0 65,425 65,425
All Directors and Executive Officers as a Group
(23 persons)................................. 6,788,816 1,288,557 8,077,373
</TABLE>
- ------------
(1) In some instances voting and investment power is shared with the spouse of
the identified person.
(2) Includes 24,000 shares owned by Mr. Clark's spouse. Also includes 6,411,776
shares owned by Case, Pomeroy & Company, Inc. Mr. Clark is the President and
Chief Executive Officer and, with family members, is a controlling
shareholder of Case Pomeroy.
(3) Includes 446 shares held of record by a Savings Plan Trust for Mr. Conger's
spouse. Mr. Conger disclaims beneficial ownership of these shares.
(4) Includes 410 shares held of record by two of Mr. Kirk's children. Mr. Kirk
disclaims beneficial ownership of these shares.
In addition, -- directors and executive officers of Homestake
beneficially owned an aggregate of -- shares of Santa Fe Common Stock.
90
<PAGE> 96
Santa Fe
The following table shows, as of December 31, 1996, the number of shares of
Santa Fe Common Stock deemed beneficially owned by each director and each of the
executive officers named in the Santa Fe Summary Compensation Table and by all
present directors and executive officers of Santa Fe as a group.
<TABLE>
<CAPTION>
OPTIONS TO
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1)(2) ACQUIRE
-------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
David H. Batchelder...............................
James T. Curry....................................
Donald W. Gentry..................................
Wayne Jarke.......................................
David K. Hogan....................................
Patrick M. James..................................
Robert D. Krebs...................................
George B. Munroe..................................
Ronald L. Parratt.................................
Jean Head Sisco...................................
David A. Smith....................................
Peter Steen.......................................
Richard J. Stoehr.................................
LeRoy E. Wilkes...................................
All Directors and Executive Officers as a Group
(17 persons)....................................
</TABLE>
- ---------------
(1) Each person has, unless otherwise indicated in the following notes, sole
voting and investment power with respect to the indicated shares.
(2) Santa Fe Common Stock beneficially owned does not exceed one percent of the
outstanding Santa Fe Common Stock as of December 31, 1996.
(3) Includes -- shares of Santa Fe Common Stock held by Mr. Munroe's spouse, of
which Mr. Munroe disclaims beneficial ownership.
In addition, -- directors and executive officers of Santa Fe
beneficially owned an aggregate of -- shares of Homestake Common Stock.
91
<PAGE> 97
AMENDMENTS TO HOMESTAKE CHARTER
Under the DGCL, an amendment to a Delaware corporation's certificate of
incorporation generally requires the approval and recommendation of the board of
directors, the approval of a majority in voting power of all shares outstanding
and entitled to vote thereon, voting together as a single class, and the
approval of a majority in voting power of the outstanding stock of each class
that is entitled to vote thereon separately as a class. Accordingly, in addition
to the December 8, 1996 approval and recommendation issued by the Homestake
Board through resolution, approval of the Homestake Charter Amendment requires
an affirmative vote of the holders of record of a majority of the shares of
Homestake Common Stock outstanding on the Homestake Record Date.
In connection with the Combination, as of the Effective Time, the Homestake
Charter will be amended to increase the number of authorized shares of Homestake
Common Stock from 250,000,000 to 500,000,000. Upon such amendment Homestake will
have an authorized share capital of 510,000,000, comprised of 500,000,000 shares
of Homestake Common Stock and 10,000,000 shares of Homestake Preferred Stock.
The Homestake Charter currently authorizes the issuance of 250,000,000
shares of Homestake Common Stock and 10,000,000 shares of Homestake Preferred
Stock. As of the Homestake Record Date, there were (i) -- shares of Homestake
Common Stock outstanding, (ii) -- shares of Homestake Common Stock reserved
for issuance pursuant to outstanding Homestake stock options and director share
rights, (iii) 6,504,000 shares of Homestake Common Stock reserved for issuance
upon conversion of the $150,000,000 aggregate principal amount of Homestake's
5.5% Convertible Subordinated Notes due June 23, 2000 and (iv) no shares of
Homestake Preferred Stock issued or outstanding. Homestake expects to issue
approximately 146,583,938 shares of Homestake Common Stock to the Santa Fe
stockholders in the Merger, and to reserve an additional approximately 1,636,728
shares for issuance upon exercise of options granted pursuant to Santa Fe's
stock option plans. The Homestake Board believes it is desirable to authorize
additional shares of Homestake Common Stock so that there will be sufficient
shares available for issuance after the Merger for purposes that the Homestake
Board may hereinafter determine to be in the best interests of Homestake and its
stockholders. Such purposes could include the offer of shares for cash,
acquisitions, employee benefit programs and other general corporate purposes. In
many situations, prompt action may be required which would not permit seeking
stockholder approval to authorize additional shares for the specific transaction
on a timely basis. The Homestake Board believes it should have the flexibility
to act promptly in the best interest of the Homestake stockholders. The terms of
any future issuance of shares of Homestake Common Stock will be dependent
largely on market and financial conditions and other factors existing at that
time of issuance. For the foregoing reasons, the Homestake Board deems it
advisable and recommends that the authorized shares of Homestake capital stock
be increased to 510,000,000 shares (consisting of 500,000,000 shares of
Homestake Common Stock and 10,000,000 shares of Homestake Preferred Stock) in
order to have a sufficient number of shares for issuance from time to time after
the Merger. Approval by the Homestake stockholders of the Homestake Charter
Amendment is a condition to the consummation of the Merger.
Homestake currently has no plans, understandings, agreements or
arrangements concerning the issuance of additional shares of Homestake Common
Stock, except for the shares to be issued in the Merger and shares reserved or
to be reserved for issuance by Homestake as described herein. If any plans,
understandings, arrangements or agreements are made concerning the issuance of
any such shares, holders of the then outstanding shares of Homestake's capital
stock may or may not be given the opportunity to vote thereon, depending upon
the nature of any such transaction, the law applicable thereto, the policy of
the NYSE and the judgment of the Homestake Board regarding the submission
thereof to the Homestake stockholders. The current rules of the NYSE, however,
would require stockholder approval if the number of shares of Homestake Common
Stock to be issued would equal or exceed 20% of the number of such shares of
Homestake Common Stock outstanding immediately prior to such issuance.
It is not presently contemplated that such additional shares of Homestake
Common Stock would be issued for the purpose of making the acquisition by an
unwanted suitor of a controlling interest in Homestake more difficult,
time-consuming or costly. However, it should be noted that shares of Homestake
Common
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<PAGE> 98
Stock could be issued for that purpose and to that effect, and the Homestake
Board reserves its right (if consistent with its fiduciary responsibilities) to
issue Homestake Common Stock for such purposes. For a description of certain
antitakeover effects of the Homestake Rights which are attached to the existing
Homestake Common Stock and will be attached to any additional shares of
Homestake Common Stock when issued (so long as the Homestake Rights Agreement is
in effect), see "Description of Homestake Capital Stock."
In connection with the Combination on December 8, 1996, the Homestake Board
adopted a resolution to increase, as of the Effective Time, the authorized
number of shares of Homestake Preferred Stock designated as Series A
Participating Cumulative Preferred Stock from 2,500,000 to 5,000,000. No vote of
the Homestake stockholders is required for such increase to become effective.
DESCRIPTION OF HOMESTAKE CAPITAL STOCK
GENERAL
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the DGCL, the Homestake Charter and the
terms of the Homestake Rights Agreement.
The following descriptions of the Homestake capital stock should be read
carefully by the Santa Fe stockholders since, at the Effective Time, each issued
and outstanding share of Santa Fe Common Stock will be converted into the right
to receive 1.115 shares of Homestake Common Stock. See "The
Combination--General."
The Homestake Charter currently authorizes the issuance of 250,000,000
shares of Homestake Common Stock and 10,000,000 shares of Homestake Preferred
Stock. In connection with the Combination, as of the Effective Time, the
Homestake Charter will be amended to increase the number of authorized shares of
Homestake Common Stock from 250,000,000 to 500,000,000. Upon such amendment
Homestake will have an authorized share capital of 510,000,000, comprised of
500,000,000 shares of Homestake Common Stock and 10,000,000 shares of Homestake
Preferred Stock. Approval by the Homestake stockholders of the Homestake Charter
Amendment is a condition to the consummation of the Share Issuance.
The Homestake Common Stock is listed on the NYSE under the symbol "HM," on
the Swiss Stock Exchange (Basel, Geneva and Zurich) and on the Australian Stock
Exchange Limited. The transfer agent and registrar for Homestake Common Stock is
The First National Bank of Boston. Ernst & Young Registry Services Pty. Ltd. is
the Australian co-transfer agent for Homestake Common Stock.
Homestake Preferred Stock may be issued in one or more series in the
discretion of the Homestake Board, with such rights, preferences and privileges
as to dividends, voting rights, conversion rights, liquidation preferences and
redemption provisions as the Homestake Board may in its discretion establish at
the time of creation of such series.
Holders of the Homestake Common Stock are entitled to one vote per share on
all matters requiring a vote of stockholders. Homestake does not have cumulative
voting and, as a result, the holders of a majority of the Homestake Common Stock
represented at a meeting of stockholders and entitled to vote in an election of
directors are able to elect all directors to be elected at the meeting.
Homestake has a classified Board of Directors, with approximately one-third
of the directors elected each year for a term of three years. During their term
of office, Homestake's directors may only be removed from office for cause.
Holders of the Homestake Common Stock are entitled to receive dividends
when and as declared by the Homestake Board from funds legally available
therefor, subject to the dividend rights of holders of any Homestake Preferred
Stock that may be issued in the future.
The Homestake Common Stock is not redeemable and does not have conversion
or pre-emptive rights.
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"FAIR PRICE" CHARTER PROVISION
The Homestake Charter contains a "Fair Price" provision which applies to
mergers and certain other types of business combinations with "Related Persons."
The Fair Price provision defines "Related Person" to include any person who,
together with any affiliate or associate, beneficially owns (or within the
preceding five years owned) shares having 10% or more of the Homestake Common
Stock outstanding or of the voting stock of Homestake outstanding. The Fair
Price provision defines "Business Combination" to include mergers,
reorganizations, sales of assets, issuances of securities, mortgages, leases,
and a variety of transactions which involve the securities or assets of
Homestake.
The Fair Price provision requires that Business Combinations between
Homestake and a Related Person meet certain alternative criteria. If none of the
alternative criteria are met, such transactions must be approved by (1) not less
than 80% of the total voting power of Homestake entitled to vote on the matter
and (2) not less than 50% of the voting power held by holders other than the
Related Person and its affiliates and associates. The alternative criteria, one
of which must be met to avoid the special voting requirements, are the
following:
(a) if the Business Combination is approved by the Homestake Board
before the Related Person first became a Related Person;
(b) if the Homestake Board unanimously approves in advance the Related
Person becoming a Related Person and the Business Combination is then
approved by the Homestake Board after the Related Person became a Related
Person;
(c) if the Business Combination involves solely Homestake and one of
its subsidiaries and all stockholders are treated equally and receive or
retain common stock in the surviving corporation or other party to the
Business Combination;
(d) if all of the following conditions are satisfied:
(1) the per share consideration to be received by holders of the
Homestake Common Stock in the Business Combination (other than the
Related Person) is not less than the higher of (i) the highest per share
price paid by such Related Person in acquiring any of the Homestake
Common Stock, or (ii) a percentage premium over the market price of
Homestake Common Stock immediately prior to the announcement of such
Business Combination which is at least as high as the percentage premium
paid by the Related Person over the market price of the Homestake Common
Stock immediately prior to the commencement of the acquisition of
Homestake Common Stock by such Related Person, but in no event in excess
of two times the highest per share price determined under (i) above;
(2) after becoming a Related Person and prior to the consummation
of such Business Combination, (i) such Related Person must not have
acquired any newly issued shares from Homestake (except upon conversion
of convertible securities acquired prior to becoming a Related Person or
upon compliance with the Fair Price provision or as a result of a pro
rata stock dividend or stock split) and (ii) such Related Person must
not have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or tax credits provided by
Homestake, or made any major change in Homestake's business or equity
capital structure; and
(3) a proxy statement meeting the requirements of the United States
federal securities laws must be used for the purpose of soliciting
stockholder approval of such Business Combination. The proxy statement
must also contain (i) any recommendation as to the advisability of the
Business Combination which any continuing or independent or "outside"
directors may choose to state, and (ii) the opinion of a reputable
national investment banking firm in the United States as to the fairness
of the terms of such Business Combination from the point of view of the
remaining public stockholders of Homestake. The investment banking firm
must be engaged solely on behalf of the public stockholders and must be
selected by a majority of any continuing directors and outside
directors.
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The Fair Price provision further provides that if there is a Related
Person, the Fair Price provision cannot be amended or repealed unless such a
change is approved by at least 80% of the total voting power and also by a
majority of the total voting power held by holders who are independent of the
Related Person.
HOMESTAKE RIGHTS AGREEMENT
On October 16, 1987, Homestake issued one Homestake Right for each issued
and outstanding share of Homestake Common Stock. Pursuant to the Homestake
Rights Agreement, each share of Homestake Common Stock issued in the Share
Issuance will be accompanied by one Homestake Right. Each Homestake Right
entitles the holder thereof to purchase 1/100th of a Series A Participating
Cumulative Preferred Share of Homestake at a price of $75, subject to adjustment
(the "Homestake Purchase Price").
The Homestake Rights are not exercisable until the "Homestake Distribution
Date" and will expire on November 2, 1997 (a "Homestake Expiration Date"),
unless they are earlier redeemed by Homestake. The Homestake Distribution Date
is defined to be the earlier of (i) the tenth day after the first public
disclosure that a person or group, together with affiliates or associates (the
"Homestake Acquiring Person") acquired or obtained the right to acquire
beneficial ownership of 20% or more of the issued and outstanding Homestake
Common Stock (a "Homestake Acquisition Date") and (ii) the tenth day after the
commencement of, or first public disclosure of an intent to commence, a tender
or exchange offer for 20% or more of the issued and outstanding Homestake Common
Stock.
In the event that, following the Homestake Distribution Date, Homestake is
acquired in any merger or other business combination or 50% or more of its
assets or assets representing 50% or more of its earning power are sold, leased,
exchanged or otherwise transferred to a publicly traded corporation, each
Homestake Right will entitle its holder to purchase for the Homestake Purchase
Price the number of common shares of such corporation which at the time of the
transaction would have a market value of twice the Homestake Purchase Price. In
the event that Homestake is acquired in any merger or other business combination
or 50% or more of its assets or assets representing 50% or more of its earning
power are sold, leased, exchanged or otherwise transferred to an entity that is
not a publicly traded corporation, each Homestake Right will entitle its holder
to purchase for the Homestake Purchase Price, at such holder's option (i) that
number of shares of such entity which at the time of transaction would have a
book value of twice the Homestake Purchase Price or (ii) if such entity has an
affiliate which has publicly traded common shares, that number of shares of such
affiliate which at the time of the transaction would have a market value of
twice the Homestake Purchase Price.
In the event a Homestake Acquiring Person (i) acquires beneficial ownership
of 30% or more of the Homestake Common Stock outstanding, unless such Homestake
Common Stock is acquired pursuant to an all cash tender offer for all Homestake
Common Stock outstanding and all other classes or series of shares of Homestake
issued and outstanding or (ii) engages in one or more "self dealing"
transactions with Homestake (a "Homestake Triggering Event"), the rights will
entitle each holder to purchase, for the Homestake Purchase Price, Homestake
Preferred Stock equivalent to the number of Homestake Common Stock which at the
time of the transaction would have a market value of twice the Homestake
Purchase Price.
In the event that Homestake merges with a Homestake Acquiring Person and
Homestake is the surviving corporation and all the Homestake Common Stock
outstanding immediately prior to the merger remain outstanding and unchanged (a
"Homestake Affiliate Transaction"), each Homestake Right will entitle its holder
to purchase, for the Homestake Purchase Price, that number of Homestake Common
Stock which at the time of the transaction would have a market value of twice
the Homestake Purchase Price.
Any rights that are or were, at any time on or after the earlier of the
Homestake Distribution Date or the Homestake Acquisition Date, beneficially
owned by a Homestake Acquiring Person will become null and void upon the
occurrence of a Homestake Affiliate Transaction or a Homestake Triggering Event
and any holder of any such right will be unable to exercise any such right after
the occurrence of a Homestake Affiliate Transaction or Homestake Triggering
Event.
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The Homestake Board may redeem the Homestake Rights at any time prior to
the earliest of the tenth day following the Homestake Acquisition Date, the
occurrence of a Homestake Triggering Event or the Homestake Expiration Date for
cash or securities equivalent to $0.01 per Homestake Right.
Until a Homestake Right is exercised, the holder will have no rights as a
stockholder of Homestake with respect to the shares purchasable upon exercise of
the Homestake Right.
All of the foregoing could discourage, delay or prevent certain types of
transactions involving an actual or potential change in control of Homestake,
including transactions in which stockholders might otherwise receive a premium
for their shares over current market prices, and could therefore have a negative
impact on the price of the Homestake Common Stock.
The Fair Price provision and the Homestake Rights Agreement described above
do not apply to the Combination.
COMPARISON OF STOCKHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Homestake Common Stock and the rights of holders of Santa Fe Common
Stock. As each of Homestake and Santa Fe is organized under the laws of
Delaware, these differences arise from various provisions of the Homestake
Charter and the Santa Fe Charter, the By-laws of each of Homestake and Santa Fe
and the Homestake Rights Agreement and Santa Fe Rights Agreement. This summary
does not purport to be a complete description of the differences between the
rights of such holders, and is subject, and qualified in its entirety by
reference, to the Homestake Charter, the Homestake By-laws, the Homestake Rights
Agreement, the Santa Fe Charter, the Santa Fe By-laws and the Santa Fe Rights
Agreement.
DIRECTORS
Number. The Homestake Charter provides that the number of directors shall
be fixed from time to time by by-law or amendment thereof duly adopted by the
Homestake Board or by the Homestake stockholders. The Homestake By-laws
currently set the authorized number of directors at thirteen. By resolution, on
December 8, 1996, the Homestake Board amended the Homestake By-laws to provide
that, at the Effective Time, the number of Homestake directors shall be twelve.
The Santa Fe Charter provides that the number of directors shall be not
less than three nor more than fifteen, the exact number of directors to be fixed
from time to time by the vote of a majority of the entire Santa Fe Board. The
current number of directors of Santa Fe is nine.
Classified Board. The Homestake Charter and the Santa Fe Charter each
provide for a classified Board of Directors. The Homestake Charter and the Santa
Fe Charter each provide for three classes of directors with as nearly equal a
number of directors as possible.
Removal of Directors. The Homestake Charter provides that directors may be
removed from office only for cause and only by the affirmative vote of the
holders of a majority of shares entitled to vote at an election of directors and
who would be entitled to vote for the election of a director to fill the vacancy
created by such removal.
The Santa Fe Charter provides that directors may be removed only for cause
by the affirmative vote of two-thirds of the shares entitled to vote at a
meeting of stockholders for which proper notice of the proposed removal has been
given, voting as a single class.
BUSINESS COMBINATIONS
See "Description of Homestake Capital Stock" for a description of the
provisions of the Homestake Charter concerning certain business combinations.
The Santa Fe Charter does not contain a comparable provision.
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SPECIAL MEETINGS OF STOCKHOLDERS
The Homestake Charter and the Homestake By-laws each provide that special
meetings of stockholders may be called only by the Homestake Board, by the
Chairman of the Board, by the President, by a committee duly designated by the
Homestake Board whose powers and authority as provided in a resolution of the
Homestake Board or in the Homestake By-laws include the power to call such
meetings, or by stockholders having not less than 75% of the total voting power
of all outstanding shares of stock of Homestake.
The Santa Fe Charter and the Santa Fe By-laws provide that special meetings
of stockholders may be called only by the Santa Fe Board pursuant to a
resolution approved by a majority of the directors then in office.
AMENDMENTS TO THE CHARTERS
The Homestake Charter requires the affirmative vote of not less than 80% of
the total voting power of Homestake and the affirmative vote of the holders of
not less than a majority of the total voting power of Homestake held by holders
other than a Related Person to amend, alter, change or repeal any provisions
contained in (i) the article regarding business combinations, (ii) the article
regarding amendment to the Homestake Charter and (iii) the article regarding
certain defined terms. All other amendments to the Homestake Charter may be made
by Homestake in the manner prescribed by law.
The Santa Fe Charter requires the affirmative vote of the holders of 80% or
more of the aggregate voting power of all the outstanding shares of capital
stock entitled to vote generally for the election of directors, voting together
as a single class, to amend, repeal or adopt any provisions inconsistent with
(i) the article regarding directors, (ii) the article regarding indemnification
and limitations of directors' liability and (iii) the article regarding amending
the Santa Fe By-laws. All other amendments to the Santa Fe Charter may be made
by Santa Fe in the manner prescribed by law.
AMENDMENTS TO THE BY-LAWS
The Homestake By-laws provide that the Homestake By-laws may be amended or
repealed, or new By-laws may be adopted (i) by the affirmative vote of the
stockholders entitled to exercise a majority of the voting power of Homestake,
or (ii) by the affirmative vote of the majority of the Homestake Board. The
Homestake By-laws further provide that any by-law adopted or amended by the
stockholders may be amended or repealed by the Homestake Board.
The Santa Fe Charter and the Santa Fe By-laws provide that the Santa Fe
Board has the power to adopt, alter, amend or repeal the Santa Fe By-laws by
vote of not less than a majority of the entire Santa Fe Board. The Santa Fe
Charter and the Santa Fe By-laws further provide that the holders of shares of
capital stock of Santa Fe entitled at the time to vote for the election of
directors will, to the extent such power is at the time conferred on them by the
Santa Fe Charter or applicable law, also have the power to adopt, alter, amend
or repeal the Santa Fe By-laws; provided, that any proposal by a stockholder to
adopt, alter, amend or repeal the Santa Fe By-laws will require for adoption the
affirmative vote of 80% of the holders of the outstanding shares of stock of
Santa Fe, voting as a single class.
RIGHTS AGREEMENTS
Homestake. On October 16, 1987, Homestake distributed one Homestake Right
for each outstanding share of Homestake Common Stock pursuant to the Homestake
Rights Agreement. The Homestake Rights entitle the Homestake stockholders to
certain rights in the event of certain transactions involving Homestake. See
"Description of Homestake Capital Stock" for a description of the Homestake
Rights Agreement. The Homestake Rights Agreement has not been amended in
connection with the Combination because the Homestake Rights do not apply to the
Combination.
Santa Fe. On January 26, 1995, the Santa Fe Board declared a dividend
distribution of one Santa Fe Right on each outstanding share of Santa Fe Common
Stock pursuant to the Santa Fe Rights Agreement. The Santa Fe Rights, which
expire on the earlier of the close of business on February 13, 2005, or
immediately
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prior to the Effective Time, were issued on February 13, 1995, to stockholders
of record on that date and were authorized to be issued in respect of each share
of Santa Fe Common Stock subsequently issued. Under certain circumstances each
Santa Fe Right will entitle the holder thereof to purchase one one-hundredth of
a share of Series A Junior Participating Preferred Stock, par value $0.01, of
Santa Fe at an exercise price of $50 per one one-hundredth of a share, subject
to adjustment (the "Santa Fe Purchase Price"). The Santa Fe Rights will not be
exercisable or transferable apart from the Santa Fe Common Stock until the
earlier to occur of either: (i) ten days following a public announcement that a
person or group has acquired 15% or more of the outstanding Santa Fe Common
Stock (a "Santa Fe Stock Acquisition Date"), or (ii) 15 business days following
the commencement of a tender or exchange offer which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
Santa Fe Common Stock. The Santa Fe Rights will not have any voting rights or be
entitled to dividends.
In the event a person or group shall become the beneficial owner of 15% or
more of the then outstanding shares of Santa Fe Common Stock (a "Santa Fe
Acquiring Person"), each holder of a Santa Fe Right other than the Santa Fe
Acquiring Person shall have the right to receive, upon exercise at the then
current Santa Fe Purchase Price, Santa Fe Common Stock, or at the election of
the Santa Fe Board, cash, property or other securities having a value equal to
two times the Santa Fe Purchase Price. If, after the Santa Fe Stock Acquisition
Date, Santa Fe is acquired in a merger or other business combination transaction
or 50% or more of its assets or earning power is sold or otherwise transferred,
each holder of a Santa Fe Right shall thereafter have the right to receive upon
exercise of the Santa Fe Right, that number of shares of common stock of the
acquiring company having a value equal to two times the Santa Fe Purchase Price.
Notwithstanding the foregoing, any rights that are owned or acquired by a Santa
Fe Acquiring Person will be void and the holder thereof shall have no right to
exercise or transfer such Santa Fe Rights. The Santa Fe Rights are redeemable at
$0.01 per right at any time prior to the date that a person becomes a Santa Fe
Acquiring Person.
In connection with the Combination, Santa Fe has taken all action to render
the Santa Fe Rights inapplicable to the Combination and the other transactions
contemplated by the Combination. See "The Agreement--Amendments to Rights
Agreement."
The significant differences between the Homestake Rights Agreement and the
Santa Fe Rights Agreement are the threshold amounts which trigger exercisability
of the respective rights. The Homestake Rights are exercisable upon the earlier
to occur of either (i) ten days following a public announcement that a Homestake
Acquiring Person has acquired 20% or more of the Homestake Common Stock
outstanding, or (ii) ten days after the commencement or disclosure of a tender
offer by a Homestake Acquiring Person to acquire more than 20% of the Homestake
Common Stock outstanding. Santa Fe Rights are exercisable upon the earlier to
occur of either: (i) ten days following a public announcement that a person or
group has acquired 15% or more of the Santa Fe Common Stock outstanding, or (ii)
15 business days following the commencement of a tender or exchange offer which
would result in the beneficial ownership by a person or group, together with any
affiliate or associate of 15% or more of the Santa Fe Common Stock outstanding.
Moreover, under the Homestake Rights Agreement, if a Homestake Acquiring
Person becomes the beneficial owner of 30% or more of the Homestake Common Stock
outstanding (other than pursuant to an all cash tender offer for all shares of
Homestake Common Stock outstanding and all other classes or series of issued and
outstanding shares of Homestake), or engages in one or more "self dealing"
transactions with Homestake as set forth in the Homestake Rights Agreement, the
holders of Homestake Rights other than the Homestake Acquiring Person shall have
the right to receive, upon exercise at the then current Homestake Purchase
Price, that number of one-one hundredth of a preferred share having a market
value of twice the Homestake Purchase Price. Under the Santa Fe Rights
Agreement, if a Santa Fe Acquiring Person becomes the beneficial owner of 15% or
more of the shares of Santa Fe Common Stock then outstanding, the holders of
Santa Fe Rights other than the Santa Fe Acquiring Person shall have the right to
receive, upon exercise at the then current Santa Fe Purchase Price, Santa Fe
Common Stock having a value of twice the Santa Fe Purchase Price.
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After the Effective Time, the rights of the Homestake stockholders
(including those who prior to the Effective Time were Santa Fe stockholders)
will be determined by reference to the Homestake Charter, the Homestake By-laws
and the Homestake Rights Agreement then in effect.
EXPERTS
The consolidated financial statements included in this Proxy Statement by
reference to Homestake's Annual Report on Form 10-K for the year ended December
31, 1995, have been so incorporated in reliance of the report of Coopers &
Lybrand, L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated financial statements incorporated in this Proxy Statement
by reference to Santa Fe's Annual Report on Form 10-K for the year ended
December 31, 1995, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in accounting and auditing.
Representatives of Coopers & Lybrand, L.L.P. and Price Waterhouse LLP are
expected to be present at the Homestake Special Meeting and the Santa Fe Special
Meeting, respectively, will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the shares of Homestake Common Stock will be passed upon
for Homestake by Thelen, Marrin, Johnson & Bridges LLP, San Francisco,
California, counsel to Homestake.
Certain federal income tax consequences of the Merger will be passed upon
for Homestake by Cravath, Swaine & Moore, New York, New York, and for Santa Fe
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
STOCKHOLDER PROPOSALS
Homestake anticipates that its 1997 Annual Meeting of Stockholders will be
held in July 1997 (the "Homestake Annual Meeting"). In such event, any Homestake
stockholder who wishes to submit a proposal for presentation to the Homestake
Annual Meeting must submit the proposal to Homestake not later than March 14,
1997, for inclusion, if appropriate, in Homestake's proxy statement and the form
of proxy relating to the Homestake Annual Meeting.
In the event that the Combination is not consummated, Santa Fe anticipates
that its 1997 Annual Meeting of Stockholders will be held in July 1997 (the
"Santa Fe Annual Meeting"). In such event, any Santa Fe stockholder who wishes
to submit a proposal for presentation to the Santa Fe Annual Meeting, must
submit the proposal to Santa Fe not later than March 14, 1997, for inclusion, if
appropriate, in Santa Fe's proxy statement and the form of proxy relating to the
Santa Fe's Annual Meeting.
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APPENDIX A
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- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 8, 1996,
AMONG
HOMESTAKE MINING COMPANY,
HMGLD CORP.
AND
SANTA FE PACIFIC GOLD CORPORATION
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<PAGE> 106
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
Parties and Recitals.................................................................. 1
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.............................................................. 1
SECTION 1.02. Closing................................................................. 1
SECTION 1.03. Effective Time of the Merger............................................ 1
SECTION 1.04. Effects of the Merger................................................... 1
SECTION 1.05. Certificate of Incorporation and By-laws................................ 2
SECTION 1.06. Directors............................................................... 2
SECTION 1.07. Officers................................................................ 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock................................................. 2
SECTION 2.02. Exchange of Certificates................................................ 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company........................... 5
SECTION 3.02. Representations and Warranties of Parent and Sub........................ 13
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business..................................................... 20
SECTION 4.02. No Solicitation by the Company.......................................... 24
SECTION 4.03. No Solicitation by Parent............................................... 25
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of Form S-4 and the Proxy Statement; Company's Stockholders'
Meeting and Parent's Stockholders' Meeting.............................. 26
SECTION 5.02. Letter of the Company's Accountants..................................... 27
SECTION 5.03. Letter of Parent's Accountants.......................................... 27
SECTION 5.04. Access to Information; Confidentiality.................................. 27
SECTION 5.05. Reasonable Efforts; Notification........................................ 27
SECTION 5.06. Rights Agreement; Consequences if Rights Triggered...................... 28
SECTION 5.07. Company Employee Stock Options.......................................... 29
SECTION 5.08. Benefit Plans........................................................... 30
SECTION 5.09. Indemnification......................................................... 30
SECTION 5.10. Fees and Expenses....................................................... 30
SECTION 5.11. Public Announcements.................................................... 31
SECTION 5.12. Tax and Accounting Treatment............................................ 31
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 5.13. Affiliates.............................................................. 31
SECTION 5.14. Stock Exchange Listing.................................................. 31
SECTION 5.15. Parent Board of Directors............................................... 31
SECTION 5.16. Parent Officers......................................................... 32
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger.............. 32
SECTION 6.02. Conditions to Obligations of Parent and Sub............................. 33
SECTION 6.03. Conditions to Obligation of the Company................................. 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination............................................................. 34
SECTION 7.02. Effect of Termination................................................... 35
SECTION 7.03. Amendment............................................................... 36
SECTION 7.04. Extension; Waiver....................................................... 37
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver............... 37
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties........................... 37
SECTION 8.02. Notices................................................................. 37
SECTION 8.03. Definitions............................................................. 38
SECTION 8.04. Interpretation.......................................................... 38
SECTION 8.05. Severability............................................................ 38
SECTION 8.06. Counterparts............................................................ 38
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries.......................... 38
SECTION 8.08. Governing Law........................................................... 38
SECTION 8.09. Assignment.............................................................. 38
SECTION 8.10. Enforcement............................................................. 39
</TABLE>
Exhibit A -- Form of Company Affiliate Letter
Exhibit B -- Form of Parent Affiliate Letter
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LOCATION OF
DEFINED TERMS IN AGREEMENT
<TABLE>
<CAPTION>
LOCATION IN
TERM AGREEMENT
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<S> <C>
"affiliate"....................................................................... sec. 8.03
"Amendment to Parent's Certificate of Designation"................................ sec. 3.02(d)
"Amendment to Parent's Restated Certificate of Incorporation"..................... sec. 3.02(d)
"Certificate of Merger............................................................ sec. 1.03
"Certificates".................................................................... sec. 2.02(b)
"Closing Date".................................................................... sec. 1.02
"Common Shares Trust"............................................................. sec. 2.02(e)
"Company Benefit Plans"........................................................... sec. 3.01(i)
"Company Capital Stock"........................................................... sec. 3.01(c)
"Company Common Stock"............................................................ Recitals
"Company Disclosure Letter"....................................................... sec. 3.01(b)
"Company Employee Stock Options".................................................. sec. 3.01(c)
"Company Employee Stock Plans".................................................... sec. 3.01(c)
"Company Material Adverse Effect"................................................. sec. 3.01(a)
"Company Property"................................................................ sec. 3.01(u)
"Company Rights".................................................................. sec. 3.01(c)
"Company Rights Agreement"........................................................ sec. 3.01(c)
"Company SEC Documents"........................................................... sec. 3.01(e)
"Company Series A Preferred Stock"................................................ sec. 3.01(c)
"Company Significant Subsidiary".................................................. sec. 3.01(a)
"Company Stock Plans"............................................................. sec. 5.08(a)
"Company Stockholder Approval".................................................... sec. 3.01(k)
"Company Subsidiary".............................................................. sec. 3.01(a)
"Company Takeover Proposal"....................................................... sec. 4.02(a)
"Company's Stockholders' Meeting"................................................. sec. 5.01(b)
"Confidentiality Agreement"....................................................... sec. 5.04
"Conversion Number"............................................................... Recitals
"Contract"........................................................................ sec. 3.01(d)
"DGCL"............................................................................ sec. 1.01
"D&O Insurance"................................................................... sec. 5.09
"Effective Time of the Merger".................................................... sec. 1.03
"Environmental Law"............................................................... sec. 3.01(r)
"ERISA"........................................................................... sec. 3.01(j)
"Excess Shares"................................................................... sec. 2.2(e)
"Exchange Act".................................................................... sec. 3.01(d)
"Exchange Agent".................................................................. sec. 2.02(a)
"Filed Company SEC Documents"..................................................... sec. 3.01(g)
"Filed Parent SEC Documents"...................................................... sec. 3.02(g)
"Form S-4"........................................................................ sec. 3.01(f)
"Governmental Entity"............................................................. sec. 3.01(d)
"Hazardous Substances"............................................................ sec. 3.01(r)
"HSR Act"......................................................................... sec. 3.01(d)
"LSARs"........................................................................... sec. 4.01(a)
"Liens"........................................................................... sec. 3.01(b)
"Material Breach"................................................................. sec. 7.02(e)
</TABLE>
iii
<PAGE> 109
<TABLE>
<CAPTION>
LOCATION IN
TERM AGREEMENT
- ---------------------------------------------------------------------------------- -----------
<S> <C>
"Maximum Period".................................................................. sec. 5.09
"NYSE"............................................................................ sec. 2.02(e)
"Options"......................................................................... sec. 3.01(c)
"Parent Benefit Plans"............................................................ sec. 3.02(i)
"Parent Common Stock"............................................................. Recitals
"Parent Convertible Notes"........................................................ sec. 3.02(c)
"Parent Disclosure Letter"........................................................ sec. 3.02(b)
"Parent Employee Stock Plans"..................................................... sec. 3.02(c)
"Parent Employee Stock Options"................................................... sec. 3.02(c)
"Parent LSARs".................................................................... sec. 5.01(a)
"Parent Material Adverse Effect".................................................. sec. 3.02(a)
"Parent Phantom Stock Options".................................................... sec. 5.07(a)
"Parent Property"................................................................. sec. 3.02(v)
"Parent Rights"................................................................... sec. 3.02(c)
"Parent Rights Agreement"......................................................... sec. 3.02(c)
"Parent SARs"..................................................................... sec. 5.01(a)
"Parent SEC Documents"............................................................ sec. 3.02(e)
"Parent Series A Preferred Stock"................................................. sec. 3.02(c)
"Parent Significant Subsidiary"................................................... sec. 3.02(a)
"Parent Stockholder Approval"..................................................... sec. 3.02(k)
"Parent Subsidiary"............................................................... sec. 3.02(a)
"Parent Takeover Proposal"........................................................ sec. 4.03(a)
"Parent's Stockholders' Meeting".................................................. sec. 5.01(c)
"Permits"......................................................................... sec. 3.01(d)
"person".......................................................................... sec. 8.03
"Phantom Stock Options"........................................................... sec. 5.07(a)
"Primary Company Executives"...................................................... sec. 3.01(p)
"Primary Parent Executives"....................................................... sec. 3.02(p)
"Prime"........................................................................... sec. 3.02(c)
"Proxy Statement"................................................................. sec. 3.01(d)
"qualified stock options"......................................................... sec. 5.07(a)
"SARs"............................................................................ sec. 4.01(a)
"SEC"............................................................................. sec. 3.01(a)
"Securities Act".................................................................. sec. 3.01(e)
"SMCRA"........................................................................... sec. 3.01(r)
"subsidiary"...................................................................... sec. 8.03
"Surviving Corporation"........................................................... Recitals
"Tax Returns"..................................................................... sec. 3.01(n)
"Taxes"........................................................................... sec. 3.01(n)
</TABLE>
iv
<PAGE> 110
AGREEMENT AND PLAN OF MERGER dated as of December 8, 1996, among HOMESTAKE
MINING COMPANY, a Delaware corporation ("Parent"), HMGLD CORP., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and SANTA FE
PACIFIC GOLD CORPORATION, a Delaware corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub into the Company (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement, whereby each issued
and outstanding share of common stock, par value $0.01 per share, of the Company
(the "Company Common Stock"), not owned directly or indirectly by Parent or the
Company, will be converted into the right to receive 1.115 (as adjusted pursuant
to Sections 2.01(d) and 5.06, the "Conversion Number") fully paid and
nonassessable shares of common stock, par value $1.00 per share, of Parent (the
"Parent Common Stock");
WHEREAS Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS for Federal income tax purposes it is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS for accounting purposes, it is intended that the Merger be
accounted for as a pooling of interests under United States generally accepted
accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time of the Merger (as defined in Section 1.03). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights, properties, liabilities and obligations of Sub in
accordance with the DGCL. At the election of Parent, any direct or indirect
wholly owned subsidiary of Parent may be substituted for Sub as a constituent
corporation in the Merger; provided, however, that such substitution has no
impact on the satisfaction of the conditions set forth in Sections 6.02(d) and
6.03(d). In such event, the parties agree to execute an appropriate amendment to
this Agreement in order to reflect such substitution.
SECTION 1.02. Closing. Upon the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at 10:00
a.m. on a date to be specified by the parties (the "Closing Date"), which shall
be no later than the second business day after satisfaction of the conditions
set forth in Section 6.01 (other than the condition set forth in Sections
6.01(d) and 6.01(e)), at the offices of Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, NY 10019, unless another time, date or place
is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time of the Merger. Upon the Closing, the parties
shall file with the Secretary of State of the State of Delaware a certificate of
merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings, recordings or publications required under the DGCL
in connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State, or
at such other time as the parties may agree and specify in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time of the
Merger").
SECTION 1.04. Effects of the Merger. (a) The Merger shall have the effects
set forth in Section 259 of the DGCL.
<PAGE> 111
(b) The Merger shall not result in any acceleration of vesting of the
outstanding non-employee Director share rights of Parent granted under the
Parent Employee Stock Plans (as defined in Section 3.02(c)) that are held by
directors of Parent who continue as members of the Board of Directors of Parent
after the Effective Time of the Merger.
(c) The Merger shall not result in any change in the terms of the
outstanding Parent Employee Stock Options (as defined in Section 3.02(c))
granted under the Parent Employee Stock Plans.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The Amended and
Restated Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time of the Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The By-laws of the Company as in effect immediately prior to the
Effective Time of the Merger shall be the By-laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The individuals who are the directors of Sub
immediately prior to the Effective Time of the Merger shall be the directors of
the Surviving Corporation until thereafter they cease to be directors in
accordance with the DGCL and the Certificate of Incorporation and By-laws of the
Surviving Corporation.
SECTION 1.07. Officers. The individuals who are the officers of the Company
immediately prior to the Effective Time of the Merger shall be the officers of
the Surviving Corporation until thereafter they cease to be officers in
accordance with the DGCL and the Certificate of Incorporation and By-laws of the
Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock that is owned by the Company or by any wholly owned
subsidiary of the Company and each share of Company Common Stock that is
owned by Parent, Sub or any other wholly owned subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
Parent Common Stock or other consideration shall be delivered in exchange
therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.02(e),
each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.01(b)) shall be
converted into the right to receive the Conversion Number of fully paid and
nonassessable shares of Parent Common Stock. As of the Effective Time of
the Merger, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive upon the surrender of such certificates,
certificates representing the shares of Parent Common Stock, any cash in
lieu of fractional shares of Parent Common Stock and any dividends to the
extent provided in Section 2.02(c) to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section
2.02, without interest.
2
<PAGE> 112
(d) Adjustment of Conversion Number. In addition to any adjustment in
the Conversion Number pursuant to Section 5.06(a), in the event of any
split, combination or reclassification of any Parent Capital Stock or any
issuance or the authorization of any issuance of any other securities in
exchange or in substitution for shares of Parent Capital Stock at any time
during the period from the date of this Agreement to the Effective Time of
the Merger, the Company and Parent shall make such adjustment to the
Conversion Number as the Company and Parent shall mutually agree so as to
preserve the economic benefits that the Company and Parent each reasonably
expected on the date of this Agreement to receive as a result of the
consummation of the Merger and the other transactions contemplated by this
Agreement.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. Immediately
following the Effective Time of the Merger, Parent shall deposit with The First
National Bank of Boston or such other bank or trust company as may be designated
by Parent and the Company (the "Exchange Agent"), for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, certificates representing the shares of Parent
Common Stock (such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
of the Merger, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.01 in exchange for outstanding shares of Company Common
Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time of the Merger represented outstanding shares of
Company Common Stock, other than shares to be canceled or retired in accordance
with Section 2.01(b), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Company Common Stock which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent Common
Stock may be issued to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.02, each Certificate shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive upon such
surrender the certificate representing the appropriate number of whole shares of
Parent Common Stock, cash in lieu of any fractional shares of Parent Common
Stock and any dividends to the extent provided in Section 2.02(c) as
contemplated by this Section 2.02. No interest will be paid or will accrue on
any cash payable in lieu of any fractional shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time of the Merger shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.02(e) until the surrender of such Certificate
in accordance with this Article II. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificate representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Parent Common Stock
to which such
3
<PAGE> 113
holder is entitled pursuant to Section 2.02(e) and the amount of dividends or
other distributions with a record date after the Effective Time of the Merger
theretofore paid with respect to such whole shares of Parent Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time of the Merger but
prior to such surrender and a payment date subsequent to such surrender payable
with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.02(c) or 2.02(e)) shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time of the Merger which may have been
declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time of the Merger, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time of the Merger. If, after the
Effective Time of the Merger, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests shall not entitle
the owner thereof to vote or to any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time of the Merger,
the Exchange Agent shall determine the excess of (x) the number of shares of
Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 2.02(a) over (y) the aggregate number of whole shares of Parent Common
Stock to be distributed to holders of the Certificates pursuant to Section
2.02(b) (such excess being herein called the "Excess Shares"). As soon as
practicable after the Effective Time of the Merger, the Exchange Agent, as agent
for the holders of the Certificates, shall sell the Excess Shares at then
prevailing prices on the New York Stock Exchange (the "NYSE") all in the manner
provided in paragraph (iii) of this Section 2.02(e).
(iii) The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more member firms of the NYSE and shall be executed
in round lots to the extent practicable. The proceeds from such sale or sales
available for distribution to the holders of Certificates shall be reduced by
the compensation payable to the Exchange Agent and the expenses incurred by the
Exchange Agent, in each case, in connection with such sale or sales of the
Excess Shares, including all related commissions, transfer taxes and other
out-of-pocket transaction costs. Until the net proceeds of such sale or sales
have been distributed to the holders of the Certificates, the Exchange Agent
shall hold such proceeds in trust for the holders of the Certificates (the
"Common Shares Trust"). The Exchange Agent shall determine the portion of the
Common Shares Trust to which each holder of a Certificate shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of a Certificate is entitled and
the denominator of which is the aggregate amount of fractional share interests
to which all holders of the Certificates are entitled.
(iv) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Certificates in lieu of any fractional share
interests, the Exchange Agent shall make available such amounts, without
interest, to such holders of Certificates who have surrendered their
Certificates in accordance with this Article II.
(f) Termination of Exchange Fund and Common Shares Trust. Any portion of
the Exchange Fund and Common Shares Trust which remains undistributed to the
holders of Certificates for six months after the Effective Time of the Merger
shall be delivered to Parent, upon demand, and any holders of Certificates who
have not theretofore complied with this Article II shall thereafter look only to
Parent for payment of their
4
<PAGE> 114
claim for Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent Common
Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund or the Common Shares Trust delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to seven years after the Effective Time of the
Merger (or immediately prior to such earlier date on which any shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock or
any dividends or distributions with respect to Parent Common Stock in respect of
such Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.01(d)), any such shares, cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(h) Investment of Exchange Fund and Common Shares Trust. The Exchange Agent
shall invest any cash included in the Exchange Fund and Common Shares Trust, as
directed by Parent, on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
and each Company Significant Subsidiary (as hereinafter defined) is a
corporation, partnership or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which
it is organized and has the requisite power and authority to carry on its
business as now being conducted. Each of the Company and each of its
subsidiaries (each a "Company Subsidiary") is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not (i) have a material adverse effect on the business,
properties, financial condition or results of operations of the Company and
the Company Subsidiaries, taken as a whole (other than effects relating to
the gold mining industry in general), or (ii) prevent the Company from
performing its obligations under this Agreement (a "Company Material
Adverse Effect"). The Company has made available to Parent complete and
correct copies of its Amended and Restated Certificate of Incorporation and
By-laws and the certificates of incorporation and by-laws or comparable
organization documents of the Company Significant Subsidiaries, in each
case as amended to the date of this Agreement. For purposes of this
Agreement, a "Company Significant Subsidiary" means any Company Subsidiary
that constitutes a significant subsidiary of the Company within the meaning
of Rule 1-02 of Regulation S-X of the Securities and Exchange Commission
(the "SEC"). The Company is not in violation of any provision of its
Amended and Restated Certificate of Incorporation or By-laws, and no
Company Subsidiary is in violation of any provisions of its certificate of
incorporation, by-laws or comparable organizational documents, except to
the extent that such violations would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) Company Subsidiaries. Section 3.01(b) of the letter from the
Company, dated the date of this Agreement, addressed to Parent (the
"Company Disclosure Letter") lists each Company Significant Subsidiary and
the ownership or interest therein of the Company. All the outstanding
shares of capital stock of each Company Significant Subsidiary have been
validly issued and are fully paid and nonassessable and, except as set
forth in Section 3.01(b) of the Company Disclosure Letter, are owned by the
Company, by another subsidiary of the Company or by the Company and another
Company
5
<PAGE> 115
Subsidiary, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock of the Company
Subsidiaries and except for the ownership interests set forth in Section
3.01(b) of the Company Disclosure Letter, the Company does not own,
directly or indirectly, any capital stock or other ownership interest, with
a fair market value as of the date of this Agreement greater than
$25,000,000, in any person.
(c) Capital Structure. The authorized capital stock of the Company
(the "Company Capital Stock") consists of 500,000,000 shares of Company
Common Stock and 50,000,000 shares of preferred stock, par value $0.01 per
share. Pursuant to a Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock, on January 26, 1995, the
Board of Directors of the Company created a series of 1,500,000 shares of
preferred stock designated as the "Series A Junior Participating Preferred
Stock", par value $0.01 per share (the "Company Series A Preferred Stock"),
which shares are issuable in connection with the rights to purchase shares
of Company Series A Preferred Stock (the "Company Rights") that were issued
pursuant to the Rights Agreement dated February 13, 1995 (as amended from
time to time, the "Company Rights Agreement"), between the Company and
Harris Trust and Savings Bank, as Rights Agent. At the close of business on
December 5, 1996: (i) 131,459,422 shares of Company Common Stock were
outstanding, all of which were validly issued, fully paid and
nonassessable, and no shares of Company Series A Preferred Stock, or of any
other series of preferred stock of the Company, were outstanding; (ii) no
shares of Company Common Stock were held by the Company in its treasury;
(iii) 1,521,912 shares of Company Common Stock were issuable upon the
exercise of outstanding employee or outside director stock options (the
"Company Employee Stock Options") that were granted pursuant to the
Company's employee stock plans set forth in Section 3.01(c) of the Company
Disclosure Letter (the "Company Employee Stock Plans"); and (iv) 1,500,000
shares of Company Series A Preferred Stock were reserved for issuance in
connection with the Company Rights. Except as set forth above, at the close
of business on December 5, 1996, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or
outstanding. There are not any bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company must vote. Except as set forth above and
except as set forth in Section 3.01(c) of the Company Disclosure Letter, as
of the date of this Agreement, there are not any options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
(collectively, "Options") to which the Company or any Company Subsidiary is
a party or by which any of them is bound relating to the issued or unissued
capital stock of the Company or any Company Subsidiary, or obligating the
Company or any Company Subsidiary to issue, transfer, grant or sell any
shares of capital stock or other equity interests in, or securities
convertible or exchangeable for any capital stock or other equity interests
in, the Company or any Company Subsidiary or obligating the Company or any
Company Subsidiary to issue, grant, extend or enter into any such Options.
All shares of Company Common Stock that are subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instrument pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in
Section 3.01(c) of the Company Disclosure Letter, as of the date of this
Agreement, there are not any outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any Company
Subsidiary, or make any material investment (in the form of a loan, capital
contribution or otherwise) in, any Company Subsidiary or any other person.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject to
the Company Stockholder Approval (as defined in Section 3.01(k)), to
consummate the transactions contemplated by this Agreement. The Board of
Directors of the Company has unanimously approved this Agreement and the
transactions contemplated by this Agreement, and has resolved to recommend
to the Company's stockholders that they give the Company Stockholder
Approval. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject to the Company Stockholder Approval. This
Agreement has been duly executed and delivered by the Company and
6
<PAGE> 116
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. Except as set forth in
Section 3.01(d) of the Company Disclosure Letter, the execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of consent, termination, purchase,
cancellation or acceleration of any obligation or to loss of any property,
rights or benefits under, or result in the imposition of any additional
obligation under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any Company Subsidiary under, (i)
the Amended and Restated Certificate of Incorporation or By-laws of the
Company or the comparable organizational documents of any Company
Subsidiary, (ii) any contract, instrument, permit, concession, franchise,
license, loan or credit agreement, note, bond, mortgage, indenture, lease
or other property agreement, partnership or joint venture agreement or
other legally binding agreement, whether oral or written (a "Contract"),
applicable to the Company or any Company Subsidiary or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any Company Subsidiary or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not have a Company Material Adverse Effect. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Federal, state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign,
including the European Community (a "Governmental Entity"), is required by
or with respect to the Company or any Company Subsidiary in connection with
the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and report
form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), (ii) the filing with the SEC of (A) a joint proxy
statement relating to the meetings of the Company's stockholders and the
Parent's stockholders to be held in connection with the Merger and the
transactions contemplated by this Agreement (as amended or supplemented
from time to time, the "Proxy Statement"), and (B) such reports under
Section 12 or 13(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business, (iv) those that may be required solely
by reason of Parent's or Sub's (as opposed to any other third party's)
participation in the Merger and the other transactions contemplated by this
Agreement and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings, including under applicable
Environmental Laws (as defined in Section 3.01(r)), (x) as may be required
under the laws of any foreign country in which the Company or any Company
Subsidiary conducts any business or owns any property or assets, (y) as are
set forth in Section 3.01(d) of the Company Disclosure Letter or (z) that,
if not obtained or made, would not, individually or in the aggregate, have
a Company Material Adverse Effect. Except as set forth in Section 3.01(d)
of the Company Disclosure Letter, the Company and the Company Subsidiaries
possess all certificates, franchises, licenses, permits, authorizations and
approvals issued to or granted by Governmental Entities (collectively,
"Permits"), including pursuant to any Environmental Law, necessary to
conduct their business as such business is currently conducted or is
expected to be conducted, except for such Permits, the lack of possession
of which has not, and is not reasonably expected to have, a Company
Material Adverse Effect. Except as set forth in Section 3.01(d) of the
Company Disclosure Letter, (i) all such Permits are validly held by the
Company or the Company Subsidiaries, and the Company and the Company
Subsidiaries have complied in all respects with all terms and conditions
thereof, except for such instances where the failure to validly hold such
Permits or the failure to have complied with such Permits has not, and is
not reasonably expected to have, a Company Material Adverse Effect, (ii)
none of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the Merger, other than such Permits the
suspension, modification or nonrenewal of which, individually or in the
aggregate, have not had and could
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not reasonably be expected to have a Company Material Adverse Effect and
(iii) since December 31, 1995, neither the Company nor any Company
Subsidiary has received any written warning, notice, notice of violation or
probable violation, notice of revocation, or other written communication
from or on behalf of any Governmental Entity, alleging (A) any violation of
any such Permit or (B) that the Company or any Company Subsidiary requires
any Permit required for its business, as such business is currently
conducted, that is not currently held by it.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1995 (the "Company SEC Documents"). As of its date,
each Company SEC Document complied in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents. None of
the Company SEC Documents contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the
extent that such statements have been modified or superseded by a later
filed Company SEC Document. The consolidated financial statements of the
Company included in the Company SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated
financial position of the Company as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the Filed Company SEC Documents
(as defined in Section 3.01(g)), neither the Company nor any Company
Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of
the Company and the consolidated Company Subsidiaries or in the notes
thereto and which, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect, other than any such
liabilities or obligations that were required to be set forth in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996. None of the Company Subsidiaries is subject to the informational
reporting requirements of Section 13 of the Exchange Act.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock in the Merger (the
"Form S-4") will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders or Parent's stockholders or at the time of the
Company's Stockholders' Meeting (as defined in Section 5.01(b)) or the
Parent's Stockholders' Meeting (as defined in Section 5.01(c)), contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation or
warranty is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent
or Sub for inclusion or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), from December 31, 1995,
to the date of this Agreement, the Company has conducted its business only
in the ordinary course, and:
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(i) during the period from September 30, 1996, to the date of this
Agreement, there has not been any event, change, effect or development
which, individually or in the aggregate, has had or is, so far as
reasonably can be foreseen, likely to have, a Company Material Adverse
Effect;
(ii) during the period from December 31, 1995, to the date of this
Agreement, there has not been except for regular annual dividends not in
excess of $0.05 per share of Company Common Stock, with customary record
and payment dates, any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any shares of Company Capital Stock;
(iii) during the period from December 31, 1995, to the date of this
Agreement, there has not been any split, combination or reclassification
of any Company Capital Stock or any issuance or the authorization of any
issuance of any other securities in exchange or in substitution for
shares of Company Capital Stock;
(iv) during the period from December 31, 1995, to the date of this
Agreement, there has not been except as disclosed in Section 3.01(g) of
the Company Disclosure Letter, (A) any granting by the Company or any
Company Subsidiary to any executive officer of the Company or any
Company Subsidiary of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as was
required under employment agreements in effect as of the date of the
most recent audited financial statements included in the Filed Company
SEC Documents, (B) any granting by the Company or any Company Subsidiary
to any such executive officer of any increase in severance or
termination pay, except as was required under any employment, severance
or termination agreements in effect as of the date of the most recent
audited financial statements included in the Filed Company SEC Documents
or (C) any entry by the Company or any Company Subsidiary into any
employment, severance or termination agreement with any such executive
officer; and
(v) during the period from December 31, 1995, to the date of this
Agreement, there has not been any change in accounting methods,
principles or practices by the Company or any Company Significant
Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in generally
accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed Company SEC Documents
or in Section 3.01(h) of the Company Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary (and the Company
does not have any reasonable basis to expect any such suit, action or
proceeding to be commenced) that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect, and there
is not any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any Company
Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future would have, any Company Material Adverse Effect. As of the date of
this Agreement, except as disclosed in the Filed Company SEC Documents or
in Section 3.01(h) of the Company Disclosure Letter, there is no suit,
action or proceeding pending, or, to the knowledge of the Company,
threatened, against the Company or any Company Subsidiary (and the Company
does not have any reasonable basis to expect any such suit, action or
proceeding to be commenced) that, individually or in the aggregate, could
reasonably be expected to prevent or delay in any material respect the
consummation of the Merger or the transactions contemplated by this
Agreement.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the
Filed Company SEC Documents or in Section 3.01(i) of the Company Disclosure
Letter, since the date of the most recent audited financial statements
included in the Filed Company SEC Documents and prior to the date of this
Agreement, there has not been any adoption or amendment in any material
respect by the Company or any Company Subsidiary of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan,
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<PAGE> 119
arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of the
Company or any Company Subsidiary (collectively, "Company Benefit Plans").
(j) ERISA Compliance. Except as described in the Filed Company SEC
Documents or in Section 3.01(j) of the Company Disclosure Letter or as
would not have a Company Material Adverse Effect, (i) all employee benefit
plans or programs maintained for the benefit of the current or former
employees or directors of the Company or any Company Subsidiary that are
sponsored, maintained or contributed to by the Company or any Company
Subsidiary, or with respect to which the Company or any Company Subsidiary
has any liability, including any such plan that is an "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA"), are in compliance with all applicable requirements
of law, including ERISA and the Code, and (ii) neither the Company nor any
Company Subsidiary has any liabilities or obligations with respect to any
such employee benefit plans or programs, whether accrued, contingent or
otherwise, nor to the knowledge of the Company are any such liabilities or
obligations expected to be incurred. Except as set forth in Section 3.01(j)
of the Company Disclosure Letter, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event
under any benefit plan, policy, arrangement or agreement or any trust or
loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee. The only severance agreements or severance
policies applicable to the Company or the Company Subsidiaries are the
agreements and policies specifically set forth in Section 3.01(j) of the
Company Disclosure Letter.
(k) Voting Requirements. The approval and adoption of this Agreement
by the holders of a majority of the outstanding shares of Company Common
Stock (the "Company Stockholder Approval") is the only vote of the holders
of any class or series of Company Capital Stock necessary to approve this
Agreement and the transactions contemplated by this Agreement.
(l) Brokers; Schedule of Fees and Expenses. Except as set forth in
Section 3.01(l) of the Company Disclosure Letter, no broker, investment
banker, financial advisor or other person is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has made
available to Parent true and complete copies of all agreements that are
referred to in Section 3.01(l) of the Company Disclosure Letter and all
indemnification and other agreements related to the engagement of the
persons so listed.
(m) Opinion of Financial Advisor. The Company has received the opinion
of SBC Warburg Inc., dated the date of this Agreement, to the effect that,
as of such date, the consideration to be received in the Merger by the
Company's stockholders is fair to the Company's stockholders from a
financial point of view, a signed copy of which opinion has been delivered
to Parent.
(n) Taxes. (i) The Company and each Company Subsidiary have timely
filed (or have had timely filed on their behalf) or will file or cause to
be timely filed, all material Tax Returns required by applicable law to be
filed by any of them prior to or as of the Effective Time of the Merger.
All such material Tax Returns are, or will be at the time of filing, true,
complete and correct in all material respects.
(ii) The Company and each Company Subsidiary have paid (or have had
paid on their behalf) or, where payment is not yet due, have established
(or have had established on their behalf and for their sole benefit and
recourse) or will establish or cause to be established on or before the
Effective Time of the Merger an adequate accrual for the payment of all
Taxes due with respect to any period ending prior to or as of the Effective
Time of the Merger, except where the failure to pay or establish adequate
reserves has not had and would not reasonably be expected to have a Company
Material Adverse Effect.
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(iii) Except as set forth in Section 3.01(n) of the Company Disclosure
Letter, no deficiencies for any material Taxes have been proposed, asserted
or assessed against the Company or any Company Subsidiary, and no requests
for waivers of the time to assess any such material Taxes are pending. The
Federal income Tax Returns of the Company and each Company Subsidiary
consolidated in such Tax Returns have been examined by and settled with the
United States Internal Revenue Service for all years through 1985.
(iv) The Company has no reason to believe that any conditions exist
that could reasonably be expected to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
(v) For purposes of this Agreement, the following terms shall have the
following meanings:
(A) "Taxes" shall mean all Federal, state, local and foreign taxes,
and other assessments of a similar nature (whether imposed directly or
through withholding), including any interest, additions to tax, or
penalties applicable thereto.
(B) "Tax Returns" shall mean all Federal, state, local and foreign
tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended tax return relating to Taxes.
(o) Compliance with Laws. Neither the Company nor any Company
Subsidiary has violated or failed to comply with any statute, law,
ordinance, regulation, rule, judgment, decree or order of any Governmental
Entity applicable to its business or operations, except for violations and
failures to comply that could not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect.
(p) No Excess Parachute Payments. Other than payments that may be made
to the persons listed in Section 3.01(p) of the Company Disclosure Letter
(the "Primary Company Executives"), any amount that could be received
(whether in cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any employee, officer
or director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Company Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term
is defined in Section 280G(b)(1) of the Code). Set forth in Section 3.01(p)
of the Company Disclosure Letter is (i) the estimated maximum amount that
could be paid to each Primary Company Executive as a result of the
transactions contemplated by this Agreement under all employment, severance
and termination agreements, other compensation arrangements and Company
Benefit Plans currently in effect and (ii) the "base amount" (as such term
is defined in Section 280G(b)(3) of the Code) for each Primary Company
Executive calculated as of the date of this Agreement.
(q) Accounting Matters. Neither the Company nor, to its best
knowledge, any of its affiliates, has taken or agreed to take any action
that (without giving effect to any action taken or agreed to be taken by
Parent or any of its affiliates) would prevent Parent from accounting for
the business combination to be effected by the Merger as a pooling of
interests.
(r) Environmental Matters. (i) Except as set forth in Section 3.01(r)
of the Company Disclosure Letter and except for items that could not, in
all such cases taken individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect, neither the
Company nor any Company Subsidiary has (x) placed, held, located, released,
transported or disposed of any Hazardous Substances (as defined below) on,
under, from or at any of the Company's or any Company Subsidiary's current
or former properties or any other properties or (y) any knowledge or reason
to know of the presence of any Hazardous Substances on, under or at any of
the Company's or any Company Subsidiary's current or former properties or
any other property but arising from the Company's or any Company
Subsidiary's current or former properties. For purposes of this Agreement,
the term "Hazardous Substance" shall mean any materials or substances
(including asbestos, buried contaminants,
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chemicals, flammable explosives, radioactive materials, petroleum and
petroleum products) defined as, or included in the definition of,
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" under any Environmental Law. For purposes of this Agreement,
the term "Environmental Law" shall mean any federal, state, provincial,
regional, territorial, municipal, local or foreign statute, code,
ordinance, rule, regulation, policy, permit, consent, approval, license,
judgment, order, writ, decree, injunction or other authorization, relating
to: (A) emissions, discharges, releases or threatened releases of Hazardous
Substances into the natural or workplace environment, including, without
limitation, ambient air, soil, sediments, land surface, subsurface, surface
water, groundwater, tailings ponds or settling lagoons; (B) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation
or shipment of Hazardous Substances; or (C) protection of health or safety
or the environment, handling, treatment or disposal of solid waste, or
operation or reclamation of mines.
(ii) Except for items that individually or in the aggregate could not
reasonably be expected to result in a Company Material Adverse Effect or as
disclosed in Section 3.01(r) of the Company Disclosure Letter, the Company
and the Company Subsidiaries are in compliance with the Surface Mining
Control and Reclamation Act, 30 U.S.C. Section 1201 et seq. (the "SMCRA")
and any state law comparable to SMCRA under 30 U.S.C. sec. 1253, and
neither the Company nor any Company Subsidiary is subject to any
reclamation obligation or other site restoration obligation under any
Environmental Law.
(iii) Except for items that individually or in the aggregate could not
reasonably be expected to result in a Company Material Adverse Effect or as
set forth in Section 3.01(r) of the Company Disclosure Letter, no
Environmental Law imposes any obligation upon the Company or any Company
Subsidiary arising out of or as a condition to any transaction contemplated
by this Agreement, including any requirement to modify or to transfer any
permit or license, any requirement to file any notice or other submission
with any Governmental Entity, the filing of any notice, acknowledgement or
covenant in any land records, or the modification of or provision of notice
under any agreement, consent order or consent decree.
(s) State Takeover Statutes. The Board of Directors of the Company has
approved the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger, this Agreement and the transactions
contemplated by this Agreement, the provisions of Section 203 of the DGCL.
To the best of the Company's knowledge, no other state takeover statute or
similar statute or regulation applies or purports to apply to the Merger,
this Agreement or any of the transactions contemplated by this Agreement.
(t) Rights Agreement. The Company has taken all necessary action to
(i) render the Company Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement and (ii) ensure that (x)
neither Parent nor any of its affiliates is an Acquiring Person (as defined
in the Company Rights Agreement), (y) none of a Distribution Date, Shares
Acquisition Date or Triggering Event (each as defined in the Company Rights
Agreement) shall occur by reason of the approval, execution or delivery of
this Agreement, the announcement or consummation of the Merger or the
consummation of any of the other transactions contemplated by this
Agreement and (z) the Company Rights shall expire immediately prior to the
Effective Time of the Merger.
(u) Dispositions of Company Property. Except as described in the Filed
Company SEC Documents or in Section 3.01(u) of the Company Disclosure
Letter, since December 31, 1995, neither the Company nor any Company
Subsidiary has sold or disposed of or ceased to hold or own any personal
property, real property, any interest or rights with respect to real
property (including exploration or production rights), any interest in a
joint venture or other assets or properties of the Company or any Company
Subsidiary ("Company Property"), other than sales and dispositions of raw
materials, obsolete equipment, mine output and other inventories, and any
interests or rights with respect to real property having an individual fair
market value of less than $10,000,000 of the Company or any Company
Subsidiary, in each case in the ordinary course of business, consistent
with past practice. Except as set forth in Section 3.01(u) of the Company
Disclosure Letter, no Company Property whose fair market
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value on the date of this Agreement is greater than $10,000,000 is subject
to any pending sale or disposition transaction.
(v) Absence of Reduction in Reserves and Mineralized Material. There
has been no material reduction in the aggregate amount of reserves or in
the aggregate amount of mineralized material of the Company and the Company
Subsidiaries, taken as a whole, from the amounts set forth in the Company's
1995 annual report to shareholders except for (i) such reductions in
reserves that have resulted from production in the ordinary course of
business and (ii) such reductions in mineralized material that have
resulted from reclassifications of mineralized material as reserves.
(w) Development Projects. The Company has no reason to believe that
(i) the estimated production capacity for each of the time periods set
forth in Section 3.01(w) of the Company Disclosure Letter with respect to
the four development projects described in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 will not be reached
during such time periods, or (ii) the estimated costs set forth in Section
3.01(w) of the Company Disclosure Letter with respect to each such
development project will be exceeded.
SECTION 3.02. Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent, Sub
and each Parent Significant Subsidiary (as hereinafter defined) is a
corporation, partnership or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which
it is organized and has the requisite power and authority to carry on its
business as now being conducted. Each of Parent, Sub and each of Parent's
subsidiaries (each a "Parent Subsidiary") is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not (i) have a material adverse effect on the business,
properties, financial condition or results of operations of Parent and the
Parent Subsidiaries, taken as a whole (other than effects relating to the
gold mining industry in general), or (ii) prevent Parent from performing
its obligations under this Agreement (a "Parent Material Adverse Effect").
Parent has made available to the Company complete and correct copies of its
Restated Certificate of Incorporation and By-laws, the Certificate of
Incorporation and By-Laws of Sub and the certificates of incorporation and
by-laws or comparable organizational documents of the Parent Significant
Subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "Parent Significant Subsidiary" means any
Parent Subsidiary that constitutes a significant subsidiary of Parent
within the meaning of Rule 1-02 of Regulation S-X of the SEC. Neither
Parent nor Sub is in violation of any provision of its certificate of
incorporation or by-laws, and no Parent Subsidiary is in violation of any
provisions of its certificate of incorporation, by-laws or comparable
organizational documents, except to the extent that such violations would
not, individually or in the aggregate, have a Parent Material Adverse
Effect.
(b) Parent Subsidiaries. Section 3.02(b) of the letter from Parent,
dated the date of this Agreement, addressed to the Company (the "Parent
Disclosure Letter") lists each Parent Significant Subsidiary and the
ownership or interest therein of Parent. All the outstanding shares of
capital stock of each Parent Significant Subsidiary have been validly
issued and are fully paid and nonassessable and, except as set forth in
Section 3.02(b) of the Parent Disclosure Letter, are owned by Parent, by
another subsidiary of Parent or by Parent and another Parent Subsidiary,
free and clear of all Liens. Except for the capital stock of the Parent
Subsidiaries and except for the ownership interests set forth in Section
3.02(b) of the Parent Disclosure Letter, Parent does not own, directly or
indirectly, any capital stock or other ownership interest, with a fair
market value as of the date of this Agreement greater than $25,000,000, in
any person.
(c) Capital Structure. Except as otherwise contemplated by this
Agreement, the authorized capital stock of Parent (the "Parent Capital
Stock") consists of 250,000,000 shares of Parent Common Stock and
10,000,000 shares of preferred stock, par value $1.00 per share. Pursuant
to a Certificate of
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Designation of Series A Participating Cumulative Preferred Stock, on
October 16, 1987, the Board of Directors of Parent created a series of
1,250,000 shares of preferred stock designated as the "Series A
Participating Cumulative Preferred Stock", par value $1.00 per share, which
series was increased to 2,500,000 shares by an amendment to such
Certificate of Designation filed with the Secretary of State of the State
of Delaware on June 4, 1993 (the "Parent Series A Preferred Stock"). The
shares of Parent Series A Preferred Stock are issuable in connection with
the rights to purchase shares of Parent Series A Preferred Stock (the
"Parent Rights") that were issued pursuant to the Rights Agreement dated
October 16, 1987 (as amended from time to time, the "Parent Rights
Agreement"), between Parent and The First National Bank of Boston. At the
close of business on December 4, 1996: (i) 146,672,452 shares of Parent
Common Stock were outstanding, all of which were validly issued, fully paid
and nonassessable, and no shares of Parent Series A Preferred Stock, or of
any other series of preferred stock of Parent, were outstanding; (ii)
12,250 shares of Parent Common Stock were held by Parent in its treasury;
(iii) 8,602,526 shares of Parent Common Stock were reserved for issuance in
connection with the granting of Directors share rights and upon the
exercise of outstanding employee stock options (the "Parent Employee Stock
Options") that were granted pursuant to the Parent's employee stock plans
set forth in Section 3.02(c) of the Parent Disclosure Letter (the "Parent
Employee Stock Plans"); (iv) 2,500,000 shares of Parent Series A Preferred
Stock were reserved for issuance in connection with the Parent Rights; and
(v) 6,504,000 shares of Parent Common Stock were reserved for issuance upon
the conversion of Parent's 5.5% Convertible Subordinated Notes due June 23,
2000 (the "Parent Convertible Notes"). Except as set forth above, at the
close of business on December 4, 1996, no shares of capital stock or other
voting securities of Parent were issued, reserved for issuance or
outstanding. Except as set forth above, there are not any bonds,
debentures, notes or other indebtedness of Parent having the right to vote
(or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of the Company must vote. Except
as set forth above and except as set forth in Section 3.02(c) of the Parent
Disclosure Letter, as of the date of this Agreement, there are not any
Options to which Parent or any Parent Subsidiary is a party or by which any
of them is bound relating to the issued or unissued capital stock of Parent
or any Parent Subsidiary, or obligating Parent or any Parent Subsidiary to
issue, transfer, grant or sell any shares of capital stock or other equity
interests in, or securities convertible or exchangeable for any capital
stock or other equity interests in, Parent or any Parent Subsidiary or
obligating Parent or any Parent Subsidiary to issue, grant, extend or enter
into any such Options. All shares of Parent Common Stock that are subject
to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instrument pursuant to which they are issuable, will be
duly authorized, validly issued, fully paid and nonassessable. All shares
of Parent Common Stock that are subject to issuance pursuant to the Merger,
upon issuance pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in Section
3.02(c) of the Parent Disclosure Letter, as of the date of this Agreement,
there are not any outstanding contractual obligations of Parent or any
Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of Parent or any Parent Subsidiary, or make any material
investment (in the form of a loan, capital contribution or otherwise) in,
any Parent Subsidiary or any other person. As of the date of this
Agreement, the authorized capital stock of Sub consists of 100 shares of
common stock, par value $0.01 per share, all of which have been validly
issued, are fully paid and nonassessable and are owned by Parent free and
clear of any Lien.
(d) Authority; Noncontravention. Parent and Sub have all requisite
corporate power and authority to enter into this Agreement and, subject to
the Parent Stockholder Approval (as defined in Section 3.02(k)) and the
filing of an amendment to Parent's Restated Certificate of Incorporation to
increase the authorized Parent Capital Stock (the "Amendment to Parent's
Restated Certificate of Incorporation") and of an amendment to Parent's
Certificate of Designation of Series A Participating Cumulative Preferred
Stock to increase the number of shares of Parent's preferred stock
constituting Parent Series A Preferred Stock (the "Amendment to Parent's
Certificate of Designation"), to consummate the transactions contemplated
by this Agreement. The Board of Directors of Parent has approved this
Agreement and the transactions contemplated by this Agreement, and has
resolved to recommend to Parent's stockholders that they give the Parent
Stockholder Approval. The execution and
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delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement, in each case by Parent or by Parent and
Sub, as the case may be, have been duly authorized by all necessary
corporate action on the part of Parent and Sub, subject to the Parent
Stockholder Approval and the filing of the Amendment to Parent's Restated
Certificate of Incorporation and the Amendment to Parent's Restated
Certificate of Designation. This Agreement has been duly executed and
delivered by Parent and Sub, respectively, and constitutes a valid and
binding obligation of Parent and Sub, respectively, enforceable against
each such party in accordance with its terms. Except as set forth in
Section 3.02(d) of the Parent Disclosure Letter, the execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of consent, termination, purchase, cancellation or
acceleration of any obligation or to loss of any property, rights or
benefits under, or result in the imposition of any additional obligation
under, or result in the creation of any Lien upon any of the properties or
assets of Parent, Sub or any other Parent Subsidiary under, (i) the
Restated Certificate of Incorporation or By-laws of Parent, the certificate
of incorporation and by-laws of Sub, or the comparable organizational
documents of any Parent Subsidiary, (ii) any Contract applicable to Parent,
Sub or any other Parent Subsidiary or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or any other Parent
Subsidiary or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not have a
Parent Material Adverse Effect. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent, Sub or any
other Parent Subsidiary in connection with the execution and delivery of
this Agreement by Parent or Sub, as the case may be, or the consummation by
Parent or Sub, as the case may be, of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger notification and report
form by Parent under the HSR Act, (ii) the filing with the SEC of (A) the
Proxy Statement, and (B) such reports under Section 13(a) of the Exchange
Act, as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the filing of the
Certificate of Merger, the Amendment to Parent's Restated Certificate of
Incorporation and the Amendment to Parent's Restated Certificate of
Designation with the Delaware Secretary of State and appropriate documents
with the relevant authorities of other states in which Parent is qualified
to do business, (iv) those that may be required solely by reason of the
Company's (as opposed to any other third party's) participation in the
Merger and the other transactions contemplated by this Agreement and (v)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings, including under applicable Environmental Laws,
(x) as may be required under the laws of any foreign country in which
Parent or any Parent Subsidiary conducts any business or owns any property
or assets, (y) as are set forth in Section 3.02(d) of the Parent Disclosure
Letter or (z) that, if not obtained or made, would not, individually or in
the aggregate, have a Parent Material Adverse Effect. Except as set forth
in Section 3.02(d) of the Parent Disclosure Letter, Parent and the Parent
Subsidiaries possess all Permits, including pursuant to any Environmental
Law, necessary to conduct their business as such business is currently
conducted or is expected to be conducted, except for such Permits, the lack
of possession of which has not, and is not reasonably expected to have, a
Parent Material Adverse Effect. Except as set forth in Section 3.02(d) of
the Parent Disclosure Letter, (i) all such Permits are validly held by
Parent or the Parent Subsidiaries, and Parent and the Parent Subsidiaries
have complied in all respects with all terms and conditions thereof, except
for such instances where the failure to validly hold such Permits or the
failure to have complied with such Permits has not, and is not reasonably
expected to have, a Parent Material Adverse Effect, (ii) none of such
Permits will be subject to suspension, modification, revocation or
nonrenewal as a result of the execution and delivery of this Agreement or
the consummation of the Merger, other than such Permits the suspension,
modification or nonrenewal of which, individually or in the aggregate, have
not had and could not reasonably be expected to have a Parent Material
Adverse Effect and (iii) since December 31, 1995, neither Parent nor any
Parent Subsidiary has received any written warning, notice, notice of
violation or probable violation, notice of revocation, or other written
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communication from or on behalf of any Governmental Entity, alleging (A)
any violation of such Permit or (B) that Parent or any Parent Subsidiary
requires any Permit required for its business, as such business is
currently conducted that is not currently held by it.
(e) SEC Documents; Undisclosed Liabilities. Parent has filed all
required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1995 (the "Parent SEC Documents"). As of its date,
each Parent SEC Document complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Documents. None of the Parent SEC Documents contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent that such statements have been modified or
superseded by a later filed Parent SEC Document. The consolidated financial
statements of Parent included in the Parent SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Parent as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the Filed Parent SEC Documents
(as defined in Section 3.02(g)), neither Parent nor any Parent Subsidiary
has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of
Parent and the consolidated Parent Subsidiaries or in the notes thereto and
which, individually or in the aggregate, could reasonably be expected to
have a Parent Material Adverse Effect, other than any such liabilities or
obligations that were required to be set forth in Parents' Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996. None of the Parent
Subsidiaries is subject to the informational reporting requirements of
Section 13 of the Exchange Act.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders or Parent's stockholders or at the time of the
Company's Stockholders' Meeting or the Parent's Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation or
warranty is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the
Company for inclusion or incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Parent SEC Documents"), from December 31, 1995, to
the date of this Agreement, Parent has conducted its business only in the
ordinary course, and:
(i) during the period from September 30, 1996, to the date of this
Agreement, there has not been any event, change, effect or development
which, individually or in the aggregate, has had or, so far as
reasonably can be foreseen, is likely to have, a Parent Material Adverse
Effect;
(ii) during the period from December 31, 1995, to the date of this
Agreement, there has not been except for regular quarterly dividends not
in excess of $0.05 per share of Parent Common
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Stock, with customary record and payment dates, any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any shares of Parent Capital Stock;
(iii) during the period from December 31, 1995, to the date of this
Agreement, there has not been any split, combination or reclassification
of any Parent Capital Stock or any issuance or the authorization of any
issuance of any other securities in exchange or in substitution for
shares of Parent Capital Stock;
(iv) during the period from December 31, 1995, to the date of this
Agreement, there has not been except as disclosed in Section 3.02(g) of
the Parent Disclosure Letter, (A) any granting by Parent or any Parent
Subsidiary to any executive officer of Parent or any Parent Subsidiary
of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent
audited financial statements included in the Filed Parent SEC Documents,
(B) any granting by Parent or any Parent Subsidiary to any such
executive officer of any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed Parent SEC Documents or (C) any entry
by Parent or any Parent Subsidiary into any employment, severance or
termination agreement with any such executive officer; and
(v) during the period from December 31, 1995, to the date of this
Agreement, there has not been any change in accounting methods,
principles or practices by Parent or any Parent Significant Subsidiary
materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in generally accepted accounting
principles.
(h) Litigation. Except as disclosed in the Filed Parent SEC Documents
or in Section 3.02(h) of the Parent Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of Parent, threatened
against Parent or any Parent Subsidiary (and Parent does not have any
reasonable basis to expect any such suit, action or proceeding to be
commenced) that, individually or in the aggregate, could reasonably be
expected to have a Parent Material Adverse Effect, and there is not any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any Parent Subsidiary having, or
which, insofar as reasonably can be foreseen, in the future would have, any
Parent Material Adverse Effect. As of the date of this Agreement, except as
disclosed in the Filed Parent SEC Documents or in Section 3.02(h) of the
Parent Disclosure Letter, there is no suit, action or proceeding pending,
or, to the knowledge of Parent, threatened, against Parent or any Parent
Subsidiary (and Parent does not have any reasonable basis to expect any
such suit, action or proceeding to be commenced) that, individually or in
the aggregate, could reasonably be expected to prevent or delay in any
material respect the consummation of the Merger or the transactions
contemplated by this Agreement.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the
Filed Parent SEC Documents or in Section 3.02(i) of the Parent Disclosure
Letter, since the date of the most recent audited financial statements
included in the Filed Parent SEC Documents and prior to the date of this
Agreement, there has not been any adoption or amendment in any material
respect by Parent or any Parent Subsidiary of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or
former employee, officer or director of Parent or any Parent Subsidiary
(collectively, "Parent Benefit Plans").
(j) ERISA Compliance. Except as described in the Filed Parent SEC
Documents or in Section 3.02(j) of the Parent Disclosure Letter or as would
not have a Parent Material Adverse Effect, (i) all employee benefit plans
or programs maintained for the benefit of the current or former employees
or directors of Parent or any Parent Subsidiary that are sponsored,
maintained or contributed to by Parent or any Parent Subsidiary, or with
respect to which Parent or any Parent Subsidiary has any liability,
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including any such plan that is an "employee benefit plan" as defined in
Section 3(3) of ERISA, are in compliance with all applicable requirements
of law, including ERISA and the Code, and (ii) neither Parent nor any
Parent Subsidiary has any liabilities or obligations with respect to any
such employee benefit plans or programs, whether accrued, contingent or
otherwise, nor to the knowledge of Parent are any such liabilities or
obligations expected to be incurred. Except as set forth in Section 3.02(j)
of the Parent Disclosure Letter, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event
under any benefit plan, policy, arrangement or agreement or any trust or
loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any employee. The only severance agreements or severance
policies applicable to Parent or the Parent Subsidiaries are the agreements
and policies specifically set forth in Section 3.02(j) of the Parent
Disclosure Letter.
(k) Voting Requirements. The (A) approval and adoption by Parent's
stockholders of the issuance of shares of Parent Common Stock pursuant to
the Merger as required by Rule 312 of the New York Stock Exchange and (B)
approval by the holders of a majority of the outstanding shares of Parent
Common Stock of an amendment to the Restated Certificate of Incorporation
of Parent to increase the number of authorized shares of Parent Common
Stock (collectively, the "Parent Stockholder Approval") are the only votes
of the holders of any class or series of Parent Capital Stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
(l) Brokers; Schedule of Fees and Expenses. Except as set forth in
Section 3.02(l) of the Parent Disclosure Letter, no broker, investment
banker, financial advisor or other person is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub. Parent has made
available to the Company true and complete copies of all agreements that
are referred to in Section 3.02(l) of the Parent Disclosure Letter and all
indemnification and other agreements related to the engagement of the
persons so listed.
(m) Opinion of Financial Advisor. Parent has received the opinion of
Dillon, Read & Co. Inc., dated the date of this Agreement, to the effect
that, as of such date, the Conversion Number is fair to Parent's
stockholders from a financial point of view, a signed copy of which opinion
has been delivered to the Company.
(n) Taxes. (i) Parent and each Parent Subsidiary have timely filed (or
have had timely filed on their behalf) or will file or cause to be timely
filed, all material Tax Returns required by applicable law to be filed by
any of them prior to or as of the Effective Time of the Merger. All such
material Tax Returns are, or will be at the time of filing, true, complete
and correct in all material respects.
(ii) Parent and each Parent Subsidiary have paid (or have had paid on
their behalf) or, where payment is not yet due, have established (or have
had established on their behalf and for their sole benefit and recourse) or
will establish or cause to be established on or before the Effective Time
of the Merger an adequate accrual for the payment of all Taxes due with
respect to any period ending prior to or as of the Effective Time of the
Merger, except where the failure to pay or establish adequate reserves has
not had and would not reasonably be expected to have a Parent Material
Adverse Effect.
(iii) Except as set forth in Section 3.02(n) of the Parent Disclosure
Letter, no deficiencies for any material Taxes have been proposed, asserted
or assessed against Parent or any Parent Subsidiary, and no requests for
waivers of the time to assess any such material Taxes are pending. The
Federal income Tax Returns of Parent and each Parent Subsidiary
consolidated in such Tax Returns have been examined by and settled with the
United States Internal Revenue Service for all years through 1991.
(iv) Parent has no reason to believe that any conditions exist that
could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
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(o) Compliance with Laws. Neither Parent nor any Parent Subsidiary has
violated or failed to comply with any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity applicable to
its business or operations, except for violations and failures to comply
that could not, individually or in the aggregate, reasonably be expected to
result in a Parent Material Adverse Effect.
(p) No Excess Parachute Payments. Other than payments that may be made
to the persons listed in Section 3.02(p) of the Parent Disclosure Letter
(the "Primary Parent Executives"), any amount that could be received
(whether in cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any employee, officer
or director of Parent or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Parent Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term
is defined in Section 280G(b)(1) of the Code). Set forth in Section 3.02(p)
of the Parent Disclosure Letter is (i) the estimated maximum amount that
could be paid to each Primary Parent Executive as a result of the
transactions contemplated by this Agreement under all employment, severance
and termination agreements, other compensation arrangements and Parent
Benefit Plans currently in effect and (ii) the "base amount" (as such term
is defined in Section 280G(b)(3) of the Code) for each Primary Parent
Executive calculated as of the date of this Agreement.
(q) Accounting Matters. Neither Parent nor, to its best knowledge, any
of its affiliates, has taken or agreed to take any action that (without
giving effect to any action taken or agreed to be taken by the Company or
any of its affiliates) would prevent Parent from accounting for the
business combination to be effected by the Merger as a pooling of
interests.
(r) Environmental Matters. (i) Except as set forth in Section 3.02(r)
of the Parent Disclosure Letter and except for items that could not, in all
such cases taken individually or in the aggregate, reasonably be expected
to result in a Parent Material Adverse Effect, neither Parent nor any
Parent Subsidiary has (x) placed, held, located, released, transported or
disposed of any Hazardous Substances on, under, from or at any of Parent's
or any Parent Subsidiary's current or former properties or any other
properties or (y) any knowledge or reason to know of the presence of any
Hazardous Substances on, under or at any of Parent's or any Parent
Subsidiary's current or former properties or any other property but arising
from Parent's or any Parent Subsidiary's current or former properties.
(ii) Except for items that individually or in the aggregate could not
reasonably be expected to result in a Parent Material Adverse Effect or as
disclosed in Section 3.02(r) of the Parent Disclosure Letter, Parent and
the Parent Subsidiaries are in compliance with the SMCRA and any state law
comparable to SMCRA under 30 U.S.C. sec. 1253, and neither Parent nor any
Parent Subsidiary is subject to any reclamation obligation or other site
restoration obligation under any Environmental Law.
(iii) Except for items that individually or in the aggregate could not
reasonably be expected to result in a Parent Material Adverse Effect or as
set forth in Section 3.02(r) of the Parent Disclosure Letter, no
Environmental Law imposes any obligation upon Parent or any Parent
Subsidiary arising out of or as a condition to any transaction contemplated
by this Agreement, including any requirement to modify or to transfer any
permit or license, any requirement to file any notice or other submission
with any Governmental Entity, the filing of any notice, acknowledgement or
covenant in any land records, or the modification of or provision of notice
under any agreement, consent order or consent decree.
(s) State Takeover Statutes. To the best of the Parent's knowledge, no
state takeover statute or similar statute or regulation applies or purports
to apply to the Merger, this Agreement or any of the transactions
contemplated by this Agreement.
(t) Rights Agreement. Parent has taken all necessary action to (i)
render the Parent Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement and (ii) ensure that (x)
neither the Company nor any of its affiliates is an Acquiring Person (as
defined in the Parent Rights Agreement) and (y) none of a Distribution
Date, Share Acquisition Date, Triggering Event or
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Business Combination (each as defined in the Parent Rights Agreement) shall
occur by reason of the approval, execution or delivery of this Agreement,
the announcement or consummation of the Merger or the consummation of any
of the other transactions contemplated by this Agreement.
(u) Dispositions of Parent Property. Except as described in the Filed
Parent SEC Documents or in Section 3.02(u) of the Parent Disclosure Letter,
since December 31, 1995, neither Parent nor any Parent Subsidiary has sold
or disposed of or ceased to hold or own any personal property, real
property, any interest in or rights with respect to real property
(including exploration or production rights), any interest in a joint
venture or other assets or properties of Parent or any Parent Subsidiary
("Parent Property"), other than sales and dispositions of raw materials,
obsolete equipment, mine output and other inventories, and any interests or
rights with respect to real property having an individual fair market value
of less than $10,000,000 of Parent or any Parent Subsidiary, in each case
in the ordinary course of business, consistent with past practice. Except
as set forth in Section 3.02(u) of the Parent Disclosure Letter, no Parent
Property whose fair market value on the date of this Agreement is greater
than $10,000,000 is subject to any pending sale or disposition transaction.
(v) Absence of Reduction in Reserves and Mineralized Material. There
has been no material reduction in the aggregate amount of reserves or in
the aggregate amount of mineralized material of Parent and the Parent
Subsidiaries, taken as a whole, from the amounts set forth in Parent's 1995
annual report to shareholders except for (i) such reductions in reserves
that have resulted from production in the ordinary course of business and
(ii) such reductions in mineralized material that have resulted from
reclassifications of mineralized material as reserves.
(w) Development Projects. Parent has no reason to believe that (i) the
estimated production capacity for each of the time periods set forth in
Section 3.02(w) of the Parent Disclosure Letter with respect to the
development project described in Parent's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 will not be reached during such
time periods, or (ii) the estimated costs set forth in Section 3.02(w) of
the Parent Disclosure Letter with respect to each such development project
will be exceeded.
(x) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement and has not
engaged in any business activities or conducted any operations other than
in connection with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective Time
of the Merger, the Company shall, and shall cause the Company Subsidiaries to,
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and in compliance in
all material respects with all applicable laws and regulations and, to the
extent consistent therewith, use reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time of the Merger,
except as expressly contemplated by this Agreement or as set forth in Section
4.01(a) of the Company Disclosure Letter, or otherwise approved in writing by
Parent, the Company shall not, and shall not permit any Company Subsidiary to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned Company Subsidiary
to its parent and regular annual cash dividends on the Company Common Stock
in an amount not in excess of $0.05 per share per annum, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or
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any Company Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, any phantom stock
options ("Phantom Stock Options") under the Company's Phantom Stock Option
Plan, or any restricted stock, performance units, performance shares, stock
appreciation rights ("SARs") or limited stock appreciation rights ("LSARs")
under the Company's Long Term Incentive Stock Plan (other than (x) the
issuance of shares of Company Common Stock (and associated Company Rights)
upon the exercise of Company Employee Stock Options outstanding on the date
of this Agreement and in accordance with their present terms, (y) the
issuance of Company Capital Stock pursuant to the Company Rights Agreement)
and (z) the grant of additional Company Employee Stock Options, Phantom
Stock Options, SARs and LSARs in the ordinary course of business consistent
with past practice to employees of the Company and the Company Subsidiaries
covering not more than an aggregate of 600,000 shares of Company Common
Stock and equivalents and, in the case of Company Employee Stock Options,
the issuance of Company Common Stock (and associated Company Rights) upon
the exercise thereof, but only if and to the extent that the terms of such
Company Employee Stock Options, Phantom Stock Options, SARs and LSARs
provide that the consummation by the Company of the transactions
contemplated by this Agreement will not result in the acceleration of
vesting or the exercisability of such Company Employee Stock Options,
Phantom Stock Options, SARs and LSARs;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except for such amendments
to its certificate of incorporation, by-laws and other comparable charter
or organizational documents that do not have an adverse affect on the
transactions contemplated by this Agreement;
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other business organization or
division thereof or (y) any assets that are material, individually or in
the aggregate, to the Company and the Company Subsidiaries taken as a
whole;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any Company Property other than (A) sales
and dispositions of interests or rights with respect to real property
having an aggregate fair market value on the date of this Agreement of less
than $20,000,000, raw materials, obsolete equipment, mine output and other
inventories, in each case only if in the ordinary course of business
consistent with past practice, and (B) encumbrances and Liens that are
incurred in the ordinary course of business consistent with past practice;
(vi) (y) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any Company Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (z) make any loans, advances (other than any advances to
employees in the ordinary course of business consistent with prior
practice) or capital contributions to, or investments in, any other person,
other than to the Company or any direct or indirect wholly owned Company
Subsidiary;
(vii) make or agree to make any new capital expenditure or
expenditures that, in the aggregate, are in excess of $25,000,000 above the
aggregate amount currently budgeted by the Company, as disclosed in Section
4.01(a) of the Company Disclosure Letter;
(viii) make any material Tax election or settle or compromise any
material Tax liability or refund, except to the extent already provided for
in the Filed Company SEC Documents;
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(ix) except pursuant to existing employment agreements or as required
by applicable laws, (A) increase the compensation payable or to become
payable to its executive officers or employees, (B) grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any director, executive officer or employee of the Company or any
Company Subsidiary (other than in accordance with Company Benefit Plans as
in effect on the date of this Agreement) or (C) establish, adopt, enter
into or amend in any material respect or take any action to accelerate any
rights or benefits under any collective bargaining agreement or Company
Benefit Plan;
(x) without limiting the generality of clause (ix) above, make any
amendment to any Company Employee Stock Plan as a result of this Agreement
or in contemplation of the Merger;
(xi) terminate or amend on terms less favorable to the Company any
agreement filed as an exhibit to any Company SEC Document; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by Parent. During the period from the date of this
Agreement to the Effective Time of the Merger, Parent shall, and shall cause the
Parent Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable laws
and regulations and, to the extent consistent therewith, use reasonable efforts
to preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them. Without limiting the generality of
the foregoing, during the period from the date of this Agreement to the
Effective Time of the Merger, except as expressly contemplated by this Agreement
or as set forth in Section 4.01(b) of the Parent Disclosure Letter, or otherwise
approved in writing by the Company, Parent shall not, and shall not permit any
Parent Subsidiary to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned Parent Subsidiary to
its parent and regular quarterly cash dividends on the Parent Common Stock
in an amount not in excess of $0.05 per share per quarter, (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of capital stock of Parent or any Parent
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or any share
appreciation rights or share rights under Parent's 1996 Stock Option and
Share Rights Plan (other than (w) the issuance of shares of Parent Common
Stock (and associated Parent Rights) in connection with Directors share
rights and upon the exercise of Parent Employee Stock Options outstanding
on the date of this Agreement and in accordance with their present terms,
(x) the issuance of shares of Parent Common Stock (and associated Parent
Rights) upon conversion of the Parent Convertible Notes, (y) the issuance
of Parent Capital Stock pursuant to the Parent Rights Agreement) and (z)
the grant of additional Parent Employee Stock Options in the ordinary
course of business consistent with past practice to employees of Parent and
the Parent Subsidiaries covering not more than 600,000 shares of Parent
Common Stock and the issuance of Parent Common Stock (and associated Parent
Rights) upon the exercise thereof, but only if and to the extent that the
terms of such Parent Employee Stock Options provide that the consummation
by Parent of the transactions contemplated by this Agreement will not
result in the acceleration of vesting or the exercisability of such Parent
Employee Stock Options;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except for such amendments
to its certificate of incorporation, by-laws and other comparable
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charter or organizational documents that do not have an adverse affect on
the transactions contemplated by this Agreement;
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other business organization or
division thereof or (y) any assets that are material, individually or in
the aggregate, to the Parent and the Parent Subsidiaries taken as a whole;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any Parent Property other than (A) sales
and dispositions of interests or rights with respect to real property
having an aggregate fair market value on the date of this Agreement of less
than $20,000,000, raw materials, obsolete equipment, mine output and other
inventories, in each case only if in the ordinary course of business
consistent with past practice, and (B) encumbrances and Liens that are
incurred in the ordinary course of business consistent with past practice;
(vi) (y) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Parent or any
Parent Subsidiary, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice,
or (z) make any loans, advances (other than advances to employees in the
ordinary course of business consistent with prior practice) or capital
contributions to, or investments in, any other person, other than to Parent
or any direct or indirect wholly owned Parent Subsidiary;
(vii) make or agree to make any new capital expenditure or
expenditures that, in the aggregate, are in excess of $25,000,000 above the
aggregate amount currently budgeted by Parent, as disclosed in Section
4.01(b) of the Parent Disclosure Letter;
(viii) make any material Tax election or settle or compromise any
material Tax liability or refund, except to the extent already provided for
in the Filed Parent SEC Documents;
(ix) except pursuant to existing employment agreements or as required
by applicable laws, (A) increase the compensation payable or to become
payable to its executive officers or employees, (B) grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any director, executive officer or employee of Parent or any Parent
Subsidiary (other than in accordance with Parent Benefit Plans as in effect
on the date of this Agreement) or (C) establish, adopt, enter into or amend
in any material respect or take any action to accelerate any rights or
benefits under any collective bargaining agreement or Parent Benefit Plan;
(x) without limiting the generality of clause (ix) above, make any
amendment to any Parent Employee Stock Plan as a result of this Agreement
or in contemplation of the Merger;
(xi) terminate or amend on terms less favorable to Parent any
agreement filed as an exhibit to any Parent SEC Document; or
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Other Actions. Except as expressly permitted by Sections 4.02, 4.03,
5.01(d) or 5.01(e), the Company and Parent shall not, and shall not permit any
of their respective subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Merger set forth in Article VI not being satisfied.
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(d) Advice of Changes. The Company and Parent shall promptly advise the
other party orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, would have, a Company Material Adverse
Effect or a Parent Material Adverse Effect, as applicable.
SECTION 4.02. No Solicitation by the Company. (a) The Company shall not,
nor shall it permit any Company Subsidiary to, nor shall it authorize or permit
any officer, director or employee of or any investment banker, attorney,
accountant or other advisor or representative of, the Company or any Company
Subsidiary to, (i) solicit, initiate or encourage the submission of any Company
Takeover Proposal (as defined below), (ii) enter into any agreement with respect
to any Company Takeover Proposal or (iii) provide any non-public information
regarding the Company to any third party or engage in any negotiations or
substantive discussions in connection with any Company Takeover Proposal;
provided, however, that (A) prior to receipt of the Company Stockholder
Approval, the Company may, in response to a Company Takeover Proposal that was
not solicited by the Company and that did not otherwise result from a breach of
this Section 4.02(a), provide any non-public information regarding itself to any
third party or engage in any negotiations or substantive discussions with such
person regarding any Company Takeover Proposal, in each case only if the
Company's Board of Directors determines in good faith, after consultation with
counsel and its financial advisors, that failing to take such action would
create a reasonable possibility of a breach of the fiduciary duties of the
Company's Board of Directors, and (B) nothing contained in this Agreement shall
prevent the Company or its Board of Directors from complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Company Takeover Proposal or
prevent the Company's Board of Directors from taking any action permitted by
Section 5.01(d). Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
executive officer of the Company or any Company Subsidiary or any investment
banker, attorney, accountant or other advisor or representative of the Company
or any Company Subsidiary, whether or not such person is purporting to act on
behalf of the Company or any Company Subsidiary or otherwise, shall be deemed to
be a breach of this Section 4.02(a) by the Company. For purposes of this
Agreement, "Company Takeover Proposal" means any proposal for a merger,
consolidation or other business combination involving the Company or a Company
Significant Subsidiary or any proposal or offer to acquire in any manner,
directly or indirectly, more than 30% of any class of voting securities of the
Company or of a Company Significant Subsidiary (other than where such Company
Significant Subsidiary's securities directly or indirectly represent an economic
interest in less than 30% of the assets of the Company and the Company
Subsidiaries, taken as a whole), including any proposal or offer relating to the
acquisition by the Company or a Company Significant Subsidiary in any manner,
directly or indirectly, of any securities or assets of another person in
consideration for the issuance of more than 30% of any class of voting
securities of the Company or of a Company Significant Subsidiary (other than
where such Company Significant Subsidiary's securities directly or indirectly
represent an economic interest in less than 30% of the assets of the Company and
the Company Subsidiaries, taken as a whole), or assets representing a
substantial portion of the assets of the Company and the Company Subsidiaries,
taken as a whole, other than the transactions contemplated by this Agreement.
The Company shall, and shall cause each Company Subsidiary to, immediately cease
and cause to be terminated any existing activities, discussions or negotiations
by the Company, any Company Subsidiary or any officer, director or employee of
or investment banker, attorney, accountant or other advisor or representative
of, the Company or any Company Subsidiary, with any parties conducted heretofore
with respect to any of the foregoing. Any action taken by the Company, any
Company Subsidiary or any officer, director or employee of or any investment
banker, attorney, accountant or other advisor or representative of, the Company
or any Company Subsidiary with or with respect to any such party on or prior to
November 28, 1996, shall be deemed not to constitute a violation of this Section
4.02(a) and shall not in and of itself constitute the solicitation of a Company
Takeover Proposal even if such actions result in any such party making a Company
Takeover Proposal after the date of this Agreement.
(b) Subject to Section 5.01(d), neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Sub, the adoption and
approval by such Board of Directors or any such committee of this Agreement or
the Merger or (ii) approve or recommend, or propose to approve or recommend, any
Company Takeover Proposal.
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(c) The Company promptly shall advise Parent orally and in writing of the
receipt of any Company Takeover Proposal and of the receipt of any inquiry with
respect to or which the Company reasonably believes could lead to any Company
Takeover Proposal. The Company promptly shall advise Parent orally and in
writing of the identity of the person making any such Company Takeover Proposal
or inquiry and of the material terms of any such Company Takeover Proposal and
of any changes thereto; provided, however, that the Company's Board of Directors
shall have determined in good faith, after consultation with counsel, that
taking such action would not create a reasonable possibility of a breach of the
fiduciary duties of the Company's Board of Directors, except that in all events
prior to exercising its right of termination pursuant to Section 7.01(d) the
Company shall endeavor to provide Parent with a reasonable opportunity to
respond to any Company Takeover Proposal which the Company otherwise may wish to
accept.
SECTION 4.03. No Solicitation by Parent. (a) Parent shall not, nor shall it
permit any Parent Subsidiary to, nor shall it authorize or permit any officer,
director or employee of or any investment banker, attorney, accountant or other
advisor or representative of, Parent or any Parent Subsidiary to, (i) solicit,
initiate or encourage the submission of any Parent Takeover Proposal (as defined
below), (ii) enter into any agreement with respect to any Parent Takeover
Proposal or (iii) provide any non-public information regarding Parent to any
third party or engage in any negotiations or substantive discussions in
connection with any Parent Takeover Proposal; provided, however, that (A) prior
to receipt of the Parent Stockholder Approval, Parent may, in response to a
Parent Takeover Proposal that was not solicited by Parent and that did not
otherwise result from a breach of this Section 4.03(a), provide any non-public
information regarding itself to any third party or engage in any negotiations or
substantive discussions with such person regarding any Parent Takeover Proposal,
in each case only if Parent's Board of Directors determines in good faith, after
consultation with counsel and its financial advisors, that failing to take such
action would create a reasonable possibility of a breach of the fiduciary duties
of Parent's Board of Directors, and (B) nothing contained in this Agreement
shall prevent Parent or its Board of Directors from complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Parent Takeover Proposal or
prevent Parent's Board of Directors from taking any action permitted by Section
5.01(e). Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by any executive officer of
Parent or any Parent Subsidiary or any investment banker, attorney, accountant
or other advisor or representative of Parent or any Parent Subsidiary, whether
or not such person is purporting to act on behalf of Parent or any Parent
Subsidiary or otherwise, shall be deemed to be a breach of this Section 4.03(a)
by Parent. For purposes of this Agreement, "Parent Takeover Proposal" means any
proposal for a merger, consolidation or other business combination involving
Parent or a Parent Significant Subsidiary or any proposal or offer to acquire in
any manner, directly or indirectly, more than 30% of any class of voting
securities of Parent or of a Parent Significant Subsidiary (other than where
such Parent Significant Subsidiary's securities directly or indirectly represent
an economic interest in less than 30% of the assets of Parent and the Parent
Subsidiaries, taken as a whole), including any proposal or offer relating to the
acquisition by Parent or a Parent Significant Subsidiary in any manner, directly
or indirectly, of any securities or assets of another person in consideration
for the issuance of more than 30% of any class of voting securities of Parent or
of a Parent Significant Subsidiary (other than where such Parent Significant
Subsidiary's securities directly or indirectly represent an economic interest in
less than 30% of the assets of Parent and the Parent Subsidiaries, taken as a
whole), or assets representing a substantial portion of the assets of Parent and
the Parent Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement. Notwithstanding the foregoing, any proposal or
offer to acquire in any manner, directly or indirectly, any of the voting
securities of Prime not owned by Parent or any Parent Subsidiary shall not
constitute a Parent Takeover Proposal. Parent shall, and shall cause each Parent
Subsidiary to, immediately cease and cause to be terminated any existing
activities, discussions or negotiations by Parent, any Parent Subsidiary, or any
officer, director or employee of or investment banker, attorney, accountant or
other advisor or representative of, Parent or any Parent Subsidiary, with any
parties conducted heretofore with respect to any of the foregoing.
(b) Subject to Section 5.01(e), neither the Board of Directors of Parent
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to the Company, the adoption and approval by such
Board of Directors or any such committee of this Agreement or the Merger or (ii)
approve or recommend, or propose to approve or recommend, any Parent Takeover
Proposal.
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(c) Parent promptly shall advise the Company orally and in writing of the
receipt of any Parent Takeover Proposal and of the receipt of any inquiry with
respect to or which Parent reasonably believes could lead to any Parent Takeover
Proposal. Parent promptly shall advise the Company orally and in writing of the
identity of the person making any such Parent Takeover Proposal or inquiry and
of the material terms of any such Parent Takeover Proposal and of any changes
thereto; provided, however, that Parent's Board of Directors shall have
determined in good faith, after consultation with counsel, that taking such
action would not create a reasonable possibility of a breach of the fiduciary
duties of Parent's Board of Directors, except that in all events prior to
exercising its right of termination pursuant to Section 7.01(e) Parent shall
endeavor to provide the Company with a reasonable opportunity to respond to any
Parent Takeover Proposal which Parent otherwise may wish to accept.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of Form S-4 and the Proxy Statement; Company's
Stockholders' Meeting and Parent's Stockholders' Meeting. (a) As soon as
practicable following the date of this Agreement, the Company and Parent shall
prepare and file with the SEC the Proxy Statement and Parent shall prepare and
file with the SEC the Form S-4, in which the Proxy Statement shall be included
as a prospectus. Each of the Company and Parent shall use reasonable efforts to
have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Each of the Company and Parent shall use
reasonable efforts to cause the Proxy Statement to be mailed to the Company's
stockholders and Parent's stockholders, respectively, as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified) required to be taken under any applicable
state securities or "blue sky" laws in connection with the issuance of Parent
Common Stock pursuant to the Merger, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
and rights to acquire Company Common Stock pursuant to the Company Employee
Stock Plans as may be reasonably requested in connection with any such action.
(b) Unless the Board of Directors of the Company shall take any action
permitted by Section 5.01(d), the Company shall, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company's Stockholders' Meeting") for
the purpose of obtaining the Company Stockholder Approval. Subject to Section
5.01(d), the Company shall, through its Board of Directors, recommend to its
stockholders that they give the Company Stockholder Approval. Parent shall vote
or cause to be voted all the shares of Company Capital Stock owned of record by
Parent or any Parent Subsidiary in favor of the Company Stockholder Approval.
(c) Unless the Board of Directors of Parent shall take any action permitted
by Section 5.01(e), Parent shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Parent's Stockholders' Meeting") for the purpose of obtaining
the Parent Stockholder Approval. Subject to Section 5.01(e), Parent shall,
through its Board of Directors, recommend to its stockholders that they give the
Parent Stockholder Approval. The Company shall vote or cause to be voted all the
shares of Parent Capital Stock owned of record by the Company or any Company
Subsidiary in favor of the Parent Stockholder Approval.
(d) The Board of Directors of the Company shall be permitted to (i) not
recommend to the Company's stockholders that they give the Company Stockholder
Approval or (ii) withdraw or modify in a manner adverse to Parent its
recommendation to the Company's stockholders that they give the Company
Stockholder Approval, but only if and to the extent that (x) a Company Takeover
Proposal is pending at the time the Company's Board of Directors determines to
take any such action or inaction and such Company Takeover Proposal was not the
result of an intentional breach of Section 4.02(a) by the Company's Board of
Directors and (y) the Company's Board of Directors determines in good faith,
after consultation with counsel and its financial advisors, and after
considering among other things whether such Company Takeover Proposal is more
favorable to the stockholders of the Company than the transactions contemplated
by this Agreement
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(taking into account all relevant material terms of such Company Takeover
Proposal and this Agreement, including all such conditions, and any changes to
this Agreement proposed by Parent in response to such Company Takeover Proposal)
that failing to take any such action would create a reasonable possibility of a
breach of the fiduciary duties of the Company's Board of Directors.
(e) The Board of Directors of Parent shall be permitted to (i) not
recommend to Parent's stockholders that they give the Parent Stockholder
Approval or (ii) withdraw or modify in a manner adverse to the Company its
recommendation to Parent's stockholders that they give the Parent Stockholder
Approval, but only if and to the extent that (x) a Parent Takeover Proposal is
pending at the time Parent's Board of Directors determines to take any such
action or inaction and such Parent Takeover Proposal was not the result of an
intentional breach of Section 4.03(a) by Parent's Board of Directors and (y)
Parent's Board of Directors determines in good faith, after consultation with
counsel and its financial advisors, and after considering among other things
whether such Parent Takeover Proposal is more favorable to the stockholders of
Parent than the transactions contemplated by this Agreement (taking into account
all relevant material terms of such Parent Takeover Proposal and this Agreement,
including all such conditions, and any changes to this Agreement proposed by the
Company in response to such Parent Takeover Proposal) that failing to take any
such action would create a reasonable possibility of a breach of the fiduciary
duties of Parent's Board of Directors.
SECTION 5.02. Letter of the Company's Accountants. The Company shall use
reasonable efforts to cause to be delivered to Parent a letter of Price
Waterhouse LLP, the Company's independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall become
effective and addressed to Parent, in form and substance reasonably satisfactory
to Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
SECTION 5.03. Letter of Parent's Accountants. Parent shall use reasonable
efforts to cause to be delivered to the Company a letter of Coopers & Lybrand
LLP, Parent's independent public accountants, dated a date within two business
days before the date on which the Form S-4 shall become effective and addressed
to the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
SECTION 5.04. Access to Information; Confidentiality. Each of the Company
and Parent shall, and shall cause each of its respective subsidiaries to, afford
to the other party and to the officers, directors, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours during the period prior to the
Effective Time of the Merger to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
the Company and Parent shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (i) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws and (ii)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Such information shall be held in confidence
to the extent required by, and in accordance with, the provisions of the letter
dated November 17, 1996, between the Company and Parent (the "Confidentiality
Agreement").
SECTION 5.05. Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
use reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or
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administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement; provided, however, that a party
shall not be obligated to take any action pursuant to the foregoing if the
taking of such action or the obtaining of any waiver, consent, approval or
exemption is reasonably likely to result in the imposition of a condition or
restriction of the type referred to in clause (ii), (iii) or (iv) of Section
6.01(g). In connection with and without limiting the foregoing, Parent, the
Company and their respective Boards of Directors shall (i) take all action
necessary so that no state takeover statute or similar statute or regulation is
or becomes applicable to the Merger, this Agreement or any other transaction
contemplated by this Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Merger, this Agreement or any
other transaction contemplated by this Agreement, take all action necessary so
that the Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other transactions contemplated by this Agreement.
(b) The Company shall give prompt notice to Parent, and Parent or Sub shall
give prompt notice to the Company, of (i) any representation or warranty made by
it or contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.06. Rights Agreements; Consequences if Rights Triggered. (a) The
Board of Directors of the Company shall take all further action (in addition to
that referred to in Section 3.01(t)) requested in writing by Parent in order to
render the Company Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement. Except as provided in Section 3.01(t) or as
requested in writing by Parent, prior to the Company's Stockholders' Meeting,
the Board of Directors of the Company shall not (i) amend the Company Rights
Agreement or (ii) take any action with respect to, or make any determination
under, the Company Rights Agreement. In the event that notwithstanding Section
3.01(t) and this Section 5.06(a), a Distribution Date, Shares Acquisition Date
or Triggering Event occurs under the Company Rights Agreement at any time during
the period from the date of this Agreement to the Effective Time of the Merger
when the Company Rights are outstanding, the Company and Parent shall make such
adjustment to the Conversion Number as the Company and Parent shall mutually
agree so as to preserve the economic benefits that the Company and Parent each
reasonably expected on the date of this Agreement to receive as a result of the
consummation of the Merger and the other transactions contemplated by this
Agreement.
(b) The Board of Directors of Parent shall take all further action (in
addition to that referred to in Section 3.02(t)) requested in writing by the
Company in order to render the Parent Rights inapplicable to the Merger and the
other transactions contemplated by this Agreement. In the event that,
notwithstanding Section 3.02(t) and this Section 5.06(b), a Distribution Date,
Share Acquisition Date, Triggering Event or Business Combination occurs under
the Parent Rights Agreement at any time during the period from the date of this
Agreement to the Effective Time of the Merger and Rights Certificates (as such
term is defined in the Parent Rights Agreement) are issued to Parent's
stockholders, Parent's Board of Directors shall take such actions as are
necessary and permitted under the Parent Rights Agreement to provide that Rights
Certificates representing an appropriate number of Rights are issued to the
Company's stockholders and employees who receive Parent Common Stock pursuant to
the Merger. In the event that Parent is not permitted under the Parent's Rights
Agreement to provide Rights Certificates to such Company stockholders and
employees following the occurrence of a Distribution Date, Triggering Event or
Business Combination during such time period, the Company and Parent shall make
such adjustment to the Conversion Number as the Company and Parent shall
mutually agree so as to preserve the economic benefits that the Company and
Parent each
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reasonably expected on the date of this Agreement to receive as a result of the
consummation of the Merger and the other transactions contemplated by this
Agreement.
SECTION 5.07. Company Employee Stock Options. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Company Employee Stock Plans)
shall adopt such resolutions or take such other actions as may be required to
effect the following:
(i) adjust the terms of all outstanding Company Employee Stock Options
granted under the Company Employee Stock Plans and the terms of the Company
Employee Stock Plans, to provide that at the Effective Time of the Merger,
each Company Employee Stock Option outstanding immediately prior to the
Effective Time of the Merger shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
Company Employee Stock Option, the same number of shares of Parent Common
Stock as the holder of such Company Employee Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Company Employee Stock Option in full immediately prior to the Effective
Time of the Merger, at a price per share equal to (y) the aggregate
exercise price for the shares of Company Common Stock otherwise purchasable
pursuant to such Company Employee Stock option divided by (z) the number of
shares of Parent Common Stock deemed purchasable pursuant to such Company
Employee Stock Option; provided, however, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under
either Section 422 or 423 of the Code ("qualified stock options"), the
option price, the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code;
(ii) adjust the terms of all outstanding Phantom Stock Options, SARs
and LSARs granted under the Company Stock Plans to provide that, at the
Effective Time of the Merger, (y) each holder of a Phantom Stock Right, SAR
or LSAR shall be entitled to that number of phantom stock rights, stock
appreciation rights or limited stock appreciation rights with respect to
Parent Common Stock ("Parent Phantom Stock Options", "Parent SARs" or
"Parent LSARs") equal to the number of Phantom Stock Options, SARs or
LSARs, as the case may be, held by such holder immediately prior to the
Effective Time of the Merger multiplied by the Conversion Number, and (z)
the share value on the grant date with respect to each Parent Phantom Stock
Option, Parent SAR or Parent LSAR, as the case may be, shall be equal to
the share value on the grant date in effect with respect to the
corresponding Phantom Stock Option, SAR or LSAR, as the case may be,
immediately prior to the Effective Time of the Merger, divided by the
Conversion Number; and
(iii) make such other changes to the Company Employee Stock Plans as
it deems appropriate to give effect to the Merger (subject to the approval
of Parent, which shall not be unreasonably withheld).
(b) As soon as practicable after the Effective Time of the Merger, Parent
shall deliver to the holders of Company Employee Stock Options, Phantom Stock
Options, SARs and LSARs appropriate notices setting forth such holders' rights
pursuant to the respective Company Employee Stock Plans and the agreements
evidencing the grants of such Company Employee Stock Options, Phantom Stock
Options, SARs and LSARs shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.07 after
giving effect to the Merger). Parent shall comply with the terms of the Company
Employee Stock Plans and ensure, to the extent required by, and subject to the
provisions of, such Company Employee Stock Plans, that the Company Employee
Stock Options which qualified as qualified stock options prior to the Effective
Time of the Merger continue to qualify as qualified stock options after the
Effective Time of the Merger.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Company Employee Stock Options assumed in accordance with this
Section 5.07. As soon as reasonably practicable after the Effective Time of the
Merger, Parent shall file a registration statement on Form S-8 (or any successor
or other appropriate form) with respect to the shares of Parent Common Stock
subject to such Company Employee Stock Options and shall use reasonable efforts
to maintain the effectiveness of such registration statement or registration
statements
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(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Company Employee Stock Options remain outstanding.
With respect to those individuals who subsequent to the Merger are subject to
the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Parent shall administer the Company Employee Stock Plans assumed
pursuant to this Section 5.07 in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent the applicable Company Stock
Plan complied with such rule prior to the Merger.
SECTION 5.08. Benefit Plans. (a) Maintenance of Benefits. For a period of
one year after the Effective Time of the Merger, Parent shall (i) either (A)
maintain or cause the Surviving Corporation (or in the case of a transfer of all
or substantially all the assets and business of the Surviving Corporation, its
successors and assigns) to maintain the Company Benefit Plans (other than
medical plans and plans providing for the issuance of Company Capital Stock or
based on the value of Company Capital Stock) at the benefit levels in effect on
the date of this Agreement or (B) provide or cause the Surviving Corporation
(or, in such case, its successors or assigns) to provide benefits (other than
medical benefits) to employees of the Company and the Company Subsidiaries that,
taken as a whole, are not materially less favorable in the aggregate to such
employees than those provided to similarly situated employees of Parent and (ii)
make available plans providing for the issuance of Parent Capital Stock or based
on the value of Parent Capital Stock, and provide or cause to be provided
medical benefits, to employees of the Company and the Company Subsidiaries that
are substantially equivalent to those provided to similarly situated employees
of Parent. From and after the Effective Time of the Merger, Parent shall, and
shall cause the Surviving Corporation to honor in accordance with their
respective terms (as in effect on the date of this Agreement), all of the
Company's employment, severance and termination agreements set forth in the
Company Disclosure Letter.
(b) Service. With respect to any "employee benefit plan", as defined in
Section 3(3) of ERISA, maintained by Parent or any Parent Subsidiary (including
any severance plan), for all purposes, including determining eligibility to
participate, level of benefits and vesting, service with the Company or any
Company Subsidiary shall be treated as service with Parent or the Parent
Subsidiaries; provided, however, that such service need not be recognized to the
extent that such recognition would result in any duplication of benefits.
SECTION 5.09. Indemnification. (a) Parent shall, to the fullest extent
permitted by law, cause the Surviving Corporation to honor all the Company's
obligations to indemnify (including any obligations to advance funds for
expenses) the current or former directors or officers of the Company for acts or
omissions by such directors and officers occurring prior to the Effective Time
of the Merger to the extent that such obligations of the Company exist on the
date of this Agreement, whether pursuant to the Company's Amended and Restated
Certificate of Incorporation, By-laws, individual indemnity agreements or
otherwise, and such obligations shall survive the Merger and shall continue in
full force and effect in accordance with the terms of such Amended and Restated
Certificate of Incorporation, By-laws and individual indemnity agreements from
the Effective Time of the Merger until the expiration of the applicable statute
of limitations with respect to any claims against such directors or officers
arising out of such acts or omissions.
(b) For a period of five years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies with reputable and financially sound carriers of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from or related to facts or
events which occurred at or before the Effective Time; provided, however, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 200% of the annual premiums paid as of the
date hereof by the Company for such insurance (such 200% amount, the "Maximum
Premium"). If such insurance coverage cannot be obtained at all, or can only be
obtained at an annual premium in excess of the Maximum Premium, Parent shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium. The Company
represents to Parent that the Maximum Premium is $625,000.
SECTION 5.10. Fees and Expenses. Except as provided in Section 7.02, all
fees and expenses, including any fees payable to any broker, investment banker
or financial advisor, incurred in connection with the Merger, this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such
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fees or expenses, whether or not the Merger is consummated, except that expenses
incurred in connection with printing and mailing the Proxy Statement and the
Form S-4 shall be shared equally by Parent and the Company.
SECTION 5.11. Public Announcements. Parent and Sub, on the one hand, and
the Company, on the other hand, shall consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions contemplated
by this Agreement, including the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange.
SECTION 5.12. Tax and Accounting Treatment. Each of Parent and the Company
shall not take any action and shall not fail to take any action which action or
failure to act would prevent, or would be likely to prevent, the Merger from
qualifying (A) for pooling of interests accounting treatment or (B) as a
reorganization within the meaning of Section 368(a) of the Code and shall use
reasonable efforts to obtain the opinions of counsel and the letters of
accountants referred to in Sections 6.02(d), 6.03(d) and 6.01(f).
SECTION 5.13. Affiliates. (a) Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company (including all directors of the Company) for
purposes of Rule 145 under the Securities Act. The Company shall use reasonable
efforts to cause each such person to deliver to Parent on or prior to the
Closing Date a written agreement substantially in the form attached hereto as
Exhibit A.
(b) Prior to the Closing Date, Parent shall deliver to the Company a letter
identifying all persons who are, at the time of the Parent's Stockholders'
Meeting, "affiliates" of Parent. Parent shall use reasonable efforts to cause
each such person to deliver to Parent on or prior to the Closing Date a written
agreement substantially in the form attached hereto as Exhibit B.
SECTION 5.14. Stock Exchange Listing. Parent shall use reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger and
pursuant to the Company Employee Stock Plans to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Closing Date.
SECTION 5.15. Parent Board of Directors. (a) The Board of Directors of
Parent shall take such corporate actions as are necessary to provide that,
effective at the Effective Time of the Merger, (i) the number of directors of
Parent shall be reduced from 13 to 12 and (ii) the Board of Directors of Parent
shall consist of (a) five individuals who are members of the Board of Directors
of Parent immediately prior to the Effective Time of the Merger (subject to
Section 5.15(b), such five individuals to be selected by the Board of Directors
of Parent at least 10 business days' prior to the Effective Time of the Merger),
with Mr. Jack E. Thompson to be the Chairman of the Board of Directors of
Parent, (b) five individuals who are members of the Board of Directors of the
Company immediately prior to the Effective Time of the Merger (subject to
Section 5.15(b), such five individuals to be selected by the Board of Directors
of the Company at least 10 business days' prior to the Effective Time of the
Merger) and (c) two individuals selected by the 10 individuals who are selected
as directors of Parent pursuant to subclauses (a) and (b) above (such two
individuals to be selected by such 10 individuals at such time before or after
the Effective Time of the Merger as such 10 individuals shall agree). The Board
of Directors of Parent shall use its reasonable efforts to provide that the five
individuals to be selected by the Board of Directors of Parent and the five
individuals to be selected by the Board of Directors of the Company are
allocated as evenly as possible among the three classes of Parent's directors.
(b) Parent shall promptly notify the Company in writing once Parent's Board
of Directors has selected its five individuals pursuant to Section 5.15(a), or
any replacement individual(s) pursuant to this Section 5.15(b). The Board of
Directors of the Company shall be permitted to reject up to two of such five
individuals (other than Jack E. Thompson) by sending Parent a written notice to
such effect within two business days after its receipt of such notice, in which
case the Board of Directors of Parent shall within two business days thereafter
select another individual or individuals, as applicable (subject to the
limitations set
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forth in Section 5.15(a)) in lieu of such rejected individual(s). If the Board
of Directors of the Company shall have only rejected one individual in the first
instance, it shall be permitted to reject the replacement individual, in which
case the Board of Directors of Parent shall select another individual (subject
to the limitations set forth in Section 5.15(a)) in lieu of such rejected
replacement individual. The Company shall promptly notify Parent in writing once
the Company's Board of Directors has selected its five individuals pursuant to
Section 5.15(a), or any replacement individual pursuant to this Section 5.15(b).
The Board of Directors Parent shall be permitted to reject up to two of such
five individuals by sending the Company a written notice to such effect within
two business days after its receipt of such notice, in which case the Board of
Directors of the Company shall within two business days thereafter select
another individual or individuals (subject to the limitations set forth in
Section 5.15(a)) in lieu of such rejected individual(s). If the Board of
Directors of Parent shall have only rejected one individual in the first
instance, it shall be permitted to reject the replacement individual, in which
case the Board of Directors of the Company shall select another individual
(subject to the limitations set forth in Section 5.15(a)) in lieu of such
rejected replacement individual.
SECTION 5.16. Parent Officers. The Board of Directors of Parent shall take
such corporate actions as are necessary to provide that, effective at the
Effective Time of the Merger, Jack E. Thompson shall be appointed the Chief
Executive Officer of Parent and Patrick M. James shall be appointed the
President and Chief Operating Officer of Parent.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To Effect The
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval and Parent Stockholder Approval. The
Company shall have obtained the Company Stockholder Approval and Parent
shall have obtained the Parent Stockholder Approval.
(b) NYSE Listing. The shares of Parent Company Stock issuable to the
Company's stockholders and employees pursuant to this Agreement shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(c) Antitrust. The waiting periods (and any extensions thereof)
applicable to the transactions contemplated by this Agreement under the HSR
Act shall have been terminated or shall have expired. Any consents,
approvals and filings under any foreign antitrust law, the absence of which
would prohibit the consummation of the Merger, shall have been obtained or
made.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
subject to the proviso in Section 5.05(a) each of the parties shall have
used reasonable efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any such injunction or
other order that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and Parent shall have received all state
securities or "blue sky" authorizations necessary to issue the Parent
Common Stock pursuant to this Agreement.
(f) Pooling Letters. Parent shall have received a letter from Coopers
& Lybrand LLP dated as of the Closing Date and addressed to Parent, and the
Company shall have received a letter from Price Waterhouse LLP dated as of
the Closing Date and addressed to the Company, in each case stating that
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the Merger will qualify as a pooling of interests transaction under Opinion
16 of the Accounting Principles Board.
(g) No Litigation. There shall not be pending any suit, action or
proceeding by any Governmental Entity (i) challenging the acquisition by
Parent or Sub of any shares of Company Common Stock, seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from the Company,
Parent or Sub any damages that are material in relation to the Company and
its subsidiaries taken as a whole, (ii) seeking to prohibit or limit the
ownership or operation by the Company, any Company Significant Subsidiary,
Parent or any Parent Significant Subsidiary of any material portion of the
business or assets of the Company, any Company Significant Subsidiary,
Parent or any Parent Significant Subsidiary or to compel the Company, any
Company Significant Subsidiary, Parent or any Parent Significant Subsidiary
to dispose of or hold separate any material portion of the business or
assets of the Company, any Company Significant Subsidiary, Parent or any
Parent Significant Subsidiary, as a result of the Merger or any of the
other transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Parent or Sub to acquire or hold, or exercise
full rights of ownership of, any shares of capital stock of the Surviving
Corporation, including the right to vote such capital stock on all matters
properly presented to the stockholders of the Surviving Corporation, (iv)
seeking to prohibit Parent or any Parent Subsidiary from effectively
controlling in any material respect the business or operations of the
Company or the Company Significant Subsidiaries or (v) which otherwise is
reasonably likely to have a Company Material Adverse Effect or a Parent
Material Adverse Effect.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or waiver by Parent on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Company set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent any such representation
or warranty expressly relates to an earlier date (in which case as of such
date), and Parent shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to
such effect.
(c) Letters from Company Affiliates. Parent shall have received from
each person named in the letter referred to in Section 5.13(a) an executed
copy of an agreement substantially in the form attached hereto as Exhibit
A.
(d) Tax Opinion. Parent shall have received an opinion dated the
Closing Date from Cravath, Swaine & Moore, counsel to Parent and Sub, in
form and substance reasonably satisfactory to Parent, substantially to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
on the Closing Date, the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code. In rendering such opinion, Cravath, Swaine & Moore may require and
rely upon (and may incorporate by reference) representations and covenants,
including those contained in certificates of officers of Parent, the
Company, Sub and others.
(e) Absence of Company Material Adverse Effect. There shall not have
occurred since the date of this Agreement any event, change, effect or
development which, individually or in the aggregate, has had or is
reasonably likely to have, a Company Material Adverse Effect.
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SECTION 6.03. Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction or
waiver by the Company on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Parent and Sub set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent any such representation
or warranty expressly relates to an earlier date (in which case as of such
date), and the Company shall have received a certificate signed on behalf
of Parent by the Chief Executive Officer and the Chief Financial Officer of
Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
the Chief Executive Officer and the Chief Financial Officer of Parent to
such effect.
(c) Letters from Parent Affiliates. Parent shall have received from
each person named in the letter referred to in Section 5.13(b) an executed
copy of an agreement substantially in the form attached hereto as Exhibit
B.
(d) Tax Opinion. The Company shall have received an opinion dated the
Closing Date from Skadden, Arps, Slate, Meagher & Flom, LLP, counsel to the
Company, in form and substance reasonably satisfactory to the Company,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the
state of facts existing on the Closing Date, the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Skadden, Arps,
Slate, Meagher & Flom, LLP may require and rely upon (and may incorporate
by reference) representations and covenants, including those contained in
certificates of officers of Parent, the Company, Sub and others.
(e) Absence of Parent Material Adverse Effect. There shall not have
occurred since the date of this Agreement any event, change, effect or
development which, individually or in the aggregate, has had or is
reasonably likely to have, a Parent Material Adverse Effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time of the Merger, whether before or after the Company
Stockholder Approval or the Parent Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if, at a duly held stockholders meeting of the Company or any
adjournment thereof at which the Company Stockholder Approval is voted
upon, the Company Stockholder Approval shall not have been obtained;
(ii) if, at a duly held stockholders meeting of Parent or any
adjournment thereof at which the Parent Stockholder Approval is voted
upon, the Parent Stockholder Approval shall not have been obtained;
(iii) if the Merger shall not have been consummated on or before
June 30, 1997 (the "Outside Date"), unless the failure to consummate the
Merger is the result of a wilful, Material Breach (as defined in Section
7.02(e)) of this Agreement by the party seeking to terminate this
Agreement;
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(iv) if any court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and non-appealable; or
(v) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Section 6.02(a) or 6.02(b) or Section 6.03(a) or 6.03(b), as
applicable, and (B) cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party of such breach
(provided that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement that would give
rise to a failure of a condition as described in clause (A) above);
(c) by either Parent or the Company in the event that any condition to
the obligation of such party to effect the Merger set forth in Section
6.01(f) or 6.02 (in the case of Parent) or Section 6.01(f) or 6.03 (in the
case of the Company) is not capable of being satisfied prior to the Outside
Date;
(d) by the Company, if the Board of Directors of the Company shall
have approved, and the Company shall concurrently with such termination
enter into, a definitive agreement providing for the implementation of the
transactions contemplated by a Company Takeover Proposal; provided,
however, that (i) such Company Takeover Proposal was not solicited by the
Company and did not otherwise result from a breach of Section 4.02(a), (ii)
the Board of Directors of the Company shall have complied with the
exception to the proviso contained in Section 4.02(c) in connection with
such Company Takeover Proposal and (iii) no termination pursuant to this
Section 7.01(d) shall be effective unless the Company shall simultaneously
make the payment required by Section 7.02(a);
(e) by Parent, if the Board of Directors of Parent shall have
approved, and Parent shall concurrently with such termination enter into, a
definitive agreement providing for the implementation of the transactions
contemplated by a Parent Takeover Proposal; provided, however, that (i)
such Parent Takeover Proposal was not solicited by Parent and did not
otherwise result from a breach of Section 4.03(a), (ii) the Board of
Directors of Parent shall have complied with the exception to the proviso
contained in Section 4.03(c) in connection with such Parent Takeover
Proposal and (iii) no termination pursuant to this Section 7.01(e) shall be
effective unless Parent shall simultaneously make the payment required by
Section 7.02(b);
(f) by the Company, if Parent's Board of Directors shall have (i)
failed to recommend to Parent's stockholders that they give the Parent
Stockholder Approval, (ii) withdrawn or modified in a manner adverse to the
Company its recommendation to Parent's stockholders that they give the
Parent Stockholder Approval, or (iii) failed to reaffirm its recommendation
to Parent's stockholders that they give the Parent Stockholder Approval
within fourteen days after the Company has made a written request to Parent
to do so (which written request may be made by the Company at any time
after the public disclosure of a Parent Takeover Proposal); and
(g) by Parent, if the Company's Board of Directors shall have (i)
failed to recommend to the Company's stockholders that they give the
Company Stockholder Approval, (ii) withdrawn or modified in a manner
adverse to Parent its recommendation to the Company's stockholders that
they give the Company Stockholder Approval, or (iii) failed to reaffirm its
recommendation to the Company's stockholders that they give the Company
Stockholder Approval within fourteen days after Parent has made a written
request to the Company to do so (which written request may be made by
Parent at any time after the public disclosure of a Company Takeover
Proposal).
SECTION 7.02. Effect of Termination. (a) In the event that (i) any person
shall make a Company Takeover Proposal that shall not have been withdrawn on the
date of the Company's Stockholders' Meeting and thereafter this Agreement is
terminated pursuant to Section 7.01(b)(i), (ii) this Agreement is terminated by
the Company pursuant to Section 7.01(d) or (iii) this Agreement is terminated by
Parent pursuant to Section 7.01(g), then the Company shall pay to Parent a fee
of $65,000,000, which amount shall be payable
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by wire transfer of same day funds, on the date of termination of this
Agreement. The Company acknowledges that the agreements contained in this
Section 7.02(a) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement. Notwithstanding the foregoing, no payment need be made by the Company
pursuant to this Section 7.02(a) if Parent shall be in Material Breach of its
representations, warranties or covenants under this Agreement.
(b) In the event that (i) any person shall make a Parent Takeover Proposal
that shall not have been withdrawn on the date of the Parent's Stockholders'
Meeting and thereafter this Agreement is terminated pursuant to Section
7.01(b)(ii), (ii) this Agreement is terminated by Parent pursuant to Section
7.01(e) or (iii) this Agreement is terminated by the Company pursuant to Section
7.01(f), then Parent shall pay to the Company a fee of $65,000,000, which amount
shall be payable by wire transfer of same day funds, on the date of termination
of this Agreement. Parent acknowledges that the agreements contained in this
Section 7.02(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Company would not enter into
this Agreement. Notwithstanding the foregoing, no payment need be made by Parent
pursuant to this Section 7.02(b) if the Company shall be in Material Breach of
its representations, warranties or covenants under this Agreement.
(c) In the event of termination of this Agreement by either Parent or the
Company pursuant to Section 7.01(b)(i) or by Parent pursuant to Section
7.01(b)(v), then (unless Section 7.02(a) is applicable) the Company shall
reimburse Parent for all its reasonable out-of-pocket expenses (up to
$5,000,000) actually incurred in connection with this Agreement and the
transactions contemplated hereby, which amount shall be payable by wire transfer
of same day funds within three business days of written demand, accompanied by a
reasonably detailed statement of such expenses and appropriate supporting
documentation, therefor. Notwithstanding the foregoing, no payment need be made
by the Company pursuant to this Section 7.02(c) if Parent shall be in Material
Breach of its representations, warranties or covenants under this Agreement.
(d) In the event of termination of this Agreement by either Parent or the
Company pursuant to Section 7.01(b)(ii) or by the Company pursuant to Section
7.01(b)(v), then (unless Section 7.02(b) is applicable) Parent shall reimburse
the Company for all its reasonable out-of-pocket expenses (up to $5,000,000)
actually incurred in connection with this Agreement and the transactions
contemplated hereby, which amount shall be payable by wire transfer of same day
funds within three business days of written demand, accompanied by a reasonably
detailed statement of such expenses and appropriate supporting documentation,
therefor. Notwithstanding the foregoing, no payment need be made by Parent
pursuant to this Section 7.02(d) if the Company shall be in Material Breach of
its representations, warranties or covenants under this Agreement.
(e) In the event of termination of this Agreement by either the Company or
Parent as provided in Section 7.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of Parent,
Sub or the Company, other than the provisions of Sections 3.01(l) and 3.02(l),
the second sentence of Section 5.04, Section 5.10, this Section 7.02 and Article
VIII and except to the extent that such termination results from a wilful,
Material Breach by a party of any of its representations, warranties, covenants
or other agreements set forth in this Agreement which has not been cured prior
to the time of such termination. For purposes of this Agreement, a "Material
Breach" shall mean a breach that is material by reference to (i) the breaching
party and its subsidiaries, taken as a whole, (ii) the ability of the parties to
consummate the Merger and the other transactions contemplated by this Agreement
in the manner contemplated by this Agreement or (iii) the benefits expected to
be received by the non-breaching party and its stockholders as a result of the
consummation of the Merger and the other transactions contemplated by this
Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the parties at
any time before or after the Company Stockholder Approval or the Parent
Stockholder Approval; provided, however, that after the Company Stockholder
Approval or the Parent Stockholder Approval, there shall be made no amendment
that by law requires further approval by such stockholders without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
36
<PAGE> 146
SECTION 7.04. Extension; Waiver. At any time prior to the Effective Time of
the Merger, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.03, waive compliance with any of the covenants or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 shall, in order to be effective, require, in the case of Parent, Sub or the
Company, action by its Board of Directors or, in the case of an extension or
waiver pursuant to Section 7.04, the duly authorized designee of its Board of
Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time of the Merger.
SECTION 8.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing (including by facsimile)
and shall be deemed given upon receipt by the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Homestake Mining Company
650 California Street
San Francisco, CA 94108-2788
Phone: (415) 981-8150
Fax: (415) 397-0952
Attention: Wayne Kirk, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Phone: (212) 474-1000
Fax: (212) 474-3700
Attention: Richard Hall, Esq.
(b) if to the Company, to
Santa Fe Pacific Gold Corporation
6200 Uptown Boulevard NE
Suite 400
Albuquerque, NM 87110
Phone: (505) 880-5300
Fax: (505) 880-5435
Attention: Wayne Jarke, Esq.
37
<PAGE> 147
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Phone: (212) 735-3000
Fax: (212) 735-2000
Attention: Peter Allan Atkins, Esq.
SECTION 8.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
A "person" means an individual, corporation, partnership, company,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person.
SECTION 8.04. Interpretation. When a reference is made in this Agreement to
a Section or Exhibit, such reference shall be to a Section of, or an Exhibit to,
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
SECTION 8.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 8.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents referred to herein) (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Article II and Sections 5.07(b), 5.07(c),
5.08 and 5.09, are not intended to confer upon any person other than the parties
any rights or remedies.
SECTION 8.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned Parent Subsidiary,
but no such assignment shall relieve Sub of any of its obligations under this
38
<PAGE> 148
Agreement. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns. Parent shall cause Sub to perform its
obligations hereunder.
SECTION 8.10. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not initiate
any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
HOMESTAKE MINING COMPANY,
By: /s/ JACK E. THOMPSON
------------------------------------
Name: Jack E. Thompson
Title: President and Chief
Executive Officer
HMGLD CORP.,
By: /s/ JACK E. THOMPSON
------------------------------------
Name: Jack E. Thompson
Title: President
SANTA FE PACIFIC GOLD CORPORATION,
By: /s/ PATRICK M. JAMES
------------------------------------
Name: Patrick M. James
Title: Chairman of the Board,
President and Chief
Executive Officer
39
<PAGE> 149
EXHIBIT A
[FORM OF COMPANY AFFILIATE LETTER]
[ ], 1996
Homestake Mining Company
650 California Street
San Francisco, CA 94108-2788
Ladies and Gentlemen:
This letter agreement (this "Agreement") is being delivered in accordance
with Section 6.02(c) of the Agreement and Plan of Merger, dated as of December
8, 1996 (the "Merger Agreement"), by and among HOMESTAKE MINING COMPANY, a
Delaware corporation ("Parent"), HMGLD Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and SANTA FE PACIFIC GOLD
CORPORATION, a Delaware corporation (the "Company"). The Merger Agreement
provides, among other things, for the merger of Sub with and into the Company
(the "Merger"), pursuant to which each share of the Common Stock, par value
$0.01 per share ("Company Common Stock"), of the Company will be converted into
the right to receive 1.115 shares of Common Stock, par value $1.00 per share
("Parent Common Stock"), of Parent on the basis described in the Merger
Agreement.
1. The undersigned ("Stockholder") hereby represents, warrants, covenants
and agrees with respect to all Parent Common Stock received as a result of the
Merger as follows:
(a) Stockholder understands that as of the date of this letter
Stockholder may be deemed to be an "affiliate" of the Company as such term
is (i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the
general rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the Commission (an
"Affiliate").
(b) Stockholder shall not make any sale, transfer or other disposition
of Parent Common Stock in violation of the Act or the Rules and
Regulations.
(c) Stockholder has carefully read this letter and the Merger
Agreement and has had an opportunity to discuss the requirements of such
documents and any other applicable limitations upon Stockholder's ability
to sell, transfer or otherwise dispose of Parent Common Stock with his
counsel or counsel for the Company.
(d) Stockholder has been advised that the issuance of Parent Common
Stock to Stockholder pursuant to the Merger has been registered with the
Commission under the Act. However, Stockholder has also been advised that,
since at the time the Merger was submitted to a vote of the stockholders of
the Company, Stockholder may be deemed to have been an Affiliate of the
Company and the distribution by Stockholder of Parent Common Stock has not
been registered under the Act. Stockholder may not offer to sell, sell,
transfer or otherwise dispose of Parent Common Stock issued to Stockholder
in the Merger unless (i) such offer, sale, transfer or other disposition
has been registered under the Act or is made in conformity with Rule 145
under the Act, or (ii) in the opinion of counsel reasonably acceptable to
Parent, or pursuant to a "no-action" letter obtained by Stockholder from
the staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
(e) Stockholder understands that Parent will give stop transfer
instructions to Parent's transfer agents with respect to Parent Common
Stock, that the Parent Common Stock issued to Stockholder will
A-1
<PAGE> 150
all be in certificated form and that the certificates therefor, or any
substitutions thereof, will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [ ], 1996, BETWEEN THE REGISTERED HOLDER
HEREOF AND HOLLAND, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF HOMESTAKE MINING COMPANY."
(f) Stockholder also understands that unless the transfer by
Stockholder of Stockholder's Parent Common Stock has been registered under
the Act or is a sale made in conformity with the provisions of Rule 145,
Parent reserves the right to place a legend substantially to the following
effect on the certificates issued to any transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH RULE 145
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SECURITIES HAVE NOT BEEN
ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH,
ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
(g) It is understood and agreed that the legends set forth in Sections
1(e) and 1(f) above shall be removed by delivery of substitute certificates
without such legend if such legend is not required for purposes of the Act.
It is understood and agreed that such legends and the stop orders referred
to above will be removed if (i) two years shall have elapsed from the date
Stockholder acquired Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
three years shall have elapsed from the date Stockholder acquired Parent
Common Stock received in the Merger and the provisions of Rule 145(d)(3)
are then available to the undersigned, or (iii) parent has received either
an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Parent, or a "no-action" letter obtained by Stockholder
from the staff of the Commission, to the effect that the restrictions
imposed by Rule 145 under the Act no longer apply to Stockholder.
2. Stockholder understands that the Merger may be accounted for using the
"pooling-of-interests" method and that such treatment for financial accounting
purposes is dependent upon the accuracy of certain of the representations and
warranties, and the compliance by Stockholder with certain of the covenants and
agreements, set forth herein. Accordingly, Stockholder further hereby represents
and covenants that Stockholder has not, within the 30 days preceding the
Effective Time of the Merger (as such term is defined in the Merger Agreement)
sold, transferred or otherwise disposed of any shares of Parent Common Stock
held by Stockholder and that it will not sell, transfer or otherwise dispose of
any Parent Common Stock received by Stockholder in the Merger until after Parent
shall have publicly released a report (the "Combined Financial Results Report")
including the combined financial results of Parent and the Company for a period
of at least 30 days of combined operations of Parent and the Company.
Stockholder understands that stop transfer instructions will be given to the
transfer agents of Parent and the Company in order to prevent any breach of the
covenants and agreements made by Stockholder in this Section 2, although such
stop transfer instructions will be promptly rescinded upon the publication of
the Combined Financial Report.
3. Parent will publish the Combined Financial Results Report as promptly as
practicable following the Merger, and in any event within 30 days after the end
of the first full calendar month following the Merger.
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4. Stockholder further understands and agrees that the representations,
warranties, covenants and agreements of Stockholder set forth herein are for the
benefit of Parent, the Company and the Surviving Corporation (as defined in the
Merger Agreement) in the Merger and will be relied up by such entities and their
respective counsel and accountants.
5. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
Shareholder and any pledgees holding the Shares as collateral. If the Merger
Agreement is terminated in accordance with its terms prior to the Effective
Time, this Agreement will thereupon automatically terminate.
Execution of this letter should not be considered an admission on the
Stockholder's part that it is an "affiliate" of the Company as described in
Section 1(a) of this Agreement.
Very truly yours,
--------------------------------------
Name:
Address:
Agreed to and accepted:
HOMESTAKE MINING COMPANY
By:
--------------------------------------------------------
Name:
Title:
A-3
<PAGE> 152
EXHIBIT B
[FORM OF PARENT AFFILIATE LETTER]
[ ], 1996
Homestake Mining Company
650 California Street
San Francisco, CA 94108-2788
Ladies and Gentlemen:
This letter agreement (this "Agreement") is being delivered in accordance
with Section 6.03(c) of the Agreement and Plan of Merger, dated as of December
8, 1996 (the "Merger Agreement"), by and among HOMESTAKE MINING COMPANY, a
Delaware corporation ("Parent"), HMGLD Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and SANTE FE PACIFIC GOLD
CORPORATION, a Delaware corporation (the "Company"). The Merger Agreement
provides, among other things, for the merger of Sub with and into the Company
(the "Merger"), pursuant to which each share of the Common Stock, par value
$0.01 per share ("Company Common Stock"), of the Company will be converted into
the right to receive 1.115 shares of Common Stock, par value $1.00 per share
("Parent Common Stock"), of Parent on the basis described in the Merger
Agreement.
1. The undersigned ("Stockholder") hereby represents, warrants, covenants
and agrees as follows:
(a) Stockholder understands that as of the date of this letter
Stockholder may be deemed to be an "affiliate" of the Company as such term
is used in and for purposes of Accounting Series Releases 130 and 135, as
amended, of the Commission (an "Affiliate" ).
(b) Stockholder has carefully read this letter and the Merger
Agreement and has had an opportunity to discuss the requirements of such
documents and any other applicable limitations upon Stockholder's ability
to sell, transfer or otherwise dispose of Parent Common Stock with his
counsel or counsel for the Company.
2. Stockholder understands that the Merger may be accounted for using the
"pooling-of-interests" method and that such treatment for financial accounting
purposes is dependent upon the accuracy of certain of the representations and
warranties, and the compliance by Stockholder with certain of the covenants and
agreements, set forth herein. Accordingly, Stockholder further hereby represents
and covenants that Stockholder has not, within the 30 days preceding the
Effective Time of the Merger (as such term is defined in the Merger Agreement)
sold, transferred or otherwise disposed of any shares of Parent Common Stock
held by Stockholder and that it will not sell, transfer or otherwise dispose of
any Parent Common Stock received by Stockholder in the Merger until after Parent
shall have publicly released a report (the "Combined Financial Results Report")
including the combined financial results of Parent and the Company for a period
of at least 30 days of combined operations of Parent and the Company.
Stockholder understands that stop transfer instructions will be given to the
transfer agents of Parent and the Company in order to prevent any breach of the
covenants and agreements made by Stockholder in this Section 2, although such
stop transfer instructions will be promptly rescinded upon the publication of
the Combined Financial Report.
3. Parent will publish the Combined Financial Results Report as promptly as
practicable following the Merger, and in any event within 30 days after the end
of the first full calendar month following the Merger.
4. Stockholder further understands and agrees that the representations,
warranties, covenants and agreements of Stockholder set forth herein are for the
benefit of Parent, the Company and the Surviving Corporation (as defined in the
Merger Agreement) in the Merger and will be relied up by such entities and their
respective counsel and accountants.
B-1
<PAGE> 153
5. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
Shareholder and any pledgees holding the Shares as collateral. If the Merger
Agreement is terminated in accordance with its terms prior to the Effective
Time, this Agreement will thereupon automatically terminate.
Execution of this letter should not be considered an admission on the
Stockholder's part that it is an "affiliate" of the Company as described in
Section 1(a) of this Agreement.
Very truly yours,
--------------------------------------
Name:
Address:
Agreed to and accepted:
HOMESTAKE MINING COMPANY
By:
- ---------------------------------------------------------
Name:
Title:
B-2
<PAGE> 154
APPENDIX B
December 8, 1996
Board of Directors
Homestake Mining Company
650 California Street
San Francisco, California 94108-2788
Madam and Gentlemen:
We understand that Homestake Mining Company (the "Company") is considering
a transaction (the "Merger") whereby a subsidiary of the Company would be merged
with and into Santa Fe Pacific Gold Corporation ("Santa Fe"), pursuant to the
terms of an Agreement and Plan of Merger, dated as of December 8, 1996 (the
"Merger Agreement"), such that Santa Fe will become a wholly owned subsidiary of
the Company. In the Merger, each outstanding share of common stock, par value
$0.01 per share, of Santa Fe would be converted into 1.115 shares (the
"Conversion Number") of common stock, par value $1.00 per share, of the Company.
The terms and conditions of the Merger are more fully set forth in the Merger
Agreement.
You have requested our opinion as to whether the Conversion Number is fair
to the stockholders of the Company from a financial point of view.
For its services, Dillon, Read & Co. Inc. ("Dillon Read") will receive a
fee, a substantial portion of which is contingent upon the consummation of the
Merger. In the past, Dillon Read has provided investment banking services to the
Company and has received customary compensation for the rendering of such
services. In the ordinary course of business, Dillon Read trades the equity
securities of the Company and Santa Fe for our own account and the accounts of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and Santa Fe, (ii) reviewed certain financial
information and other data provided to us by the Company that is not publicly
available relating to the business and prospects of the Company, including
financial projections prepared by the management of the Company, (iii) reviewed
certain financial information and other data provided to us by Santa Fe that is
not publicly available relating to the business and prospects of Santa Fe,
including financial projections prepared by the management of Santa Fe, (iv)
conducted discussions with members of the senior managements of the Company and
Santa Fe, (v) reviewed the historical market prices and trading volumes of the
common stocks of the Company and Santa Fe, (vi) considered certain pro forma
effects of the Merger on the financial results of the Company and reviewed
certain estimates of synergies prepared by the managements of the Company and
Santa Fe, (vii) reviewed publicly available financial and stock market data with
respect to certain other companies we believe to be generally comparable to
those of the Company and Santa Fe, (viii) compared the financial terms of the
Merger with the financial terms of certain other mergers and acquisitions we
believe to be relevant, (ix) reviewed the Merger Agreement, and (x) conducted
such other financial studies, analyses and investigations, and considered such
other information as we deemed necessary or appropriate.
Our opinion does not address the Company's underlying business decision to
effect the Merger or constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote with respect to the Merger. Our
opinion does not imply any conclusion as to the likely trading range for the
common stock of the Company following the consummation of the Merger, which may
vary depending on numerous factors which generally influence the prices of
securities. With your consent, we have assumed that
<PAGE> 155
the Merger will be treated as tax-free to both the Company and its stockholders
and will be accounted for as a pooling-of-interests.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have, with your
consent, relied on its being complete and accurate in all material respects. In
addition, we have not made any evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of the Company or Santa Fe, nor have we
been furnished with any such evaluation or appraisal. With respect to the
financial projections and estimates of synergies referred to above, we have
assumed, with your consent, that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the Company's
and Santa Fe's managements as to the future financial performance of the Company
and Santa Fe, respectively. Further, our opinion is based on economic, monetary
and market conditions existing on the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Conversion Number is fair to the stockholders of the Company
from a financial point of view.
Very truly yours,
DILLON, READ & CO. INC.
<PAGE> 156
APPENDIX C
The Board of Directors December 8, 1996
Santa Fe Pacific Gold Corporation
6200 Uptown Boulevard N.E.
Suite 400
Albuquerque
New Mexico 87125
To the Members of the Board of Directors:
We understand that Santa Fe Pacific Gold Corporation ("SFPG" or the "Company"),
Homestake Mining Company ("Homestake") and HMGLD Corp., a wholly owned
subsidiary of Homestake, plan to enter into an Agreement and Plan of Merger
dated as of December 8, 1996 (the "Merger Agreement"). The terms of the Merger
Agreement provide, among other things, that HMGLD Corp. shall be merged with and
into the Company in a merger transaction (the "Merger"), pursuant to which the
Company shall be the surviving corporation and become a wholly owned subsidiary
of Homestake and each share of common stock of the Company (par value $0.01 per
share) will be exchanged for 1.115 shares of common stock, par value $1.00 per
share, of Homestake (the "Exchange Ratio"). The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to the fairness, from a financial point of
view, to the holders of common stock of SFPG of the Exchange Ratio set forth in
the Merger Agreement.
For purposes of the opinion set forth herein, we have among other things:
<TABLE>
<S> <C>
(i) reviewed certain publicly available financial statements and other information
of the Company and Homestake;
(ii) reviewed certain internal financial statements and operating information
relating to the Company prepared by the Company's management, including without
limitation "life of mine" plans, and certain internal financial statements and
operating information relating to Homestake prepared by the management of
Homestake;
(iii) reviewed and discussed with the managements of the Company and of Homestake
certain financial projections of the Company and of Homestake prepared by their
respective managements;
(iv) discussed the past and current operations and financial condition and prospects
of the Company and Homestake with their respective senior managements;
(v) analyzed the pro forma financial impact of the merger on Homestake and on the
shareholders of the Company;
(vi) reviewed the historical market prices and trading activity for the common shares
of the Company and Homestake;
(vii) compared the financial performance of the Company and Homestake and the prices
and trading activity of their respective common stocks with those of certain
other publicly-traded companies in similar businesses which we deemed
appropriate;
(viii) reviewed the financial terms, to the extent publicly available, of certain
merger and acquisition transactions which we deemed appropriate;
(ix) participated in discussions and negotiations among representatives of the
Company and Homestake and their respective advisors;
(x) reviewed a draft of the Merger Agreement substantially in the form to be
executed; and
(xi) performed such other analyses and examinations and considered such other factors
as we deemed relevant to this opinion.
</TABLE>
<PAGE> 157
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for purposes of this
opinion. With respect to the financial projections and "life of mine" plans
relating to the Company and Homestake used in our analyses, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's and Homestake's managements
as to the future financial performance of the Company and Homestake
respectively. We have not prepared any independent valuation or appraisal of the
reserves, properties or other assets or liabilities (contingent or otherwise) of
the Company or Homestake.
Our opinion is necessarily based on the economic, market, and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise or reaffirm
this opinion. We express no opinion as to the price at which Homestake common
stock will trade subsequent to the consummation of the Merger. We have relied on
the advice of counsel to the Company as to all legal matters regarding the
structure and tax implications of the Merger and related matters. We have
assumed that the Merger will be treated as a pooling of interests under
Generally Accepted Accounting Principles in the United States and we have
assumed that the Merger will result in a tax-free roll-over of bases for U.S.
shareholders of the Company.
SBC Warburg Inc. is acting as financial advisor to the Company in connection
with this transaction and will receive a fee for its services, a significant
proportion of which is contingent on the consummation of the Merger.
Additionally, we have previously rendered investment banking and financial
advisory services to the Company for which we have received compensation. In the
ordinary course of our business, we trade the equity and debt securities of both
the Company and Homestake for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
It is understood that this letter is for the information of the Board of
Directors of SFPG only and is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without our prior written
consent other than as provided for in the engagement letter dated January 19,
1996 between SFPG and S.G. Warburg & Co. Inc. (as predecessor company to SBC
Warburg Inc.). Our opinion does not constitute a recommendation to any board
member or stockholder of the Company as to how they should vote on the Merger or
otherwise address the Company's decision to effect the Merger or the relative
attractiveness of the Merger compared to other strategic alternatives available
to the Company.
Based upon and subject to the foregoing, it is our opinion as investment bankers
that, as of the date hereof, the Exchange Ratio is fair, from a financial point
of view, to the holders of the Company's common stock.
Very truly yours,
SBC WARBURG INC.
<TABLE>
<S> <C> <C> <C>
By: Brian J. Hanson By: Anthony P. W. Durrant
Title: Managing Director Title: Managing Director
</TABLE>
2
<PAGE> 158
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XVII of Homestake's Restated Certificate of Incorporation contains
a provision, permitted by Section 102(b)(7) of the Delaware General Corporation
Law (the "Delaware Law"), limiting the personal monetary liability of directors
for breach of fiduciary duties as a director. Delaware Law provides that such a
provision does not eliminate or limit liability (i) for any breach of the
director's duty of loyalty to Homestake or its stockholders, (ii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware Law, (iii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, or
(iv) for any transaction from which the director derived an improper personal
benefit.
Section 145 of the Delaware Law permits indemnification against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with actions, suits or
proceedings in which an officer, director, employee or agent is a party by
reason of the fact that he is or was such a director, officer, employee or
agent, if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. However, in connection with actions by or in the right of the
corporation, such indemnification is not permitted if such person has been
adjudged liable to the corporation unless the court determines that, under all
of the circumstances, such person is nonetheless fairly and reasonably entitled
to indemnity for such expenses as the court deems proper. Section 145 also
permits a corporation to purchase and maintain insurance on behalf of its
directors and officers against and liability which may be asserted against, or
incurred by, such persons in their capacities as directors or officers of the
corporation whether or not Homestake would have the power to indemnify such
persons against such liabilities under the provisions of such section. Homestake
has purchased such insurance. Section 145 further provides that the statutory
provision is not exclusive of any other right to which those seeking
indemnifications or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or independent directors, or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office.
Article XIV, Section 8, of the By-laws of Homestake provides that Homestake
must indemnify directors and officers to the fullest extent permitted by the
Delaware Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of December 8, 1996 among Homestake, HMGLD
Corp. and Santa Fe Pacific Gold Corporation (attached as Appendix A to the Joint
Proxy Statement/Prospectus contained in this Registration Statement).
4.1 Rights Agreement dated October 16, 1987, between Homestake and The First National
Bank of Boston, as Rights Agent (incorporated by reference to Homestake's
Registration Statement on Form 8-A dated October 16, 1997).
5 Opinion of Thelen, Marrin, Johnson & Bridges LLP as to the legality of the shares
being registered.*
</TABLE>
II-1
<PAGE> 159
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
8.1 Opinion of Cravath, Swaine & Moore as to certain federal income tax consequences
of the Merger.*
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to certain federal income
tax consequences of the Merger.*
23.1 Consent of Thelen, Marrin, Johnson & Bridges LLP (included in the opinion filed as
Exhibit 5).*
23.2 Consent of Cravath, Swaine & Moore (included in the opinion filed as Exhibit
8.1).*
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in the opinion filed
as Exhibit 8.2).*
23.4 Consent of Pincock, Allen & Holt, Inc.
23.5 Consent of Independent Mining Consultants, Inc.
23.6 Consent of Coopers & Lybrand L.L.P., with respect to Homestake's financial
statements.
23.7 Consent of Price Waterhouse LLP, with respect to Santa Fe's financial statements.
23.8 Consent of Dillon, Read & Co. Inc.
23.9 Consent of SBC Warburg Inc.
24 Powers of Attorney (see page II-4).
99.1 Form of Proxy Card for the Stockholders of Homestake.
99.2 Form of Proxy Card for the Stockholders of Santa Fe.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
None
ITEM 22. UNDERTAKINGS
Homestake hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
II-2
<PAGE> 160
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof;
(5) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(6) that every prospectus: (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof;
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Homestake pursuant to the foregoing provisions, or otherwise, Homestake has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Homestake of expenses incurred or
paid by a director, officer or controlling person of Homestake in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
Homestake will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act, Homestake has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on this 3rd day of January, 1997.
Homestake Mining Company,
a Delaware corporation
By: /s/ WAYNE KIRK
------------------------------------
Wayne Kirk
Vice President, General
Counsel and Corporate Secretary
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gene G. Elam,
Wayne Kirk and Jack E. Thompson, and each of them severally, acting alone and
without the other, his true and lawful attorney-in-fact with authority to
execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement, and to sign any registration
statement for the same offering covered by this registration statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, necessary or advisable to enable Homestake to comply with the Securities
Act of 1933 and any rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, which amendments may make such changes
in this registration statement as the aforesaid attorney-in-fact deems
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: January 3, 1997 /s/ JACK E. THOMPSON
------------------------------------------------
Jack E. Thompson
Director, President and Chief Executive Officer
Date: January 3, 1997 /s/ GENE G. ELAM
------------------------------------------------
Gene G. Elam
Vice President, Finance and Chief Financial
Officer
Date: January 3, 1997 /s/ DAVID W. PEAT
------------------------------------------------
David W. Peat
Vice President, Controller and Chief Accounting
Officer
Date: January 3, 1997 /s/ M. NORMAN ANDERSON
------------------------------------------------
M. Norman Anderson
Director
Date: January 3, 1997 /s/ ROBERT H. CLARK
------------------------------------------------
Robert H. Clark
Director
</TABLE>
II-4
<PAGE> 162
<TABLE>
<S> <C>
Date: January 3, 1997 /s/ HARRY M. CONGER
------------------------------------------------
Harry M. Conger
Director and Chairman of the Board
Date: January 3, 1997 /s/ G. ROBERT DURHAM
------------------------------------------------
G. Robert Durham
Director
Date: January 3, 1997 /s/ DOUGLAS W. FUERSTENAU
------------------------------------------------
Douglas W. Fuerstenau
Director
Date: January 3, 1997 /s/ HENRY G. GRUNDSTEDT
------------------------------------------------
Henry G. Grundstedt
Director
Date: January 3, 1997 /s/ WILLIAM A. HUMPHREY
------------------------------------------------
William A. Humphrey
Director
Date: January , 1997
------------------------------------------------
Robert K. Jaedicke
Director
Date: January , 1997
------------------------------------------------
John Neerhout, Jr.
Director
Date: January , 1997
------------------------------------------------
Stuart T. Peeler
Director
Date: January 3, 1997 /s/ CAROL A. RAE
------------------------------------------------
Carol A. Rae
Director
Date: January 3, 1997 /s/ BERNE A. SCHEPMAN
------------------------------------------------
Berne A. Schepman
Director
</TABLE>
II-5
<PAGE> 1
Exhibit 23.4
[PINCOCK, ALLEN & HOLT LETTERHEAD]
CONSENT OF PINCOCK, ALLEN & HOLT, INC.
We hereby consent to the use of our name and the reference to our
report in the Registration Statement on Form S-4 of Homestake Mining Company
to be submitted in January 1997.
PINCOCK, ALLEN & HOLT
By: /s/ Alex Bissett
-------------------------
Name: Alex Bissett, P.E.
Title: President
Date: January 2, 1997
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT 2700 E. Executive Drive, Suite 140
MINING CONSULTANTS, INC. Tucson, Arizona 85706 USA
Tel. (520) 294-9861 Fax: (520) 294-9865
Consent Agreement - Independent Mining Consultants
We hereby consent to the use of our name and the reference to our reserve audit
report in the registration statement on Form S-4 of Homestake Mining Company.
INDEPENDENT MINING CONSULTANTS
By: Michael G. Hester
-----------------------------
Name: MICHAEL G. HESTER
---------------------------
Title: VICE PRESIDENT
--------------------------
Date: JANUARY 6, 1997
---------------------------
<PAGE> 1
Exhibit 23.6
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated February 9, 1996 on our audits of the financial statements and
financial statement schedules of Homestake Mining Company. We also consent to
the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
January 3, 1997
<PAGE> 1
Exhibit 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Homestake
Mining Company of our report dated January 30, 1996 appearing on page 41 of
Santa Fe Pacific Gold Corporation's Annual Report on Form 10-K for the year
ended December 31, 1995. We also consent to the reference to us under the
heading"Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Phoenix, Arizona
January 3, 1997
<PAGE> 1
Exhibit 23.8
CONSENT OF DILLON, READ & CO., INC.
We hereby consent to the use of Appendix B containing our opinion
letter dated December 8, 1996 to the Board of Directors of Homestake Mining
Company ("Homestake") in the Joint Proxy Statement/Prospectus constituting a
part of the Registration Statement on Form S-4 relating to the combination of
Homestake and Santa Fe Pacific Gold Corporation and to the references to our
firm in such Joint Proxy Statement/Prospectus. In giving this consent, we do
not admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
DILLON, READ & CO., INC.
/s/ Dillon, Read & Co., Inc.
----------------------------
New York, New York
January 6, 1997
<PAGE> 1
Exhibit 23.9
CONSENT OF SBC WARBURG INC.
We hereby consent to the use of Appendix C containing our opinion
letter dated December 8, 1996 to the Board of Directors of Santa Fe Pacific
Gold Corporation ("Santa Fe") in the Joint Proxy Statement/Prospectus
constituting a part of the Registration Statement on Form S-4 relating to the
combination of Homestake Mining Company and Santa Fe and to the references to
our firm in such Joint Proxy Statement/Prospectus. In giving this consent, we
do not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
SBC Warburg Inc.
/s/ SBC Warburg Inc.
----------------------------
New York, New York
January 6, 1997
<PAGE> 1
EXHIBIT 99.1
HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108-2788
P
SPECIAL MEETING OF SHAREHOLDERS -- , 1997
R
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
The undersigned hereby appoints Jack E. Thompson, Gene G. Elam
and Wayne Kirk as proxies,
X
each with the power to appoint a substitute, and hereby authorize a
majority (or if only one, then that one) of them to represent and to
vote, as designated on the reverse side, all shares of common stock
Y
of Homestake Mining Company held of record by the undersigned on
, 1997 at the special meeting of shareholders, or any
postponement or adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS
ARE GIVEN, THIS PROXY WILL BE VOTED FOR ITEMS NUMBER 1
AND 2.
------ VOTES AS IN
X THIS EXAMPLE.
------
1. Approval of the amendment to Homestake's Restated Certificate of
Incorporation to increase the authorized number of shares of Homestake Common
Stock from 250,000,000 to 500,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
2. Approval of the issue of shares of Homestake Common Stock in the combination
to the Santa Fe stockholders in exchange for their shares of Santa Fe Common
Stock.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT
LEFT / /
By execution of this proxy the undersigned hereby authorizes such proxies or
their substitutes to vote in their discretion on such other business as may
properly come before the meeting.
Sign exactly as name appears on this proxy card. If shares are held jointly,
each holder should sign. Executors, administrators, trustees, guardians,
attorneys and agents should give their full titles. If shareholder is a
corporation, sign in full corporate name by an authorized officer.
------------------------------ ---------------------------------
Signature Date Signature Date
<PAGE> 1
EXHIBIT 99.2
PROXY CARD PROXY CARD
SANTA FE PACIFIC GOLD CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON , 1997
The undersigned appoints Bruce Hansen, David Smith, and Wayne Jarke, or
any of them, proxies for the undersigned, each with full power of substitution,
to attend the Special Meeting of Stockholders of Santa Fe Pacific Gold
Corporation to be held on , at .m., Mountain Time, and at any
adjournments or postponements thereof, and to vote all the shares of Common
Stock of Santa Fe Pacific Gold Corporation which the undersigned would be
entitled to vote if personally present. This Proxy when properly executed will
be voted in accordance with your indicated directions. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF DECEMBER 8, 1996, AMONG HOMESTAKE MINING COMPANY, HMGLD
CORP. AND SANTA FE PACIFIC GOLD CORPORATION, AS IT MAY BE AMENDED (THE
"AGREEMENT").
The Board of Directors recommends a vote "FOR" the proposal to adopt the
Agreement.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE
SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
SANTA FE PACIFIC GOLD CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
For Against Abstain
1. The Proposal to adopt the Agreement. [ ] [ ] [ ]
By execution of this Proxy the undersigned hereby authorizes such proxies
or their substitutes to vote in their discretion on such other business as may
properly come before the meeting.
The undersigned acknowledges
receipt of the Notice of
Special Meeting of
Stockholders and of the Proxy
Statement.
Dated:________________, 1997
Signature(s)
_____________________________
_____________________________
PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS. JOINT OWNERS
SHOULD EACH SIGN PERSONALLY.
WHERE APPLICABLE, INDICATE
YOUR OFFICIAL POSITION OR
REPRESENTATION CAPACITY.
