<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
(AMENDMENT NO. 6)
ASARCO INCORPORATED
(NAME OF SUBJECT COMPANY)
AAV CORPORATION
AND
PHELPS DODGE CORPORATION
(BIDDERS)
COMMON STOCK, NO PAR VALUE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(TITLE OF CLASSES OF SECURITIES)
------------------------
04341310 (COMMON STOCK)
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
S. DAVID COLTON, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
PHELPS DODGE CORPORATION
2600 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004-3014
(602) 234-8100
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL W. BLAIR, ESQ. STEPHEN R. VOLK, ESQ.
DEBEVOISE & PLIMPTON DAVID W. HELENIAK, ESQ.
875 THIRD AVENUE SHEARMAN & STERLING
NEW YORK, NY 10022 599 LEXINGTON AVENUE
(212) 909-6000 NEW YORK, NEW YORK 10022
TELEPHONE: (212) 848-4000
</TABLE>
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
----------------------------------------------------
----------------------------------------------------
TRANSACTION VALUATION AMOUNT OF FILING FEE
----------------------------------------------------
<S> <C>
$852,856,552* $170,572**
----------------------------------------------------
----------------------------------------------------
</TABLE>
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: $230,873
Form or Registration No.: 333-86063
Filing Party: Phelps Dodge Corporation
Date Filed: August 27, 1999
</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes
that 39,783,396 shares of common stock, no par value per share, of Asarco
Incorporated will be exchanged for shares of common stock, $6.25 par value
per share, of Phelps Dodge Corporation. Pursuant to Rules 0-11(d) and
0-11(a)(4) of the Securities Exchange Act of 1934, as amended, the filing fee
was based upon the average of the high and low prices of Asarco Incorporated
common stock on September 1, 1999, as reported on the New York Stock Exchange
Composite Tape.
** The filing fee is calculated by taking 1/50 of 1% of the Transaction
Valuation, pursuant to Rule 0-11(d) of the Exchange Act.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS:
Phelps Dodge Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
13-1808503
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP
(a) [ ] (b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, BK
- ---------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(e) or 2(f)
[ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
- ---------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES
[ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS:
AAV Corporation
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON:
N/A
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP
(a) [ ] (b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCES OF FUNDS
WC, BK
- ---------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(e) or 2(f)
[ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
- ---------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES
[ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 4
Phelps Dodge Corporation, a New York corporation ("Phelps Dodge"), and its
wholly owned subsidiary, AAV Corporation, a Delaware corporation ("Purchaser"),
hereby amend and supplement their Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") filed with the Securities and Exchange Commission (the
"Commission") on September 3, 1999 with respect to the Purchaser's exchange
offer to acquire all outstanding shares of common stock, no par value per share,
(including the associated preferred share purchase rights, the "Asarco Shares")
of Asarco Incorporated, a New Jersey corporation, ("Asarco") by filing this
Amendment No. 6 to the Schedule 14D-1 ("Amendment No. 6"), and an amended
Prospectus dated October 12, 1999 (the "Prospectus") and the related Letter of
Election and Transmittal which together constitute the Offer.
Item 3 is hereby amended and supplemented as follows:
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth under the captions "Summary -- The
Offer," "Background of the Offer" and "Relationships with Asarco" in the
Prospectus is incorporated herein by reference.
<PAGE> 5
Item 10 is hereby amended and supplemented as follows:
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(c) The information set forth under the captions "Background of the
Offer" and "The Offer -- Conditions of Our Offer" in the Prospectus is
incorporated herein by reference.
(d) The information set forth under the caption "The Offer -- Effect of
Offer on Market for Asarco Shares; Registration under the Exchange Act" in the
Prospectus is incorporated herein by reference.
(e) The information set forth under the caption "The Offer -- Litigation"
in the Prospectus is incorporated herein by reference.
(f) The information set forth in the Prospectus and the related Letter of
Election and Transmittal, attached as Exhibits (a)(21) and (22) hereto, is
incorporated herein by reference.
<PAGE> 6
Item 11 is hereby amended and supplemented by the addition of the following
Exhibits thereto:
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(21) Prospectus of Phelps Dodge dated October 12, 1999.
(a)(22) Form of Letter of Election and Transmittal.
(a)(23) Form of Notice of Guaranteed Delivery.
(a)(24) Form of Letter from Morgan Stanley & Co. Incorporated to
Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(25) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(26) Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(c)(1) Agreement and Plan of Merger dated as of October 5, 1999.
(d)(3) Tax opinion of Shearman & Sterling.
(e)(3) See exhibit (a)(21).
(f)(5) Third Proxy Statement Supplement of Phelps Dodge dated
October 8, 1999 (incorporated by reference).
</TABLE>
<PAGE> 7
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Phelps Dodge Corporation
By /s/ RAMIRO G. PERU
------------------------------------
Name: Ramiro G. Peru
Title: Chief Financial Officer and
Senior Vice President
October 12, 1999
<PAGE> 8
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
AAV Corporation
By /s/ RAMIRO G. PERU
------------------------------------
Name: Ramiro G. Peru
Title: Vice President and Treasurer
October 12, 1999
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
(a)(21) Prospectus of Phelps Dodge dated October 12, 1999.
(a)(22) Form of Letter of Election and Transmittal.
(a)(23) Form of Notice of Guaranteed Delivery.
(a)(24) Form of Letter from Morgan Stanley & Co. Incorporated to
Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(25) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(26) Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(c) Agreement and Plan & Merger dated as of October 5, 1999.
(d)(3) Tax opinion of Shearman & Sterling.
(e)(3) See exhibit (a)(21).
(f)(5) Third Proxy Statement Supplement of Phelps Dodge dated
October 8, 1999 (incorporated by reference).
</TABLE>
<PAGE> 1
The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated October 12, 1999
[PHELPS DODGE LOGO]
Phelps Dodge Corporation
Amended Offer to Exchange Each Outstanding Share
of Common Stock
(Including Associated Preferred Share Purchase Rights)
of
ASARCO Incorporated
For 0.50266 Shares of Common Stock
of
Phelps Dodge Corporation
or $29.50 net to the seller in cash
subject, in each case, to the election and proration procedures described in
this prospectus and the related letter of election and transmittal.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON OCTOBER 25, 1999 UNLESS EXTENDED. SHARES TENDERED PURSUANT TO THIS
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER. THIS
AMENDED PROSPECTUS AMENDS AND RESTATES OUR PROSPECTUS DATED SEPTEMBER 22, 1999.
ON OCTOBER 5, 1999, WE ENTERED INTO AN AGREEMENT AND PLAN OF MERGER WITH
ASARCO PURSUANT TO WHICH WE AGREED TO AMEND OUR OFFER TO ASARCO SHAREHOLDERS.
We are offering to exchange $14.75 net in cash plus 0.25133120 shares of
Phelps Dodge common stock for each outstanding share of Asarco Incorporated
common stock, on a fully prorated basis. You may elect to receive either $29.50
in cash or 0.50266 shares of Phelps Dodge common stock for each of your Asarco
common shares that are validly tendered and not properly withdrawn, subject, in
each case, to the election and proration procedures described in this prospectus
and the related letter of election and transmittal. We are also making a
separate offer to exchange $7.61176875 net in cash and 0.2203 shares of Phelps
Dodge common stock for each outstanding common share of Cyprus Amax Minerals
Company on a fully prorated basis and subject to the same election and proration
procedures.
Our obligation to exchange Phelps Dodge common stock and cash for Asarco
common stock is subject to the conditions listed under "The Offer -- Conditions
of Our Offer." Our offer to Asarco shareholders is not, however, conditioned on
the success of our offer to Cyprus Amax shareholders, nor is our offer to Cyprus
Amax shareholders conditioned on the success of our offer to Asarco
shareholders.
Phelps Dodge's common stock trades on the New York Stock Exchange under the
symbol "PD."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. A solicitation of proxies will be made only pursuant to separate proxy
solicitation materials complying with the requirements of Section 14(a) of the
Securities Exchange Act of 1934.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The Dealer Manager for the Offer is
MORGAN STANLEY DEAN WITTER
-------------------------
The date of this prospectus is October , 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION........ iii
WHERE YOU CAN FIND MORE INFORMATION......................... v
SUMMARY..................................................... 1
The Proposed Combination.................................. 1
Reasons for the Proposed Combination...................... 1
The Offer................................................. 3
The Companies............................................. 4
Risk Factors.............................................. 5
RISK FACTORS................................................ 6
Benefits of the Combination May Not Be Realized........... 6
Fixed Exchange Ratio of Our Offer Could Work to Your
Disadvantage........................................... 6
You May Not Receive all Consideration in the Form that You
Have Elected........................................... 7
Copper Price Volatility May Reduce Income................. 7
Environmental and Regulatory Compliance May Impose
Substantial Costs...................................... 8
Operations Outside the United States Are Subject to
Risks.................................................. 10
Mining Is Subject to Risks................................ 11
Reserve Levels Are Subject To Uncertainty................. 11
Year 2000 Poses Potential Risks........................... 12
THE PROPOSED COMBINATION.................................... 13
REASONS FOR THE PROPOSED COMBINATION........................ 14
BACKGROUND OF THE OFFER..................................... 15
THE OFFER................................................... 45
Description of Election and Proration Procedures.......... 46
Timing of Our Offer....................................... 47
Litigation................................................ 47
Extension, Termination and Amendment...................... 48
Exchange of Asarco Shares; Delivery of Phelps Dodge Common
Stock and Cash......................................... 49
Cash Instead of Fractional Shares of Phelps Dodge Common
Stock.................................................. 50
Withdrawal Rights......................................... 51
Procedure for Tendering................................... 52
Material U.S. Federal Income Tax Considerations........... 53
Reorganization Treatment.................................. 53
Asarco Rights............................................. 55
Effect of Offer on Market for Asarco Shares; Registration
Under the Exchange Act................................. 55
Purpose of Our Offer; the Phelps Dodge/Asarco Merger...... 56
Conditions of Our Offer................................... 57
Source and Amount of Funds................................ 59
Relationships with Asarco................................. 59
Fees and Expenses......................................... 60
Accounting Treatment...................................... 60
Stock Exchange Listings................................... 61
Regulatory Matters........................................ 61
THE COMPANIES............................................... 62
Phelps Dodge Corporation.................................. 62
ASARCO Incorporated....................................... 62
Cyprus Amax Minerals Company.............................. 63
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE PHELPS DODGE/ASARCO MERGER AGREEMENT.................... 63
The Offer................................................. 63
Form of Merger............................................ 64
Consideration to be Received in the Merger................ 64
Exchange Agent; Procedures for Exchange of Certificates... 65
Surviving Corporation Following the Merger................ 65
Representations and Warranties in the Merger Agreement.... 66
Covenants in the Merger Agreement......................... 66
Stockholder Approvals and Other Cooperation............... 68
No Solicitation of Alternative Takeover Proposals......... 69
Stock Options and Other Stock-Based Awards................ 70
Benefits Matters.......................................... 70
Indemnification; Directors' and Officers' Insurance....... 71
Litigation................................................ 71
Conditions Precedent to the Merger........................ 71
Termination............................................... 71
Closing................................................... 72
Termination Fees.......................................... 72
Costs and Expenses........................................ 73
Amendment................................................. 73
Appraisal Rights.......................................... 73
Waiver.................................................... 73
MARKET PRICES AND DIVIDENDS................................. 74
PHELPS DODGE CORPORATION SELECTED HISTORICAL FINANCIAL
DATA...................................................... 75
ASARCO INCORPORATED SELECTED HISTORICAL FINANCIAL DATA...... 76
CYPRUS AMAX MINERALS COMPANY SELECTED HISTORICAL FINANCIAL
DATA...................................................... 78
PHELPS DODGE COMPARATIVE PER SHARE INFORMATION.............. 80
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 82
DESCRIPTION OF PHELPS DODGE CAPITAL STOCK................... 101
Authorized Capital Stock.................................. 101
Phelps Dodge Common Stock................................. 101
Phelps Dodge Preferred Stock.............................. 101
Transfer and Dividend Paying Agent and Registrar.......... 101
COMPARISON OF RIGHTS OF HOLDERS OF PHELPS DODGE SHARES AND
ASARCO SHARES............................................. 102
Comparison of Charter and By-law Provisions............... 102
Comparison of Certain Statutory Provisions................ 109
ASARCO AND CYPRUS AMAX INFORMATION.......................... 112
FORWARD-LOOKING INFORMATION................................. 112
LEGAL MATTERS............................................... 113
EXPERTS..................................................... 113
</TABLE>
<TABLE>
<S> <C> <C>
SCHEDULE A -- DIRECTORS AND EXECUTIVE OFFICERS......................... A-1
SCHEDULE B -- ADDITIONAL INFORMATION REGARDING PHELPS DODGE
CORPORATION'S EXPLORATION AND MINING PROPERTIES............. B-1
</TABLE>
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT PHELPS DODGE THAT IS NOT INCLUDED IN OR DELIVERED WITH THE PROSPECTUS.
THAT INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL
REQUEST. YOU MUST ADDRESS YOUR REQUEST TO CORPORATE SECRETARY, PHELPS DODGE
CORPORATION, 2600 NORTH CENTRAL AVENUE, PHOENIX, ARIZONA 85004-3014, TELEPHONE
(602) 234-8598. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO
LATER THAN OCTOBER 18, 1999.
ii
<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION
Q: WHY IS PHELPS DODGE AMENDING ITS OFFER?
A: Phelps Dodge and Asarco have reached an agreement to combine their
businesses. Phelps Dodge has agreed to amend its exchange offer to increase
the premium we are offering for your shares -- to approximately 59% above
the last trading price of Asarco common shares just before trading was
halted on August 20, 1999, the day we publicly announced our proposed
business combination. In addition, we're still offering you a choice to
receive Phelps Dodge common shares or cash for your Asarco common shares.
Q: WHAT WOULD I RECEIVE IN EXCHANGE FOR MY SHARES?
A: We are offering to exchange $14.75 net in cash plus 0.25133120 shares of
Phelps Dodge common stock per Asarco common share, on a fully prorated
basis. You may elect to receive either $29.50 in cash or 0.50266 shares of
Phelps Dodge common stock for each of your Asarco common shares that are
validly tendered and not properly withdrawn. You will receive either cash,
Phelps Dodge common stock, or a combination of cash and Phelps Dodge common
stock. To the extent the demand for either the cash or stock component of
our offer exceeds the aggregate amount of cash or stock in our offer, we
will prorate the total cash or stock, as the case may be, proportionally
among the shareholders who elect that component. Shareholders who do not
make an election will be allocated whatever component is remaining (or a
proportionate share of each component if neither is oversubscribed), after
taking into account the preferences of the tendering shareholders who make
elections. We describe our procedures for prorating cash and common stock
under the caption "The Offer -- Description of Election and Proration
Procedures." You will not receive any fractional Phelps Dodge shares.
Instead, you will receive cash in an amount equal to the market value of any
fractional Phelps Dodge shares you would otherwise have been entitled to
receive.
Q: WILL I BE TAXED ON THE PHELPS DODGE SHARES I RECEIVE?
A: The tax treatment will depend on the extent to which you receive cash or our
common stock pursuant to our offer and the Phelps Dodge/Asarco merger in
exchange for your Asarco shares:
- If you elect to receive solely our common stock and no proration of the
number of shares of our common stock is required, we expect that the
transaction will be tax-free to you.
- If you elect to receive solely cash and no proration of cash is required,
we expect that, in general, you will recognize gain or loss in respect of
your Asarco shares.
- If, because of proration, you receive some cash and some shares, we
expect that, in general, you will recognize some or all of the gain, if
any, in your Asarco shares but will not recognize loss, if any.
Q: HAS ASARCO RECEIVED A FAIRNESS OPINION IN CONNECTION WITH THE OFFER?
A: Yes. Asarco has received an opinion from Credit Suisse First Boston
Corporation dated October 5, 1999, substantially to the effect that, as of
such date, the consideration to be received by Asarco stockholders in the
offer and the Asarco/Phelps Dodge merger is fair from a financial point of
view to the stockholders of Asarco.
iii
<PAGE> 5
Q: WHAT ARE THE CONDITIONS TO YOUR OFFER?
A: Our offer is subject to several conditions, including:
- tender of at least 80% Asarco's shares; and
- our stockholders having approved the issuance of our stock pursuant to our
offer.
These conditions and other conditions to our offer are discussed in this
prospectus under "The Offer -- Conditions of Our Offer."
Q: WHAT HAPPENED TO ASARCO'S AGREEMENT FOR A TWO-WAY COMBINATION WITH CYPRUS
AMAX?
A: Cyprus Amax terminated its merger agreement with Asarco in order to enter
into a merger agreement with us.
Q: HOW WOULD YOU GO ABOUT COMPLETING YOUR PROPOSED ACQUISITION?
A: Once we acquire shares in the offer, our wholly owned subsidiary AAV
Corporation will merge with Asarco, so that Asarco will become a wholly
owned subsidiary of Phelps Dodge.
Q: HOW LONG WILL IT TAKE TO COMPLETE YOUR PROPOSED COMBINATION?
A: We expect to complete our combination with Asarco early in the fourth
quarter of this year.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT PHELPS DODGE, ASARCO AND CYPRUS
AMAX?
A: You can find more information about Phelps Dodge, Asarco and Cyprus Amax
from various sources described under "Where You Can Find More Information"
on page vi.
Q: HOW DO I PARTICIPATE IN YOUR OFFER?
A: To tender your shares, you should do the following:
- If you hold your shares in your own name, complete and sign the enclosed
letter of election and transmittal and return it with your share
certificates to ChaseMellon Shareholder Services, L.L.C., the exchange
agent for the offer, at one of its addresses on the back cover of this
prospectus.
- If you hold your shares in "street name" through a broker, ask your broker
to tender your shares and make the election on your behalf.
- If you have a preference for receiving cash or Phelps Dodge shares,
express your preference on the enclosed letter of election and
transmittal. You may change your election only by properly withdrawing
your shares and tendering them again before our offer expires.
Q: AM I REQUIRED TO MAKE AN ELECTION?
A: No. If you do not make an election, you will still receive payment for your
Asarco shares. However, if you have a preference for receiving either Phelps
Dodge shares or cash and do not make an election, we will not take your
preference into account and you will be allocated whatever component is
remaining (or a proportionate share of each component if neither is
oversubscribed) after taking into account the preferences of other tendering
shareholders.
Q: IF I HAVE ALREADY TENDERED MY SHARES, DO I NEED TO TAKE FURTHER ACTION?
A: No, but if you tendered pursuant to our initial offer (prospectus dated
September 2, 1999), you must withdraw and re-tender your shares if you wish
to make an election to receive cash or Phelps Dodge shares. If you tendered
pursuant to our amended offer (prospectus dated September 22, 1999), you
need not take any further action unless you wish to change any cash or stock
election you made.
Q: WHAT SHOULD I DO IF I HAVE QUESTIONS?
A: If you have any questions about our offer, please call our information
agent, Innisfree M&A Incorporated, toll-free at 1-877-750-5838.
iv
<PAGE> 6
WHERE YOU CAN FIND MORE INFORMATION
Phelps Dodge, Asarco and Cyprus Amax file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (the SEC). You may read and copy any reports, statements or other
information we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the SEC's public reference rooms in New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at www.sec.gov. Phelps Dodge
filed a registration statement on Form S-4 to register with the SEC the Phelps
Dodge common shares to be issued pursuant to our offer. This prospectus is a
part of that registration statement. As allowed by SEC rules, this prospectus
does not contain all the information you can find in the registration statement
or the exhibits to the registration statement.
When we commenced our offer, we filed with the SEC a statement on Schedule
14D-1 pursuant to rule 14d-3 under the Securities Exchange Act of 1934 to
furnish certain information about our offer. We filed an amended Schedule 14D-1
on September 22, 1999 and on October 7, 1999. Today we are filing a further
amended Schedule 14D-1. You may read and copy the Schedule 14D-1 (and any
amendments to it) at the SEC's public reference room in Washington, D.C.
referred to above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Phelps Dodge, Asarco or Cyprus Amax have previously filed with the SEC. These
documents contain important information about Phelps Dodge, Asarco and Cyprus
Amax and their financial condition.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST TO: CORPORATE SECRETARY, PHELPS DODGE CORPORATION, 2600 NORTH CENTRAL
AVENUE, PHOENIX, AZ 85004-3014, TELEPHONE (602) 234-8598. IN ORDER TO ENSURE
TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NO LATER THAN
OCTOBER 18, 1999.
The following documents filed with the SEC by Phelps Dodge are
incorporated herein by reference:
(i) Phelps Dodge's Annual Report on Form 10-K for the year ended
December 31, 1998 (revised information regarding Phelps Dodge's exploration
and mining properties is set forth in Schedule B to this prospectus);
(ii) Phelps Dodge's Proxy Statement for the Annual Meeting of Phelps
Dodge Stockholders held on May 5, 1999;
(iii) Phelps Dodge's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999;
(iv) Phelps Dodge's Annual Report on Form 11-K for the fiscal year
ended December 31, 1998;
(v) Phelps Dodge's Current Reports on Form 8-K dated August 23, 1999,
August 26, 1999, September 3, 1999, September 22, 1999, September 30, 1999
and October 6, 1999;
(vi) Phelps Dodge Definitive Proxy Statement for the special meeting
of Asarco shareholders to be held on September 30, 1999;
(vii) Phelps Dodge's Definitive Proxy Statement for the special
meeting of Cyprus Amax stockholders to be held on September 30, 1999; and
(viii) Phelps Dodge's Definitive Proxy Statement, dated September 13,
1999, for the special meeting of Phelps Dodge stockholders to be held on
October 13, 1999, as supplemented on September 22, 1999, October 1, 1999
and October 8, 1999.
v
<PAGE> 7
The following documents filed with the SEC by Asarco are incorporated
herein by reference:
(i) Asarco's Annual Report on Form 10-K for the year ended December
31, 1998 (except for the report of Asarco's independent accountants
contained therein which is not incorporated herein by reference because the
consent of Asarco's independent accountants has not yet been obtained);
(ii) Asarco's Proxy Statement for the Annual Meeting of Shareholders
held on April 28, 1999;
(iii) Asarco's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1999 and June 30, 1999; and
(iv) Asarco's Current Reports on Form 8-K dated July 20, 1999,
September 7, 1999, September 20, 1999, September 28, 1999, October 6, 1999
and October 7, 1999.
The following documents filed with the SEC by Cyprus Amax are incorporated
herein by reference:
(i) Cyprus Amax's Annual Report on Form 10-K for the year ended
December 31, 1998 (except for the report of Cyprus Amax's independent
accountants contained therein which is not incorporated herein by reference
because the consent of Cyprus Amax's independent accountants has not yet
been obtained);
(ii) Cyprus Amax's Proxy Statement for the Annual Meeting of
Shareholders held on May 6, 1999;
(iii) Cyprus Amax's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999; and
(iv) Cyprus Amax's Current Reports on Form 8-K dated February 24,
1999, July 14, 1999, July 21, 1999 and September 28, 1999.
All documents filed by Phelps Dodge, Asarco or Cyprus Amax pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 from
the date of this prospectus to the date that shares are accepted for exchange
pursuant to our offer (or the date that our offer is terminated) shall also be
deemed to be incorporated herein by reference.
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<PAGE> 8
SUMMARY
This summary highlights selected information from this prospectus, and may
not contain all of the information that is important to you. To better
understand the proposed Phelps Dodge/Asarco/Cyprus Amax combination and our
separate offers to the shareholders of Asarco and Cyprus Amax, you should read
this entire document carefully, as well as those additional documents to which
we refer you. See "Where You Can Find More Information" on page vi.
THE PROPOSED COMBINATION
We have agreed to combine the businesses of Phelps Dodge Corporation
(Phelps Dodge) and ASARCO Incorporated (Asarco). Pursuant to our agreement with
Asarco, we are offering to exchange $14.75 net in cash plus 0.25133120 shares of
Phelps Dodge common stock per Asarco common share, on a fully prorated basis.
You may elect to receive either $29.50 in cash or 0.50266 shares of Phelps Dodge
common stock for each of your Asarco common shares that are validly tendered and
not properly withdrawn, subject, in each case, to the election and proration
procedures described in this prospectus under the caption "The Offer --
Description of Election and Proration Procedures." The consideration we are
offering you has a value of $28.21, based on the closing price of Phelps Dodge
common stock on October 5, 1999 of 53 9/16. If you receive all consideration in
the form of stock, at the exchange ratio of 0.50266 Phelps Dodge common shares
per Asarco share, your consideration would be worth $26.92, based on the same
closing price. We are also making a separate offer to shareholders of Cyprus
Amax to exchange $7.61176875 in cash and 0.2203 shares of Phelps Dodge common
stock per Cyprus Amax common share, on a fully prorated basis and subject to the
same election and proration procedures.
In July 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies. In August 1999, we proposed a three-way combination
with Asarco and Cyprus Amax. Since then, we have reached separate agreements to
combine with each of Cyprus Amax and Asarco.
We are making our offers to the Asarco and Cyprus Amax shareholders
pursuant to our merger agreements with each company. We expect to complete both
acquisitions early in the fourth quarter of 1999. However, our offer to Asarco
shareholders is not conditioned on the success of our offer to Cyprus Amax
shareholders, nor is our offer to Cyprus Amax shareholders conditioned on the
success of our offer to Asarco shareholders. See "The Offer" beginning on page
44.
REASONS FOR THE PROPOSED COMBINATION
We believe that our proposed combination of Phelps Dodge, Asarco and Cyprus
Amax presents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to deliver superior
results in all business cycles. In addition to the substantial dividend increase
for Asarco and Cyprus Amax shareholders, we believe that the combination of
Phelps Dodge, Asarco and Cyprus Amax will produce the following benefits:
- Substantial premium. The exchange ratios and cash that we are offering
imply premiums of approximately 59% for Asarco shareholders and 44% for
Cyprus Amax shareholders based on the last trading prices of Phelps
Dodge, Asarco and Cyprus Amax common stock just before trading was halted
on August 20, 1999, the day we publicly announced our proposed business
combination.
- Accretion to cash flow and earnings. The combination would result in
immediate and substantial accretion to the cash flow of the combined
company. We expect the combination to result in significant accretion to
earnings per share of the combined company beginning in the second year
after closing, assuming copper prices of $0.80 - $0.85 per pound in 2001.
- Ability to integrate operations. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities.
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<PAGE> 9
- Management strength. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace.
- Cost savings. We expect to achieve annual cash cost savings of at least
$200 million by the end of the second year after closing, as a result of
reductions in overhead, purchasing, exploration and other expenses. We
also expect at least another $28 million in annual savings from lower
depreciation expenses, bringing the total annual savings to at least $228
million. These cost savings are based on public information and our
expectation that we can deliver at least $75 million in incremental
savings above the cash synergy figure of $125 million projected in the
proposed Asarco-Cyprus Amax merger. This does not include any cost
savings from the rationalization of high-cost production during periods
of low copper prices.
- Operating leverage. The combined company would have tremendous operating
leverage, together with enough diversity in other businesses to mitigate
cyclical downturns.
- Superior production capability. The total annual copper production of
the combined company would be approximately 3.8 billion pounds at current
levels, with total attributable copper reserves of approximately 80
billion recoverable pounds.
- Increased competitiveness. The combined company would have increased
ability to compete for world-class projects.
- Reduced capital expenditures. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce capital
expenditures.
- Financial strength. The company would have a strong, liquid balance
sheet, with excellent access to capital.
See "Reasons for the Proposed Combination" beginning on page 14.
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<PAGE> 10
THE OFFER
SUMMARY OF THE OFFER
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of election and transmittal, to
exchange 0.50266 shares of Phelps Dodge common stock, or $29.50 in cash, for
each outstanding share of common stock of Asarco that is validly tendered on or
prior to the expiration date and not properly withdrawn, subject, in each case,
to the election and proration procedures described in this prospectus and the
related letter of election and transmittal. We are making our offer through our
wholly owned subsidiary, AAV Corporation, which is a Delaware corporation. The
term "expiration date" means 12:00 midnight, New York City time, on October 25,
1999, unless we extend the period of time for which this offer is open, in which
case the term "expiration date" means the latest time and on which the offer, as
so extended, expires. We are also making a separate offer to exchange 0.3500
shares of Phelps Dodge common stock, or $20.54 in cash, for each outstanding
share of common stock of Cyprus Amax, subject to the same election and proration
procedures.
CONDITIONS OF OUR OFFER
Our obligation to exchange shares of Phelps Dodge common stock and cash for
Asarco shares pursuant to the offer is subject to several conditions referred to
below under "The Offer -- Conditions of Our Offer," including conditions as to
the minimum number of shares tendered, approval by our stockholders, and other
conditions that are discussed below.
TIMING OF THE OFFER
Our offer is currently scheduled to expire on October 25, 1999; however, we
currently intend to extend our offer from time to time as necessary until all
the conditions to the offer have been satisfied or waived. See "The
Offer -- Extension, Termination and Amendment."
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right (subject to our agreement with Asarco), in
our sole discretion, at any time or from time to time, to extend the period of
time during which our offer remains open, and we can do so by giving oral or
written notice of such extension to the exchange agent. If we decide to extend
our offer, we will make an announcement to that effect no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
expiration date. We are not making any assurance that we will exercise our right
to extend our offer, although we currently intend to do so until all conditions
have been satisfied or waived. During any such extension, all Asarco shares
previously tendered and not withdrawn will remain subject to the offer, subject
to your right to withdraw your Asarco shares.
Subject to the SEC's applicable rules and regulations, we also reserve the
right (subject to our merger agreement with Asarco), in our sole discretion, at
any time or from time to time, (a) to delay our acceptance for exchange or our
exchange of any Asarco shares pursuant to our offer, regardless of whether we
previously accepted Asarco shares for exchange, or to terminate our offer and
not accept for exchange or exchange any Asarco shares not previously accepted
for exchange or exchanged, upon the failure of any of the conditions of the
offer to be satisfied and (b) to waive any condition (other than the minimum
condition, the condition relating to the Phelps Dodge stockholder approval and
the condition relating to the effectiveness of the registration statement for
the Phelps Dodge shares to be issued in our offer) or otherwise to amend the
offer in any respect, by giving oral or written notice of such delay,
termination or amendment to the exchange agent and by making a public
announcement. We will follow any extension, termination, amendment or delay, as
promptly as practicable, with a public announcement. In the case of an
extension, any such announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Securities Exchange Act of 1934, which require that any
material change in the information published, sent or given to the stockholders
in connection with the offer be promptly sent to stockholders in a manner
reasonably designed to inform stockholders of such change) and without limiting
the manner in which we may choose to
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<PAGE> 11
make any public announcement, we assume no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
EXCHANGE OF SHARES; DELIVERY OF PHELPS DODGE COMMON STOCK AND CASH
Upon the terms and subject to the conditions of our offer (including, if
the offer is extended or amended, the terms and conditions of any such extension
or amendment), Phelps Dodge will accept for exchange, and will exchange, shares
validly tendered and not properly withdrawn as promptly as practicable after the
expiration date.
WITHDRAWAL RIGHTS
Your tender of Asarco shares pursuant to the offer is irrevocable, except
that Asarco shares tendered pursuant to the offer may be withdrawn at any time
prior to the expiration date, and, unless we previously accepted them pursuant
to the offer, may also be withdrawn at any time after November 2, 1999.
PROCEDURE FOR TENDERING SHARES
For you to validly tender Asarco shares pursuant to our offer, (a) a
properly completed and duly executed letter of election and transmittal (or
manually executed facsimile of that document), along with any required signature
guarantees, or an agent's message, which is explained below, in connection with
a book-entry transfer, and any other required documents, must be transmitted to
and received by the exchange agent at one of its addresses set forth on the back
cover of this prospectus, and certificates for tendered Asarco shares must be
received by the exchange agent at such address, or those Asarco shares must be
tendered pursuant to the procedures for book-entry tender set forth in "The
Offer" (and a confirmation of receipt of such tender received), in each case
before the expiration date, or (b) you must comply with the guaranteed delivery
procedures set forth in "The Offer."
ELECTION AND PRORATION PROCEDURES
You will be able to elect to receive either cash or Phelps Dodge common
shares in exchange for your Asarco common shares, subject to the election and
proration procedures described under the caption "The Offer -- Description of
Election and Proration Procedures." You can make this election by filling out
the appropriate box in the letter of election and transmittal or, if you hold
your Asarco shares through a broker, by asking your broker to make an election
on your behalf. If you tendered your Asarco shares pursuant to our initial offer
(prospectus dated September 2, 1999), you must withdraw and re-tender your
shares if you wish to make an election. Otherwise, you will be treated as having
made no election. If you tendered pursuant to our amended offer (prospectus
dated September 22, 1999), you need not take any further action unless you wish
to make or change any cash or stock election.
THE COMPANIES
PHELPS DODGE CORPORATION
2600 North Central Avenue
Phoenix, AZ 85004-3014
(602) 234-8100
Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions:
- Phelps Dodge Mining Company, which includes our worldwide copper
operations and worldwide mineral exploration and development programs;
and
- Phelps Dodge Industries, which includes our specialty chemicals segment
and our wire and cable segment.
As of June 30, 1999, Phelps Dodge and its subsidiaries had 13,193
employees.
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<PAGE> 12
ASARCO INCORPORATED
180 Maiden Lane
New York, NY 10038
(212) 510-2000
Asarco Incorporated, a New Jersey corporation organized in 1899, is one of
the world's leading producers of copper. Asarco also produces specialty
chemicals and aggregates. Asarco's copper business includes integrated mining,
smelting and refining operations in North America and in Peru through its 54.3%
owned subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly
owned subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone. Asarco
also operates a custom lead smelting business, a zinc mining business and a
specialty metals business. Asarco owns Encycle, Inc., which operates a waste
recycling facility and Hydrometrics, an environmental consulting and
construction firm. As of June 30, 1999, Asarco and its subsidiaries employed
approximately 10,100 employees.
CYPRUS AMAX MINERALS COMPANY
9100 East Mineral Circle
Englewood, CO 80112
(303) 643-5000
Cyprus Amax Minerals Company, a Delaware corporation, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June 1999. Cyprus Amax
still holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and
its subsidiaries employed approximately 4,600 employees.
RISK FACTORS
In deciding whether to tender your shares pursuant to our offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
- the risks associated with integrating Asarco and Cyprus Amax into our
company, including the risk that the amount and timing of the cost
savings and other expected benefits from the business combination may be
different from what we expect;
- the fixed exchange ratio of our offer, which may work to your
disadvantage if you receive Phelps Dodge shares in our offer and Asarco
stock increases in value or Phelps Dodge stock decreases in value;
- the possibility that, due to the election and proration procedures, you
may not receive all consideration in the form that you have elected;
- the fact that our offers to Asarco and Cyprus Amax shareholders are not
conditioned on each other and if we don't complete business combinations
with both Asarco and Cyprus Amax, the expected cost savings and other
benefits would be reduced;
- the volatility of copper prices;
- the extensive governmental regulations, including regulations relating to
environmental matters, to which Phelps Dodge, Asarco and Cyprus Amax are
subject;
- the risks associated with conducting operations outside the United
States, especially in less developed countries;
- the risks associated with mining;
- the fact that reserve levels are subject to uncertainties; and
- potential risks associated with the Year 2000.
See "Risk Factors" beginning on the following page for a more complete
discussion of these factors.
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<PAGE> 13
RISK FACTORS
In deciding whether to tender your shares pursuant to our offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
BENEFITS OF THE COMBINATION MAY NOT BE REALIZED
If we complete the proposed Phelps Dodge/Asarco/Cyprus Amax business
combination, we will integrate three companies that have previously operated
independently. This will involve integrating:
- corporate headquarters and mining administration offices;
- worldwide exploration and development activities;
- mining operations, particularly in the southwestern United States; and
- administrative functions in the U.S., Chile and Peru.
We may not be able to integrate the operations of Asarco and Cyprus Amax without
encountering difficulties. The diversion of the attention of management to the
integration effort and any difficulties encountered in combining operations
could adversely affect the combined company's businesses. Although we expect at
least $200 million in annual cash cost savings from the combination by the end
of the second year (excluding any savings from rationalizations of high-cost
production during periods of low copper prices), together with $28 million in
annual savings from lower depreciation, we cannot be sure that we will be able
to achieve them in the amounts expected or as quickly as we now expect. Actual
cost savings may be higher or lower than we currently expect, and may take a
longer or shorter time to achieve than we currently expect. Our estimates
concerning the amount and timing of cost savings have been developed by our
management and reflect our best judgment based on publicly available information
about Asarco and Cyprus Amax.
More generally, our views about the expected benefits of our proposed
combination are based on publicly available information about Asarco and Cyprus
Amax. Those companies may have other information, not available to us, that
would significantly affect our estimates or views.
Because our offers to acquire Asarco and Cyprus Amax are separate, and
neither offer is dependent on the success of the other, it is possible that one
of the following scenarios will occur:
- we will acquire Asarco, but not Cyprus Amax;
- we will acquire Cyprus Amax, but not Asarco; or
- we will acquire both Asarco and Cyprus Amax, but it will take us much
longer to acquire one company than the other.
In any of these cases, the cost savings we expect from the combination will be
less than if all three companies combined promptly. If we acquire only one of
Asarco or Cyprus Amax, we may still encounter difficulties in integrating its
operations, and may not be able to achieve the cost savings we expect in the
amounts or time periods anticipated.
FIXED EXCHANGE RATIO OF OUR OFFER COULD WORK TO YOUR DISADVANTAGE
We are offering to exchange 0.50266 shares of Phelps Dodge common stock, or
$29.50 in cash, at your election, for each outstanding share of Asarco common
stock, subject, in each case, to the election and proration procedures described
in this prospectus and the related letter of election and transmittal. If you
receive Phelps Dodge common stock (either because you have elected to receive
Phelps Dodge shares or because of the allocation procedures), once you have
tendered your stock and your withdrawal rights have expired, you will be locked
into that exchange ratio, and you will not be able to capture gains from
possible
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<PAGE> 14
increases in value of Asarco common stock. While you may benefit from possible
increases in value of Phelps Dodge common stock, you may incur losses from
possible decreases in value of Phelps Dodge common stock.
YOU MAY NOT RECEIVE ALL CONSIDERATION IN THE FORM THAT YOU HAVE ELECTED
We are offering to exchange $14.75 net in cash plus 0.25133120 shares of
Phelps Dodge common stock per Asarco common share, on a fully prorated basis. At
the time you tender your shares and make your election, you will not know
exactly what combination of stock and/or cash you will receive because it will
also depend upon the elections made by other tendering stockholders. You can
tell us your preference to receive either $29.50 cash or 0.50266 shares of
Phelps Dodge common stock for each of your Asarco common shares, and you will
receive either cash, Phelps Dodge common stock, or a combination of cash and
Phelps Dodge common stock, based upon your stated preference and the preferences
of other tendering shareholders. To the extent the demand for either the cash or
stock component of our offer exceeds the aggregate amount of cash or stock in
our offer, we will prorate the total cash or stock, as the case may be,
proportionally among the shareholders who elect that component. Shareholders who
do not make an election will be allocated whatever component is remaining (or a
proportionate share of each component if neither is oversubscribed), after
taking into account the preferences of the tendering shareholders who make
elections. We describe our procedures for prorating cash and common stock under
the caption "The Offer -- Description of Election and Proration Procedures."
COPPER PRICE VOLATILITY MAY REDUCE INCOME
Copper is an internationally traded commodity. Its prices are effectively
determined on the two major metals exchanges -- New York Mercantile Exchange
(COMEX) and London Metal Exchange (LME). The prices on these exchanges reflect
the worldwide balance of copper demand and supply and various domestic and
international macroeconomic and political conditions. Prices are also sometimes
influenced significantly by numerous other factors, including speculative
actions, the availability and cost of substitute materials, and currency
exchange fluctuations. The copper market is volatile and cyclical, as
illustrated by the following chart showing the high, low and average COMEX spot
price per pound of copper cathode for the years indicated:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
- ---- ------ ------ -------
<S> <C> <C> <C>
1989........................................... $ 1.55 $ 1.03 $ 1.27
1990........................................... 1.38 0.96 1.19
1991........................................... 1.20 0.96 1.05
1992........................................... 1.16 0.93 1.03
1993........................................... 1.07 0.72 0.85
1994........................................... 1.40 0.78 1.07
1995........................................... 1.46 1.21 1.35
1996........................................... 1.31 0.86 1.06
1997........................................... 1.23 0.76 1.04
1998........................................... 0.86 0.64 0.75
1999 (through October 5)....................... 0.83 0.61 0.70
------
</TABLE>
- ---------------
SOURCE: COMEX
On October 5, 1999, the closing spot price of copper cathode on the COMEX was
$0.80 per pound.
Any material change in the price we receive for copper, or in our unit
production costs, has a significant effect on our results. Our share of current
annual production is approximately 1.6 billion pounds of copper. Accordingly,
each 1 cent per pound change in the average annual copper price, or in average
annual unit production costs, causes a variation in annual operating income
before taxes of approximately $16 million. Following the completion of our
proposed Phelps Dodge/Asarco/Cyprus Amax combination, the combined company's
annual production would be approximately 3.8 billion pounds, based on current
levels. We estimate that each 1 cent per pound change in the average annual
copper price, or in average unit production costs,
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<PAGE> 15
would cause a variation in annual operating income before taxes of approximately
$38 million at these production levels.
If we combined with Asarco but not with Cyprus Amax, our combined annual
production would be approximately 2.7 billion pounds, based on current levels.
We estimate that each 1 cent per pound change in the average annual copper
price, or in average unit production costs, would cause a variation in annual
operating income before taxes of approximately $27 million at these production
levels.
While Phelps Dodge, Asarco and Cyprus Amax historically have used limited
financial risk management techniques to reduce a portion of their exposure to
the volatility of commodity market prices, there can be no assurance that the
combined company will continue to be able to do so effectively in the future. In
addition, depending upon the specific techniques employed, market conditions and
other factors, these activities could reduce the earnings or cash flow that the
combined company otherwise would realize or could result in losses.
Cyprus Amax is the world's largest producer of molybdenum, which, like
copper, is characterized by volatile and cyclical prices. Molybdenum consumption
depends heavily on worldwide demand from the specialty steel industry and, to a
lesser extent, on chemical applications. World molybdenum consumption remained
at record levels in the first half of 1998, continuing the growth trend begun in
1994. Beginning in the second half of 1998, molybdenum consumption declined as a
result of the economic downturn in Asia. Overall 1998 molybdenum worldwide
consumption declined an estimated four percent primarily in metallurgical
applications. The molybdenum market remained oversupplied during the second half
of 1998, and production curtailments were announced in China and at three
primary mines in North America during the fourth quarter. The molybdenum market
continued to be oversupplied in the first half of 1999. Western World
metallurgical grade molybdenum dealer oxide prices averaged about $2.65 per
pound in the first half of 1999 compared with full-year averages of about $3.40
per pound in 1998 and about $4.30 per pound in 1997. Cyprus Amax molybdenum
realizations averaged $4.11 per pound in the first half of 1999 compared with
full-year averages of $4.95 per pound in 1998 and $5.50 per pound in 1997, with
realizations positively impacted by higher-valued molybdenum chemical products.
A substantial portion of world molybdenum production is a by-product of copper
mining, which is relatively insensitive to molybdenum price levels. Exports to
the Western World, especially from China, can also influence competitive
conditions.
ENVIRONMENTAL AND REGULATORY COMPLIANCE MAY IMPOSE SUBSTANTIAL COSTS
The mining operations and exploration activities of Phelps Dodge, Asarco
and Cyprus Amax, both inside and outside the United States, are subject to
extensive laws and regulations governing prospecting, developing, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
and remediation of the environment, protection of endangered and protected
species, mine safety, toxic substances and other matters. Mining is also subject
to risks and liabilities associated with pollution of the environment and the
disposal of waste products occurring as a result of mineral exploration and
production. Compliance with these laws and regulations could impose substantial
costs and subject the combined company to significant potential liabilities.
ENVIRONMENTAL MATTERS
Our operations in the United States are subject to stringent federal, state
and local laws and regulations relating to improving or maintaining
environmental quality. Our global operations are also subject to many
environmental protection laws. Environmental laws often require parties to pay
for remedial action or to pay damages regardless of fault. Environmental laws
also often impose liability with respect to divested or terminated operations,
even if the operations were terminated or divested many years ago. The federal
Clean Air Act has had a significant impact, particularly on our smelters. Costs
associated with environmental compliance have increased over time, and we expect
these costs to continue to rise in the future.
We are subject to the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA or Superfund), as amended by the Superfund Amendments
and Reauthorization Act of 1986. Under Superfund, the Environmental Protection
Agency (EPA) has identified on its CERCLIS database approximately 35,000 sites
throughout the United States for review, ranking and possible inclusion on the
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<PAGE> 16
National Priorities List (NPL). The EPA has included 13 sites owned by us on the
CERCLIS database. Even though we believe that most, if not all, of the sites
identified do not qualify for listing on the NPL, we may be required to remove
hazardous waste or remediate the alleged effects of hazardous substances on the
environment. In many cases, this involves past disposal practices at sites not
owned by us. We have received notice that we are a potentially responsible party
from the EPA or individual states under CERCLA or an equivalent state law. We
are participating in environmental assessment and remediation activity at 39
sites.
At December 31, 1998, we had reserves of $106.0 million for remediation of
some of the sites discussed above and other environmental costs. We record
liabilities for environmental expenditures when it is probable that obligations
have been incurred and the costs can be reasonably estimated. The amounts of
these liabilities are very difficult to estimate. This is due to factors such as
the unknown extent of the remedial actions that may be required. In the case of
sites not owned by us, the extent of our probable liability in proportion to the
probable liability of other parties is difficult to estimate. We have other
possible environmental liabilities that in our judgment cannot be reasonably
estimated. Losses attributable to remediation costs are reasonably possible at
other sites. Based on the information available to us, the accruals, both
individually and in the aggregate, from known environmental liabilities are not
expected to result in a material additional loss beyond that already accrued. We
cannot currently estimate the total additional loss we may incur for
environmental liabilities resulting from such things as frequently changing
environmental laws, regulations or agency interpretations, which are beyond our
control, but that loss could be potentially material.
The U.S. and non-U.S. operations of Asarco and Cyprus Amax are also subject
to stringent environmental laws, including CERCLA. The following excerpts are
from Asarco's quarterly report on Form 10-Q for the period ended June 30, 1999:
Reserves for closed plants and environmental matters, including mine
reclamation costs for active and closed properties, totaled $123.8 million
at June 30, 1999. Asarco anticipates that expenditures relating to these
reserves will be made over the next several years. Net cash expenditures
against these reserves for the three months ended June 30, 1999 and 1998
were $12.6 million and $25.4 million, respectively. Expenditures for the
six months ended June 30, 1999 and 1998 were $25.6 million and $40.2
million, respectively.
. . .
Asarco and certain of its subsidiaries have received notices from EPA
and other federal and state agencies that they and in most cases numerous
other parties are potentially responsible to remediate alleged hazardous
substance releases at certain sites under CERCLA or similar state laws. In
addition, Asarco and certain of its subsidiaries are defendants in lawsuits
brought under CERCLA or state laws that seek substantial damages and
remediation. Remedial action is being undertaken by Asarco at some of the
sites.
The following excerpt is from Cyprus Amax's quarterly report on Form 10-Q for
the period ended June 30, 1999:
At June 30, 1999, Cyprus Amax had accruals of approximately $252
million for expected future mine closure, reclamation, and environmental
remediation liabilities. Total reclamation costs for Cyprus Amax at the end
of current mine lives are estimated at about $253 million of which
approximately $110 million was reserved at June 30, 1999. Additionally, the
cost range of reasonably possible outcomes for sites where remediation
costs are estimable is from $120 million to $450 million, of which
approximately $142 million was accrued at June 30, 1999. Work on these
sites is expected to be substantially completed in the next several years,
subject to the inherent delays involved in the process. Remediation costs
that could not be reasonably estimated at June 30, 1999, are not expected
to have a material impact on the financial condition and ongoing operations
of Cyprus Amax.
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<PAGE> 17
OTHER REGULATORY MATTERS
In recent years, the U.S. Congress has considered a number of proposed
amendments to the General Mining Law of 1872 which governs mining claims and
related activities on federal lands. Although Congress has not adopted any such
legislation, it could do so in the future. If ever adopted, such legislation
could impose royalties on minerals extracted from federal lands, require payment
of fair market value for patenting federal lands, and required that patented
lands used for non-mining purposes revert to the federal government. Passage of
mining law amendments or revisions to the hardrock mining surface management
regulations could result in additional expenses in the development and operation
of new mines on federal lands.
Phelps Dodge, Asarco and Cyprus Amax are also subject to federal and state
laws and regulations pertaining to plant and mine safety and health conditions.
These laws include the Occupational Safety and Health Act of 1970 and the Mine
Safety and Health Act of 1977. Present and proposed regulations govern worker
exposure to a number of substances and conditions present in work environments.
These include dust, mist, fumes, heat and noise. Compliance with these
regulations may require significant expenditures.
The global operations of Phelps Dodge, Asarco and Cyprus Amax are also
subject to extensive laws and regulations governing mining operations and
exploration, including laws and regulations pertaining to plant and mine safety
and health conditions. These laws and regulations may impose substantial costs
on our operations outside the United States.
PRODUCT AND PERSONAL INJURY LITIGATION
Asarco may also be subject to risks from product liability and personal
injury lawsuits. The following excerpt is from Asarco's quarterly report on Form
10-Q for the period ended June 30, 1999:
Asarco and two subsidiaries, as of June 30, 1999, are defendants in
1,169 lawsuits brought by 5,221 primary and 924 secondary plaintiffs
seeking substantial actual and punitive damages for personal injury or
death allegedly caused by exposure to asbestos. Three of these lawsuits are
purported class actions, two of which are allegedly brought on behalf of
persons who are not known to have asbestos-related injury. The third is
purportedly brought on behalf of persons suing both tobacco-related and
asbestos-related entities claiming damages for personal injury or death
arising from exposure to asbestos and cigarette smoke. In addition, Asarco
and certain subsidiaries are defendants in product liability lawsuits
involving various other products, including metals.
OPERATIONS OUTSIDE THE UNITED STATES ARE SUBJECT TO RISKS
We are a global company with substantial operations outside the United
States, including in Latin America, Asia and Europe. Both Asarco and Cyprus Amax
also have significant operations located in countries outside the United States,
including Chile, Peru and throughout Europe, Asia and Australia.
Mining and other investments outside the United States are subject to the
risks normally associated with conducting business in non-U.S. countries,
particularly those that are less developed or have emerging economies:
- uncertain political and economic environments;
- risks of war and civil disturbances;
- government restrictions on the movement of funds;
- government actions to deprive us of our contract rights or to take our
property without fair compensation;
- adverse changes in laws or policies of particular countries;
- increases in foreign taxation;
- delays in obtaining or the inability to obtain necessary governmental
permits;
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<PAGE> 18
- limitations on ownership and on repatriation of earnings; and
- foreign exchange controls and currency fluctuations.
Although we are not currently experiencing any significant problems in
non-U.S. countries arising from these risks, problems could arise in the future.
Investments made by Phelps Dodge, Asarco and Cyprus Amax outside the U.S. may
also be adversely affected by U.S. government laws and policies affecting
foreign trade, investment and taxation.
MINING IS SUBJECT TO RISKS
The business of mining is subject to a number of risks and hazards,
including:
- environmental hazards;
- labor disputes;
- encountering unusual or unexpected geologic formations or other
geological or grade problems;
- encountering unanticipated ground or water conditions;
- metallurgical and other processing problems;
- cave-ins, pit-wall failures and rock falls; and
- periodic interruptions due to inclement or hazardous weather conditions
or other unfavorable operating conditions.
In addition to the foregoing items, in the case of development projects,
the economic feasibility of any individual project is based upon, among other
things:
- the interpretation of geological data obtained from drill holes and other
sampling techniques;
- feasibility studies, which derive estimates of cash operating costs based
upon anticipated tonnage and grade of ore to be mined and processed;
- the configuration of the ore body;
- expected recovery rates of metals from the ore;
- comparable facility and equipment costs;
- environmental and regulatory requirements;
- anticipated climatic conditions; and
- estimates of labor productivity.
Such development projects also are subject to the successful completion of
final feasibility studies, issuance of necessary permits, and receipt of
adequate financing. Accordingly, uncertainties related to development projects
are more significant than those pertaining to existing operations.
The risks associated with mining described above could cause personal
injury or death, environmental damage, delays in mining, monetary losses and
possible legal liability. These risks could also cause mining projects to be
more expensive to develop or operate than expected, or to produce less than
expected, and could result in damage to mines or producing facilities.
RESERVE LEVELS ARE SUBJECT TO UNCERTAINTY
There are a number of uncertainties inherent in estimating quantities of
reserves, including many factors beyond the control of Phelps Dodge, Asarco and
Cyprus Amax. The reserve data incorporated by reference in this prospectus are
in large part only estimates. We cannot assure you that the volume and grade of
reserves recovered and rates of production will not be less than anticipated.
Declines in the market price of a particular metal also may render reserves
containing relatively lower grades of mineralization uneconomic to exploit. If
11
<PAGE> 19
the price we realized for a particular commodity were to decline substantially
below the price at which ore reserves were calculated for a sustained period of
time, we potentially could experience reductions in reserves and asset
write-downs. Under certain such circumstances, we may discontinue the
development of a project or mining at one or more properties. Further, changes
in operating and capital costs and other factors, including but not limited to
short-term operating factors such as the need for sequential development of ore
bodies and the processing of new or different ore grades, may materially and
adversely affect reserves.
YEAR 2000 POSES POTENTIAL RISKS
We continue to review our "Year 2000" readiness. The Year 2000 issue stems
from the predominant use in computer applications of a two-digit field to
capture the year (e.g., "99" for 1999). Because the "19" is assumed in the date,
when computers turn their clocks to the year 2000, the two-digit field will read
"00" and some computer programs will assume the year is 1900. Programs that
calculate, compare or sort on a date field may cause erroneous results and
errors leading to the risk of business interruption or shutdown and other
potential problems. The Year 2000 issue is a global issue that is very complex
because of the many programs that may be impacted in any computer system. These
computer systems are used to support the activities of our businesses including
financial systems, process control technology and other computer-controlled
equipment.
The following is a list of representative types of risks that could result
in the event of one or more major failures of our information systems, mining
sites, or facilities to be Year 2000 ready, or similar major failures by one or
more of our major third party suppliers or customers:
- Information systems -- could include disruptions of business and
transaction processing such as customer billing, payroll, accounts
payable, purchasing, and other information processes until the systems
can be remedied or replaced;
- Mining facilities -- could include disruptions of mining processes and
facilities resulting in delays in delivery of products until
non-compliant components can be remedied;
- Major suppliers -- could include disruptions in the provision of supplies
and components and transportation that could cause subsequent
interruptions of mining activities and delays in product deliveries; and
- Major customers -- could include disruptions in sales, revenue, and cash
inflow as a particular customer may not be Year 2000 compliant or one of
their suppliers may experience failures that could impact the amount of
copper, molybdenum, or coal they require.
Failure to correct a material Year 2000 problem could materially and adversely
affect our results of operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 issue, resulting in part from the
uncertainty of the readiness of suppliers and customers, we are unable to
determine with any certainty the consequences of Year 2000 failures and the
materiality of these potential failures. In addition, we cannot make any
assurances about the Year 2000 readiness of Asarco or Cyprus Amax.
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<PAGE> 20
THE PROPOSED COMBINATION
We have agreed to combine the businesses of Phelps Dodge and Asarco in a
transaction that we believe will create superior value for the shareholders of
both companies.
Pursuant to our agreement with Asarco, we are offering to exchange $14.75
net in cash plus 0.25133120 shares of Phelps Dodge common stock per Asarco
common share, on a fully prorated basis. You may elect to receive either $29.50
in cash or 0.50266 shares of Phelps Dodge common stock for each of your Asarco
common shares that are validly tendered and not properly withdrawn, subject, in
each case, to the election and proration procedures described in this prospectus
and the related letter of election and transmittal. We expect our proposed
transaction to be tax-free to you except that gain, if any, generally will be
recognized to the extent of cash received by you.
In July 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies. In August 1999, we proposed a three-way combination
with Asarco and Cyprus Amax. Since then, we have reached separate agreements to
combine with Cyprus Amax and Asarco. Under our merger agreement with Cyprus
Amax, we are also making a separate offer to Cyprus Amax shareholders to
exchange $7.61176875 in cash plus 0.2203 shares of Phelps Dodge common stock per
Cyprus Amax common share, on a fully prorated basis and subject to the same
election and proration procedures as are applicable to our offer to Asarco
shareholders.
We are making our offers to Asarco and Cyprus Amax shareholders pursuant to
our merger agreements with each company. We expect to complete both acquisitions
early in the fourth quarter of 1999. However, our offer to Asarco shareholders
is not conditioned on the success of our offer to Cyprus Amax shareholders, nor
is our offer to Cyprus Amax shareholders conditioned on the success of our offer
to Asarco shareholders. See "The Offer" beginning on page 41.
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<PAGE> 21
REASONS FOR THE PROPOSED COMBINATION
We believe the combination of Phelps Dodge, Asarco and Cyprus Amax
represents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to excel through
business cycles. We believe that the combination of Phelps Dodge, Asarco and
Cyprus Amax will produce the following valuable benefits:
- Ability to integrate operations. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities. Following the
combination, we would expect to operate all properties in accordance with
Phelps Dodge's disciplined management approach. This means that each
property would be run on a basis intended to earn in excess of the cost
of capital over the full copper price cycle.
- Accretion to cash flow. The combination would result in immediate and
substantial accretion to the cash flow of the combined company.
- Accretion to earnings. We expect the combination to result in
significant accretion to earnings per share of the combined company in
the second year, assuming copper prices of $0.80 -- $0.85 per pound.
- Superior production capability. The total annual worldwide copper
production of the combined company would be approximately 3.8 billion
pounds at current levels, with total attributable copper reserves of
approximately 80 billion recoverable pounds.
- Substantial cost savings. We expect the combined company to achieve
annual cash cost savings of at least $200 million by the end of the
second year after closing, as a result of reductions in overhead,
purchasing, exploration and other expenses. We also expect at least
another $28 million in annual savings from reduced depreciation expenses,
bringing the total annual savings to at least $228 million. These cost
savings are based on public information and our expectation that we can
deliver at least $75 million in incremental savings above the cash
synergy figure of $125 million projected in the proposed Asarco-Cyprus
Amax merger. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper
prices.
- Management strength. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace. Phelps Dodge's management team would have
the opportunity to implement value-based portfolio management. We believe
that Phelps Dodge's management team has the credibility to make the tough
decisions necessary to integrate all three businesses rapidly and to
build sustainable long-term shareholder value.
- Portfolio of world-class copper mines. The combined company would have a
core portfolio of world-class copper mines, including Morenci, Southern
Peru Copper Corporation, El Abra, Cerro Verde and Candelaria. This core
portfolio would represent more than 50% of the combined company's current
annual production. At current levels, these properties would produce
approximately 2 billion pounds of copper annually, at an average cash
cost of less than $0.50 per pound.
- Operating leverage. The combined company would have tremendous operating
leverage, together with enough diversity in other businesses to mitigate
cyclical downturns.
- Increased competitiveness. The combined company would have increased
ability to compete for world-class projects.
- Reduced capital expenditures. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce maintenance and
growth capital expenditures significantly.
- Financial strength. The combined company would have a strong, liquid
balance sheet, with excellent access to capital. The company's financial
strength would give it the ability to create a world-class portfolio of
cost-competitive mining assets.
We believe these factors will provide superior value creation
opportunities, on an ongoing basis, for the shareholders of all three companies.
While we would expect to maximize the benefits outlined above in a three-way
combination involving Phelps Dodge, Asarco and Cyprus Amax, we believe similar
benefits, though on a smaller scale, would result from a two-way combination
with Asarco.
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<PAGE> 22
BACKGROUND OF THE OFFER
In the autumn of 1996, Douglas C. Yearley, Chairman and CEO of Phelps
Dodge, had an informal conversation with Richard de J. Osborne, then Chairman,
Chief Executive Officer and President of Asarco, regarding a possible
combination of the two companies. Mr. Osborne declined to hold discussions on
this subject.
On July 15, 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies into a new company to be called "Asarco Cyprus
Incorporated." According to the press release issued by Asarco and Cyprus Amax,
Cyprus Amax shareholders would receive 0.765 shares of the combined company for
each of their Cyprus Amax shares, while Asarco shareholders would receive one
share of the combined company for each of their Asarco shares. The combined
company would have an initial dividend rate of 0.05 per share per quarter. The
transaction was approved by the Boards of Directors of Asarco and Cyprus Amax,
but remains subject to regulatory approvals and shareholder approvals.
On August 10, 1999, Mr. Yearley telephoned Milton H. Ward, Cyprus Amax's
Chairman, Chief Executive Officer and President, and Francis R. McAllister,
Asarco's Chairman and Chief Executive Officer, to propose a meeting to discuss
the possibility of a three-way combination involving Phelps Dodge, Asarco and
Cyprus Amax. Shortly thereafter, Messrs. Ward and McAllister sent the following
letter to Mr. Yearley:
August 10, 1999
Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue -- 16th Floor
Phoenix, AZ 85004-3014
Dear Doug:
We have discussed your request to meet with us jointly. We would like to
advise you that Cyprus Amax and Asarco are pursuing a combination under a Merger
Agreement dated July 15, 1999. Under the terms of that Agreement we are not at
liberty to have a discussion of the nature you were suggesting earlier today.
Best regards.
/s/ MILTON H. WARD
- ------------------------------------------
Milton H. Ward
Chairman, Chief Executive Officer
and President
Cyprus Amax Minerals Company
/s/ FRANCIS R. MCALLISTER
- ------------------------------------------
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
15
<PAGE> 23
On August 11, 1999, during the late afternoon, Mr. Yearley and J. Steven
Whisler, Phelps Dodge's President and Chief Operating Officer, sent the
following letter to Messrs. McAllister and Ward:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 11, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
We are disappointed that you have declined to meet with us. As you know
from our telephone conversations, we have considered your pending business
combination and would like to discuss with you our proposal, described in more
detail below, to combine all three of our companies in a negotiated transaction.
We believe that a three-way combination of Phelps Dodge, Asarco and Cyprus
Amax would create superior shareholder value for the shareholders of Asarco and
Cyprus Amax. A three-way combination, by creating a lower-cost global
competitor, would also benefit the employees and customers of all three
companies. For these reasons, we are approaching you to discuss the concept of a
three-way combination.
We propose that all of the outstanding common stock of both Asarco and
Cyprus Amax be exchanged for Phelps Dodge common stock. The transaction would be
tax-free to your shareholders.
A combination of these businesses would result in cost savings well in
excess of the amounts you have indicated to be achievable through your pending
merger. Preliminarily we estimate that the annual cash cost savings should reach
at least $150 million.
We propose to reward your shareholders for these substantial incremental
benefits by offering your shareholders an exchange ratio of 0.3756 Phelps Dodge
common shares for each Asarco common share and 0.2874 Phelps Dodge common shares
for each Cyprus Amax common share. These exchange ratios preserve the relative
economics of your proposed combination and imply premiums of approximately 25%
based on current market prices for Asarco and Cyprus Amax.
We believe this proposal creates superior value for your shareholders based
on:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;
- their opportunity to participate in the ongoing value creation of the
combined company; and
- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in substantial dividend increases for
both Asarco and Cyprus Amax shareholders to 3.76 times the level
contemplated in your pending merger.
Our preference is for a combination of all three companies, which would of
course involve the consent of both Asarco and Cyprus Amax to a modification of
your existing agreement.
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<PAGE> 24
Since your merger agreement has not been publicly filed, we have not had
the opportunity to review its terms. Based on your August 10, 1999 letter, it is
unclear to us whether discussions may proceed once you receive a written
proposal such as this letter. In any event, if necessary under your merger
agreement, we request that you grant one another waivers to allow meetings with
us on our proposal which, as discussed below, would be far more favorable to
your shareholders than your proposed merger.
We are confident that the market reaction to a three-way combination would
be positive. In particular we believe the market would recognize:
- the significantly stronger ability of the combined company, relative to
the Asarco-Cyprus Amax combination, to integrate southwest U.S. mining
operations, administrative functions in Chile and Peru and world-wide
exploration and development activities;
- the financial strength of the combined company and ability to create a
world class portfolio of cost competitive mining assets;
- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;
- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;
- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;
- the ability of the combined company to reduce capital expenditures;
- a strong, liquid balance sheet, with excellent access to capital; and
- how all of these factors would build greater shareholder value, on an
ongoing basis, for the shareholders of all three companies.
This is intended to be a confidential proposal which is subject to the
execution of a definitive merger agreement and receipt of customary approvals,
including approval by our respective Boards of Directors and shareholders. We
have conducted in-depth analyses of the proposed three-way combination from a
regulatory perspective and have concluded that it will be possible to obtain the
necessary approvals on a timely basis.
We believe that our proposal is substantially more attractive to your
shareholders than your pending merger. In addition to the sizeable premium we
are offering, your shareholders would participate, through their ongoing Phelps
Dodge common stock ownership, in a larger enterprise with greater realizable
cost savings and synergies, a stronger portfolio of cost competitive assets and
a deep management team with a strong operating record. We have no doubt that
your shareholders will enthusiastically embrace our proposal once they learn of
it.
We have discussed this proposal with our Board, which fully supports it. We
are confident of our ability, with your cooperation, to complete this
transaction as quickly as your proposed two-party Asarco-Cyprus Amax merger.
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<PAGE> 25
We are firmly committed to moving forward quickly to consummate this
transaction. As we mentioned, we would be happy to meet with you in New York or
another mutually convenient location to amplify our proposal. In any event, we
would appreciate a response by 5:00 p.m., New York time, on Wednesday, August
18, 1999.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and
Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On the morning of August 12, 1999, Messrs. McAllister and Ward telephoned
Mr. Yearley and once again refused to meet to discuss Phelps Dodge's proposal.
That afternoon, Phelps Dodge sent the following letter to the Board of Directors
of Asarco (and sent a substantially similar letter to the Board of Directors of
Cyprus Amax):
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 12, 1999
Board of Directors of ASARCO Incorporated
c/o Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Gentlemen:
We would like to engage in discussions on our proposal to combine Asarco,
Cyprus Amax and Phelps Dodge in a negotiated transaction. Our proposal,
described in more detail in the attached correspondence, is far better for the
shareholders of your company than your pending merger with Cyprus Amax because
of:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;
- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in a substantial dividend increase for
Asarco shareholders to more than three times the level contemplated in
your pending merger; and
- their opportunity to participate in the ongoing value creation of the
combined company through the ownership of Phelps Dodge common stock.
In our attached letter of August 11, we proposed specific exchange ratios
of Phelps Dodge shares for Asarco and Cyprus Amax shares. Based on the August 11
closing price of Phelps Dodge, Asarco and Cyprus Amax shares, these ratios
implied premiums of approximately 25% for each of Asarco and Cyprus Amax and
preserved the relative economics of your proposed combination with Cyprus Amax.
We would reiterate our intention on the basis of the current levels of Phelps
Dodge, Asarco and Cyprus Amax share prices to pay premiums of approximately 25%
for Asarco and Cyprus Amax.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly
18
<PAGE> 26
outperformed the stock prices of Asarco and Cyprus Amax. As a result of Phelps
Dodge's higher dividend, the level of outperformance is even greater when viewed
on the basis of the total return to shareholders assuming reinvestment of
dividends. Over the past 10 years Phelps Dodge's total return has been 161% as
compared to -20% and -26% for Asarco and Cyprus Amax, respectively. Similarly,
over the past five years, Phelps Dodge's total return has been 20% as compared
to -27% for Asarco and -40% for Cyprus Amax. We are very proud of this strong
management and operational track record over a difficult copper environment.
Thus far, however, your management has refused to listen to, or consider,
our proposal.
On Tuesday afternoon, August 10, 1999, following a meeting of our board of
directors, we spoke by telephone with Messrs. McAllister and Ward to request a
meeting to discuss our proposal. Just a few hours later, we received from them
the attached letter, dated August 10, 1999, advising that under the terms of a
non-public July 15, 1999 Merger Agreement they were "not at liberty" to have
such a discussion.
Since Messrs. McAllister and Ward refused to meet with us, late yesterday
we sent them the enclosed August 11 letter laying out the basic terms of our
proposal and again requesting a meeting.
This morning we received a telephone call from Messrs. McAllister and Ward
again refusing to discuss our proposal.
Although it would have been our preference to communicate through your CEO,
his adamant refusal to meet with us, or even to give our written proposal any
serious consideration, has required that we communicate with you directly. Since
you and Cyprus Amax are the only parties to your merger agreement, and may amend
it or waive its provisions at any time, for management of the two companies to
state that their own agreement prevents such discussions seems a particularly
weak basis for their refusal even to meet with us.
We are making a similar proposal to Cyprus Amax. Our willingness to enter
into discussions with each of you is not conditioned on the participation of the
other (assuming this is consistent with any applicable, binding contracts).
We are resolute in our determination to complete this transaction with both
companies. We are confident that your shareholders will recognize the superior
benefits of our proposal, and will accept nothing less.
We still strongly prefer to consummate this transaction on a mutually
satisfactory, negotiated basis. Accordingly, we do not plan to disclose our
proposal publicly at this time. Because of the importance of this matter to your
shareholders, we request that you make a commitment, by 5:00 p.m. Friday, August
20, 1999, to meet with us promptly to commence serious negotiations.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and
Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On August 20, 1999, Asarco and Cyprus Amax filed a joint proxy
statement/prospectus in connection with their proposed merger, and for the first
time disclosed the terms of their merger agreement. In addition, Asarco and
Cyprus Amax issued a press release announcing that they had set August 25, 1999
as the record date for determining shareholders entitled to vote at the
shareholder meetings, scheduled for September 30, 1999, to consider approval of
their proposed merger. Asarco and Cyprus Amax also disclosed Phelps Dodge's
proposal for a three-way business combination and announced that they were
rejecting it. Asarco and Cyprus
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<PAGE> 27
Amax also revised upward their estimates of synergies resulting from their
proposed two-party merger. The text of the press release was as follows:
DENVER, CO. and NEW YORK, N.Y., August 20, 1999 -- Cyprus Amax Minerals
(NYSE:CYM) and ASARCO Incorporated (NYSE:AR) announced that they have set
shareholder meetings for September 30, 1999 to approve their previously
announced merger of equals. Asarco Cyprus Incorporated will be the largest
publicly traded copper company with an estimated cash cost of under 50 cents.
Definitive proxy materials will be mailed to shareholders of record on August
25, 1999.
Cyprus and Asarco also announced that joint Asarco and Cyprus merger teams
are reviewing all operating and administrative aspects of the new organization
to identify organizational and other profit driven changes in the way they do
business. The companies have engaged outside consultants to assist in
identification of cost savings to facilitate the process. As a result of these
reviews, the estimate of annual expense reductions is now approaching $200
million including $50 million in reduced administrative and overhead costs, $50
million from lower costs of purchased materials and services, $25 million in
other costs and $75 million in lower depreciation. As part of the cost
reductions, Cyprus' Denver office will be closed and Asarco's New York office
will be downsized and relocated to New Jersey. In addition, the companies
believe the merger will provide the flexibility to rationalize higher cost
production during periods of low copper prices, which could be expected to
result in operational cash improvements approaching $75 million annually.
Cyprus and Asarco also jointly reported that the Boards of both companies
had received an unsolicited proposal from Phelps Dodge Corporation to negotiate
an agreement for Phelps Dodge to acquire both companies for stock. Phelps Dodge
proposed an exchange of .3756 of a Phelps Dodge share for each Asarco share and
.2874 of a Phelps Dodge share for each Cyprus share. Phelps Dodge's proposal is
subject to a number of contingencies.
On August 19, 1999, the Asarco Board of Directors and the Cyprus Amax Board
of Directors, together with their respective legal and financial advisors, met
separately to consider the unsolicited proposal from Phelps Dodge. Both the
Asarco Board of Directors and the Cyprus Amax Board of Directors determined that
pursuing the Asarco Cyprus merger was in best interests of Asarco and Cyprus
Amax stockholders, respectively, and reconfirmed their respective
recommendations of the merger.
Since the merger announcement, both Boards noted that the share prices of
Cyprus and Asarco have outperformed the other U.S. listed copper companies.
Asarco Cyprus expects that at its estimated cash costs of under 50 cents per
pound, it will require a copper price of less than 65 cents per pound to
breakeven on a net earnings basis. Asarco Cyprus will have a strong, experienced
management team and the financial capacity to further enhance operating
efficiencies, expand or develop low cost copper properties and otherwise
rationalize operations to achieve optimum operating levels.
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Also on August 20, 1999, Asarco and Cyprus Amax sent the following letter
to Phelps Dodge:
August 20, 1999
Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050
Dear Doug:
We have tried to reach you this morning to convey the response of our
respective Boards and to share with you the attached press release.
Each of our companies has convened its Boards and received thorough
presentations from financial and legal advisors. After full consideration of
your proposal, each Board unanimously decided that it was in the best interests
of its shareholders to pursue the Asarco Cyprus merger. That is what we intend
to do.
Sincerely,
<TABLE>
<S> <C>
/s/ FRANCIS R. MCALLISTER /s/ MILTON H. WARD
------------------------------------------ -------------------------------------
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
Asarco Incorporated Cyprus Amax Minerals
Company
</TABLE>
During the afternoon of August 20, 1999, Phelps Dodge made the following
announcement by press release:
PHELPS DODGE PROPOSES TO ACQUIRE ASARCO AND CYPRUS AMAX IN
STOCK TRANSACTIONS AT APPROXIMATE 30% PREMIUMS
UNIQUE OPPORTUNITY TO CREATE PORTFOLIO OF LOWER-COST GLOBAL COPPER ASSETS
PHOENIX, AZ, August 20, 1999 -- Phelps Dodge Corporation (NYSE:PD)
announced today that it is proposing to acquire both Asarco Incorporated
(NYSE:AR) and Cyprus Amax Minerals Company (NYSE:CYM) in stock-for-stock mergers
that would provide approximate 30% premiums to the shareholders of both
companies. Neither proposal is conditioned upon acceptance of the other.
On July 15, 1999, Asarco and Cyprus Amax announced a no-premium merger
subject to shareholder approval. Phelps Dodge has since made numerous
unsuccessful attempts to negotiate business combinations with both companies on
terms that are greatly superior for Asarco and Cyprus Amax shareholders.
Phelps Dodge would acquire Asarco in a tax-free merger in which each share
of Asarco common stock would be converted into 0.4098 Phelps Dodge common
shares. Based on the share prices of Phelps Dodge and Asarco before the stocks
were halted this morning, the proposal values Asarco at $24.05 per
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<PAGE> 29
share, or a total equity value of approximately $960 million, representing an
approximate 30% premium for Asarco shareholders.
Phelps Dodge would acquire Cyprus Amax in a tax-free merger in which each
share of Cyprus Amax common stock would be converted into 0.3135 Phelps Dodge
common shares. Based on share prices of Phelps Dodge and Cyprus Amax before the
stocks were halted this morning, the proposal values Cyprus Amax at $18.40 per
share, or a total of equity value of approximately $1.7 billion, representing an
approximate 29% premium for Cyprus Amax shareholders.
The Phelps Dodge proposals represent a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to excel through business cycles. This three-way combination would
also provide significantly greater opportunities to integrate operations in the
southwestern United States, administrative functions in the United States, Chile
and Peru, and worldwide exploration and development activities than the proposed
Asarco/Cyprus Amax merger. Consistent with demonstrated Phelps Dodge standards,
all Asarco and Cyprus Amax properties would be operated to earn more than the
cost of capital over the copper cycle. At current levels, annual worldwide
copper production of the combined companies would be approximately 3.8 billion
pounds, with attributable copper reserves of approximately 80 billion pounds,
predominantly in the U.S., Chile and Peru.
Phelps Dodge expects the three-way combination to be immediately and
substantially accretive to its cash flow, with significant opportunities to
improve return on capital at the combined entity. The transactions would be
significantly accretive to Phelps Dodge's earnings per share beginning in the
second year after closing, based on the current portfolio of the combined
companies and analysts' estimates of copper prices of $0.80 to $0.85 per pound
in 2001.
Phelps Dodge expects to achieve annual cash cost savings of at least $200
million, to be fully phased in by the end of the second year after closing,
through reductions in SG&A expenses, operating improvements and efficiencies in
exploration. Additional non-cash savings of approximately $65 million per year
are expected to result from lower depreciation charges. These cost savings are
based on public information and the Company's expectation that it can deliver at
least $75 million in incremental savings above the new cash synergy figure of
$125 million now projected in the proposed Asarco/Cyprus Amax combination. This
does not include any cost savings for the rationalization of high-cost
production during periods of low copper prices. The transactions would use
purchase accounting.
Phelps Dodge intends to continue its current annual cash dividend of $2.00
per share. This would provide a substantial dividend increase to shareholders of
both Asarco and Cyprus Amax -- equal to 4.1 times the dividend they would
receive in the proposed Asarco/Cyprus Amax merger.
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge,
said, "We are very disappointed that Asarco and Cyprus Amax have declined our
repeated attempts to enter into negotiated agreements. Our proposed three-way
combination provides superior value to shareholders of Asarco and Cyprus Amax,
including substantial premiums, the opportunity to participate in the tremendous
upside potential of the combined entity, and a cash dividend that is more than
quadruple what they would receive in the proposed Asarco/Cyprus Amax
transaction."
Yearley continued, "This compelling combination would create a more
cost-effective global copper producer with the operating expertise, broad
resource base and financial strength to deliver enhanced value to shareholders
of all three companies. The improved efficiencies of the combined companies
would also benefit other stakeholders, including our customers, employees and
communities. In the global copper market, efficient and low-cost operations are
critical, and this transaction would enhance our ability to compete and give us
greater ability to satisfy our customers' needs. Customers would continue to
enjoy Phelps Dodge's high standard of on-time delivery and quality products and
benefit from our combined lower cost structure; employees would become part of a
stronger organization with enhanced ability to compete for large-scale projects;
and communities would benefit from our corporate citizenship and philanthropy
and continued commitment to responsible environmental practices."
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<PAGE> 30
J. Steven Whisler, President and Chief Operating Officer of Phelps Dodge,
said, "We are committed to optimizing the combined operations of the three
companies and delivering superior returns on capital throughout the entire
copper cycle. Phelps Dodge has generated much better shareholder returns than
Asarco and Cyprus Amax through copper cycles -- greatly outperforming both
companies over the past three, five, 10 and 15-year periods. For example, during
the past 10 years on a total return basis with dividends reinvested Phelps Dodge
has produced a positive shareholder return of 161% versus negative 20% for
Asarco and negative 26% for Cyprus Amax. Over the 15-year period, Phelps Dodge
has produced a positive shareholder return of 1024% versus 25% for Asarco and
102% for Cyprus Amax. Phelps Dodge's strong and deep management and operating
teams have a proven track record of active, value-based portfolio management and
of taking decisive actions required to build sustainable long-term shareholder
value. We intend to take advantage of the substantial opportunities to integrate
the combined companies' mining assets and will ensure that every property in the
portfolio provides an appropriate return on invested capital."
Yearley concluded, "This innovative three-way combination fits well with
our strategy of sustaining a strong and liquid balance sheet, achieving earnings
and cash flow accretion and improving our resource base, while maintaining a
cost-competitive profile. While we continue to prefer negotiated transactions,
this three-way combination is so compelling, both strategically and financially,
that we are determined to take all necessary steps to complete it expeditiously.
We are confident we will obtain the necessary regulatory approvals to complete
the transactions and believe shareholders of Asarco and Cyprus Amax will
strongly support this unique opportunity to create value in the global copper
market in which we compete."
Phelps Dodge's financial advisor is Morgan Stanley Dean Witter and its
legal advisors are Debevoise & Plimpton and Shearman & Sterling.
Phelps Dodge Corporation is among the world's largest producers of copper.
The company also is one of the world's largest producers of carbon black, one of
the world's largest manufacturers of magnet wire, and has operations and
investments in mines and wire and cable manufacturing facilities around the
world. Phelps Dodge has operations in 28 countries.
Statements in this press release include "forward-looking statements" that
express expectations of future events or results. All statements based on future
expectations rather than on historical facts are forward-looking statements that
involve a number of risks and uncertainties, and the company cannot give
assurance that such statements will prove to be correct. Please refer to the
Management's Discussion and Analysis sections of the company's report on Form
10-K for the year ended December 31, 1998.
Later that day, Phelps Dodge sent the following letter to the Board of
Directors of Asarco (and sent a substantially similar letter to the Board of
Directors of Cyprus Amax):
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 20, 1999
Board of Directors of ASARCO Incorporated
c/o Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Gentlemen:
We are disappointed in your response to our proposed three-way combination
of Asarco, Cyprus Amax and Phelps Dodge. As you know, we have on three recent
occasions requested the opportunity to
23
<PAGE> 31
discuss our proposal, which we believe would be far superior to your
shareholders than your proposed combination with Cyprus Amax.
We are particularly disappointed that instead of accepting our previous
requests to meet to discuss our proposal to acquire Asarco for a substantial
premium, you chose today to announce unilaterally our interest in acquiring
Asarco and Cyprus Amax and to reject our proposal in favor of your no-premium
merger proposal with Cyprus Amax. This appears consistent with the manner in
which you have chosen to treat your own shareholders by announcing just today,
at the same time you first disclosed the terms of your July 15 merger agreement,
that the record date for your shareholder vote on the no-premium merger with
Cyprus Amax would be August 25. Since trades after today will settle after
August 25, this effectively precluded any significant trading in the market on
an informed basis before the determination of shareholders eligible to vote at
your meeting.
In light of your unilateral announcement, we have no other choice than to
publicly announce our proposal to enter into a business combination with Asarco
and Cyprus Amax, so that share owners of all three companies are fully informed.
Terms of our Proposal
We propose a business combination of Phelps Dodge and Asarco pursuant to
which all of the outstanding common stock of Asarco would be exchanged for
Phelps Dodge common stock at an exchange ratio of 0.4098 Phelps Dodge common
shares for each Asarco common share. We are also independently proposing to
Cyprus Amax a business combination of Phelps Dodge and Cyprus Amax pursuant to
which all of the outstanding common stock of Cyprus Amax would be exchanged for
Phelps Dodge common stock at an exchange ratio of 0.3135 Phelps Dodge common
shares for each Cyprus Amax common share. Based on share prices for the three
companies' common shares before trading was halted this morning, these ratios
imply a premium of approximately 30% for Asarco and a premium of approximately
29% for Cyprus Amax, while preserving the relative economics of the exchange
ratio under your proposed combination with Cyprus Amax.
Following the combination, we plan to continue the current $2.00 per share
Phelps Dodge common dividend. This would result in a substantial dividend
increase for Asarco shareholders to 4.1 times the dividend contemplated in your
proposed merger with Cyprus Amax.
Our proposed transaction would be tax-free for your shareholders. In
addition, through their ownership of Phelps Dodge common stock, your
shareholders would continue to participate in the ongoing value creation of the
combined company. Although we prefer a transaction involving all three
companies, we are prepared to enter into a negotiated business combination with
either Asarco or Cyprus Amax, regardless of whether the other company is willing
to proceed on a negotiated basis.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly outperformed the stock prices
of Asarco and Cyprus Amax. As a result of Phelps Dodge's higher dividend, the
level of outperformance is even greater when viewed on the basis of the total
return to shareholders assuming reinvestment of dividends. Over the past 10
years Phelps Dodge's total return has been 161% as compared to negative 20% and
negative 26% for Asarco and Cyprus Amax, respectively. Similarly, over the past
15 years, Phelps Dodge's total return has been 1024% as compared to 25% for
Asarco and 102% for Cyprus Amax. We are very proud of this strong management and
operational track record over a difficult copper environment.
The Combined Company
We believe that our proposal presents a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to deliver superior results in all business
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<PAGE> 32
cycles. Our proposal would create a much stronger company than would your
proposed merger with Cyprus Amax through:
- the significantly stronger ability of the combined company, relative to
the Asarco-Cyprus Amax combination, to integrate southwestern U.S.
mining operations, administrative functions in the U.S., Chile and Peru,
and worldwide exploration and development activities;
- the financial strength of the combined company and ability to create a
world class portfolio of cost-competitive mining assets;
- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;
- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;
- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;
- the immediate and substantial accretion to the cash flow of the combined
company resulting from the transaction;
- the significant accretion to earnings per share of the combined company
beginning in the second year after closing, based on the current
portfolio of the combined companies and analysts' estimates of copper
prices of $0.80 to $0.85 per pound in 2001;
- the total current annual copper production of the combined company of
3.8 billion pounds and the total attributable copper reserves of 80
billion pounds;
- the increased ability of the combined company to compete for world-class
projects;
- the ability of the combined company to reduce capital expenditures;
- the strong, liquid balance sheet of the combined company, with excellent
access to capital; and
- the way all of these factors would build greater shareholder value, on
an ongoing basis, for the shareholders of all three companies.
Through the measures described above we estimate that in a three-way
combination we could achieve approximately $200 million in annual cash cost
savings, fully phased in by the end of the second year after closing of the
transaction. In addition, we expect lower depreciation of approximately $65
million annually, bringing total estimated annual savings to approximately $265
million. These cost savings are based on public information and our expectation
that we can deliver at least $75 million in incremental savings above the new
cash synergy figure of $125 million that you have projected in the proposed
Asarco-Cyprus Amax combination. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper prices.
Following the combination, we would expect to operate all properties in
accordance with Phelps Dodge's disciplined management approach. This means that
each property would be run on a basis intended to earn in excess of the cost of
capital over a full copper price cycle. We believe that Phelps Dodge's
management team has the credibility to make the tough decisions necessary to
rapidly integrate all three businesses and to create value for shareholders.
A three-way combination, by creating a more efficient global competitor,
would also benefit the employees and customers of all three companies. We have
conducted an in-depth analysis of the three-way combination from a regulatory
perspective and have concluded that it will be possible to obtain the necessary
approvals on a timely basis.
Our Board of Directors has authorized this proposal and we are resolutely
committed to its consummation. We are confident that your shareholders will find
our proposal to be a unique and compelling opportunity. We continue to prefer to
proceed on a mutually satisfactory, negotiated basis
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<PAGE> 33
but are prepared to pursue all other avenues should that be necessary. We are
ready to meet with you or your management at any time.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On August 25, 1999, Asarco and Cyprus Amax sent the following letter to
Phelps Dodge:
August 25, 1999
Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050
Dear Doug:
We and our respective boards have considered your revised proposal to
acquire our companies. We have the following issues with your proposal:
1. The exchange ratios proposed in your August 20 press release do not
allocate to Cyprus Amax and Asarco holders a fair share of the value
created by uniting their two companies. We are prepared to negotiate a
transaction with Phelps Dodge that would provide our holders with .4055
shares of Phelps Dodge common stock for each Cyprus Amax share, and
.5300 Phelps Dodge shares for each Asarco share.
2. In order for us to proceed with Phelps Dodge, you must make clear that
Phelps Dodge will undertake all actions necessary to secure regulatory
approval for your proposed transaction including any divestiture or
similar action required, and will provide credible assurances that such
regulatory approval will be forthcoming. The statements in your letters
concerning antitrust issues are not sufficient on this point.
3. You have not proposed a form of contract for your transaction. We would
be prepared to proceed on the basis of representations, warranties and
covenants made by Cyprus Amax and Asarco to each other in their merger
agreement, with similar representations, warranties and covenants made
by Phelps Dodge.
4. Your letter did not indicate whether your proposal was subject to due
diligence. A due diligence requirement introduces substantial
uncertainty as to your proposal. We would expect, as part of our effort
to close our pending merger or any potential transaction with you as
quickly as possible, that you would not require any further due
diligence with respect to either Cyrus Amax or Asarco.
We strongly believe that the combination of Cyprus Amax and Asarco, without
the effect of combining further with Phelps Dodge, provides greater value to
Cyprus Amax and Asarco holders than your August 20 proposal, poses fewer
regulatory issues and can be completed more quickly. Accordingly, we will be
proceeding to present that transaction to our stockholders and to closing on
September 30, 1999. We are prepared, however, to negotiate a transaction that
involves all three companies that satisfies all the foregoing requirements. For
your information, we are attaching to this letter a copy of the
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<PAGE> 34
press release Asarco and Cyprus Amax issued today concerning our response to
Phelps Dodge. We also want to advise you that apart from this communication,
neither party has waived any of its legal or other rights, or rights or
obligations under our merger agreement.
Sincerely,
<TABLE>
<S> <C>
/s/ FRANCIS R. MCALLISTER /s/ MILTON H. WARD
- ----------------------------------------- ---------------------------------------------------
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
ASARCO Incorporated Cyprus Amax Minerals Company
</TABLE>
The text of the attached press release was as follows:
DENVER, CO AND NEW YORK, NY, AUGUST 25, 1999 -- Cyprus Amax Minerals
Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today jointly announced
that they have improved the terms of their own combination transaction. In
addition they have written to Phelps Dodge outlining their willingness to
negotiate with Phelps Dodge on terms included in the letter. According to the
letter, Asarco and Cyprus Amax would be willing to proceed with a three-way
combination with Phelps Dodge if its proposed exchange ratios are increased, if
Phelps Dodge fully underwrites the risk of antitrust problems with its proposal
and if the contract terms mirror those of the Asarco/Cyprus contract. Asarco and
Cyprus Amax said the exchange ratios they would require were .5300 of a Phelps
Dodge share for Asarco holders and .4055 of a Phelps Dodge share for Cyprus Amax
holders. The letter to Phelps Dodge is attached.
The two companies also said they have decided to improve the financial
terms of their own combination by including a special payment of $5.00 per share
to the stockholders of the combined Asarco Cyprus Incorporated. The special
payment would be paid to stockholders as soon as possible after consummation of
the merger. Asarco and Cyprus Amax emphasized that they were proceeding with
their two-way combination which, subject to stockholder approval, will close on
September 30, 1999.
Speaking together, Milton H. Ward, Chairman and Chief Executive Officer of
Cyprus Amax and Francis R. McAllister, Chairman and Chief Executive Officer of
Asarco said "Our response to Phelps Dodge evidences our intent to secure the
best value for our shareholders whether through a three way combination
including Phelps Dodge or through consummation of the merger previously
announced. We have presented very simple terms to Phelps Dodge which we believe
recognize the contributions our two companies make to a three way combination.
The proposal previously communicated by Phelps Dodge fails to reward our
stockholders for the values derived from the Asarco Cyprus transaction. Our
proposed exchange ratio gives recognition to the fact that our shareholders
would be contributing approximately 50% of the value of a three way combination.
"We intend to move forward to complete our own merger transaction as soon
as possible and as a sign of confidence of our ability to achieve cost
reductions of at least $200 million annually, Asarco Cyprus will make a special
payment to shareholders when the merger closes. This special $5.00 per share
payment reflects the Boards' and managements' confidence in their ability to
deliver benefits from the merger. Asarco Cyprus is expected to have in excess of
$1 billion in cash at the time of closing and the Boards of both companies have
agreed that Asarco Cyprus will pursue the sale of Cyprus Amax's investments in
Kinross Gold and its Australian coal holdings and Asarco's specialty chemicals
business. We would expect the sales to be completed within six months after
closing. Proceeds are expected to approach $1 billion and cash taxes would be
minimized due to tax benefits from the sale of the Kinross shares. Proceeds
would be used to pay down debt and improve the liquidity of the company."
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<PAGE> 35
Messrs. Ward and McAllister stated that they and their respective Boards
are committed to maximizing shareholder value and will continue to do so after
the merger is completed. In order to ensure that Phelps Dodge or any interested
buyer is able to present a bona fide proposal to acquire 100% of the stock of
the Company, during the first 90 days following completion of the merger,
stockholders will have the right to call a meeting to redeem the rights plan. In
addition, change in control provisions in any employment contracts entered into
by the Company will be waived for that same 90 day period.
Actual results may vary materially from any forward-looking statement the
Company makes. Refer to the Cautionary Statement and Risk Factors contained in
Cyprus Amax's and Asarco's 1998 Form 10Ks.
In response, Phelps Dodge issued the following press release:
PHELPS DODGE CONFIRMS RECEIPT OF LETTER FROM ASARCO AND CYPRUS AMAX
PHOENIX, Aug. 25 -- Phelps Dodge Corporation (NYSE: PD) confirmed that it
has received a letter from Asarco Incorporated (NYSE: AR) and Cyprus Amax
Minerals Company (NYSE: CYM) and issued the following response:
"The proposal put forth by Asarco and Cyprus Amax does not change Phelps
Dodge's commitment to complete a three-way combination that is beneficial to
shareholders of all three companies. While Phelps Dodge will review the most
recent proposal from Asarco and Cyprus Amax, we believe that the Phelps Dodge
proposal, which already provides Asarco and Cyprus Amax shareholders a 30%
premium, a $2.00 annual dividend and very substantial participation in the
greater upside potential of the three-way combination, is fully priced based on
public information and Phelps Dodge's best estimates of the real, achievable
cost synergies in a three-way combination. Phelps Dodge indicated that the
economic aspects of Asarco and Cyprus Amax's proposed three-way merger terms are
totally unreasonable and would deliver nearly all of the economic value of the
three-way combination to Asarco and Cyprus shareholders."
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge,
added, "If Asarco and Cyprus Amax are truly interested in a negotiated
transaction and not just posturing, we would be more than willing to begin real
discussions. Neither company has attempted to sit down with us."
Phelps Dodge indicated that it intends to complete its review in the near
term and to make a more definitive and comprehensive response thereafter.
On August 27, 1999, Phelps Dodge issued the following press release:
PHELPS DODGE FILES REGISTRATION STATEMENTS FOR
EXCHANGE OFFERS FOR ASARCO AND CYPRUS AMAX
------------------------------------
FILES PRELIMINARY PROXY STATEMENTS TO OPPOSE ASARCO/CYPRUS AMAX MERGER;
COMMENCES LITIGATION AGAINST BOTH COMPANIES
PHELPS DODGE WILL WITHDRAW OFFER AND NOT BID FURTHER IF ASARCO AND CYPRUS AMAX
SHAREHOLDERS APPROVE TWO-WAY MERGER AT SEPTEMBER 30 VOTE
PHOENIX, AZ, AUGUST 27, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has filed registration materials with the Securities and
Exchange Commission for exchange offers for all outstanding Asarco Incorporated
(NYSE: AR) and Cyprus Amax Minerals Company (NYSE: CYM) common shares. Phelps
Dodge will commence the exchange offers as soon as the registration statements
are declared effective.
In addition, the Company filed preliminary proxy materials with the
Securities and Exchange Commission to solicit proxies from Asarco and Cyprus
Amax stockholders to vote against the proposed
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<PAGE> 36
merger of Asarco and Cyprus Amax. Asarco and Cyprus Amax have set shareholder
meetings for September 30, 1999 to vote on their proposed merger.
Separately, Phelps Dodge announced that it has commenced litigation in New
Jersey and Delaware against Asarco and Cyprus Amax, respectively, and their
directors, for breaching their fiduciary duties by impermissibly prohibiting
directors from informing themselves of any third-party merger or acquisition
proposal and providing excessive break-up fees.
"While we continue to prefer negotiated transactions, we are committed to
this compelling three-way combination, and are taking all necessary steps to
complete it," said Douglas C. Yearley, Chairman and Chief Executive Officer of
Phelps Dodge. "If Asarco and Cyprus Amax are truly interested in a negotiated
transaction we are ready to begin discussions immediately. We continue to
believe our offer is fully priced and compelling. We are confident that
shareholders of Asarco and Cyprus Amax will recognize that our proposals are
clearly superior to the Asarco/Cyprus Amax no-premium two-way merger. We view
the September 30 vote as a referendum. If Asarco and Cyprus Amax shareholders do
approve their two-way combination, we will withdraw our substantial premium
proposal and will not bid further."
Phelps Dodge also today sent the following letter to the Chairmen of Asarco
and Cyprus Amax:
August 27, 1999
Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Mr. Milton H. Ward
Chairman, Chief Executive and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
We continue to believe that our proposed three-way combination is clearly
superior for your shareholders than your proposed no-premium, two-party
transaction. Our fully priced proposal provides a substantial premium, our $2.00
annual dividend and opportunity for participation in greater upside potential.
In your August 25 letter to us you identified four issues with our
proposal. We are prepared to accept three of your points. On the fourth point,
your demand on exchange ratios, we hope that you will reconsider your
unreasonable position and sit down at the table with us to complete our proposed
three-way combination.
Should you proceed to complete your two-way merger, you will proceed alone
because we will withdraw our substantial premium proposal and will not bid
further. Your September 30 vote will be a referendum on our proposal.
Your proposal on exchange ratios is so unreasonable that its sincerity is
questionable. It seems to be premised on the flawed assumption that since your
combined production would be comparable to Phelps Dodge's, you should be valued
at the same level as Phelps Dodge. Of course, this is clearly not what investors
believe since it is not reflected in the relative market valuations of the three
companies. The simplistic assumption you seem to be making fails to reflect
Phelps Dodge's long track record of making tough management decisions and
delivering significantly greater value to shareholders than either ASARCO or
Cyprus Amax. Over a fifteen year period we have delivered total returns to
shareholders of 1,024% in contrast to 25% for ASARCO and 102% for Cyprus Amax.
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<PAGE> 37
Moreover, based on the information in your August 20 Form S-4 registration
statement, it appears that the conclusions arrived at by your own investment
bankers do not support your exchange ratio demand. The exchange ratios you have
demanded would deliver nearly all of the incremental value to be derived from a
three-way combination to your shareholders and very little to our shareholders.
This is, as you no doubt anticipated, completely unacceptable to us.
In addition, we don't believe that your shareholders will be fooled by the
flawed measures you announced which purport to accommodate the possibility of a
third party transaction during the 90 days following completion of your merger.
None of your public statements address in any meaningful way all of the many
steps that would be necessary to give your shareholders a realistic opportunity
to benefit from an attractive third party proposal. Among the additional matters
that would have to be addressed if you were serious about accommodating third
party transactions would be to eliminate your staggered Board and the highly
unusual management entrenchment arrangements built into your two-party merger
agreement.
Those unusual management-entrenchment provisions guarantee no change in the
roles of the proposed four senior executives of the ASARCO-Cyprus combined
company prior to the 2002 annual meeting except upon a vote of 75% of the Board.
Since management will hold 25% of the Board seats, this effectively requires a
unanimous vote of the non-management directors. Because your Board is divided
into three classes, this means that a buyer of 100% of the outstanding stock of
the ASARCO-Cyprus combined company would not be able to obtain management
control for nearly three years.
Indeed, even in the two aspects of your 90-day proposal for which you try
to take credit, there is confusion, contradiction and unnecessary complexity.
You propose an unspecified shareholder mechanism to redeem your poison pill
which is inevitably more cumbersome than simple Board action. Secondly, we noted
with interest the statement in your August 25 press release that "In addition,
change in control provisions in any employment contracts entered into by the
Company will be waived for that same 90 day period." We were therefore surprised
to read the contradictory statement in the Form 8-K you filed yesterday that:
"The rights and benefits under the existing [change of control]
arrangements with the employees... of each of Cyprus Amax and
ASARCO, however, will remain in full force and effect and will be
unaffected during the 90 days following completion of the business
combination, as will any rights under arrangements entered into
with such employees in substitution for any existing
arrangements."
Frankly, we believe that all of your statements concerning the 90-day
period are no more than a public relations gambit. There is no evidence in your
conduct to date that you have any willingness to pursue transactions that are in
the best interests of your shareholders.
With regard to the three points in your August 25 letter other than the
exchange ratio, we are pleased to confirm that:
- We are prepared to enter into a merger agreement with substantially the
same representations, warranties and covenants as those contained in your
July 15 merger agreement.
- This proposal is not subject to due diligence.
- We have studied the regulatory issues carefully and are confident that
all necessary regulatory approvals for our three-way combination will be
obtained on a timely basis. We would be pleased to give you strong
contractual assurances on this point.
30
<PAGE> 38
If you take seriously your fiduciary duty and want to inform yourselves
about a compelling transaction that would be in the best interests of your
shareholders, let's sit down and negotiate. If not, your shareholders will
decide which alternative they prefer on September 30.
Sincerely,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
------------------------------------------ ------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
On September 3, 1999, Phelps Dodge commenced its exchange offers for Asarco
and Cyprus Amax common shares and issued the following press release:
PHELPS DODGE COMMENCES EXCHANGE OFFERS FOR
ASARCO AND CYPRUS AMAX
PHOENIX, AZ, September 3, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has formally commenced exchange offers for all
outstanding Asarco Incorporated (NYSE: AR) and Cyprus Amax Minerals Company
(NYSE: CYM) common shares.
Phelps Dodge's registration statements for its previously announced
exchange offers to acquire Asarco and Cyprus Amax were declared effective
by the Securities and Exchange Commission yesterday. Under the terms of the
Phelps Dodge exchange offers, Asarco shareholders would receive 0.4098
Phelps Dodge shares for each share of Asarco stock tendered and Cyprus Amax
shareholders would receive 0.3135 Phelps Dodge shares for each share of
Cyprus Amax stock tendered. The expiration date of the exchange offers will
be 12:00 midnight, New York City time, on Friday, October 1, 1999 and may
be extended from time to time by Phelps Dodge until the various conditions
of the exchange offers have been satisfied or waived.
"We are pleased to formally commence our exchange offers for Asarco
and Cyprus Amax," said Douglas C. Yearley, Chairman and CEO of Phelps
Dodge. "We look forward to a swift completion of these transactions."
On September 7, 1999, Asarco and Cyprus Amax issued the following
press release:
DENVER, CO. AND NEW YORK, N.Y., SEPTEMBER 7, 1999 -- Cyprus Amax
Minerals Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today
announced that they were urging the shareholders of Cyprus Amax and Asarco
to vote for the proposed Cyprus Amax and Asarco merger on September 30th.
Cyprus Amax and Asarco emphasized that their boards view the Asarco
Cyprus merger as the only transaction which is assured of completion on
September 30th and the only transaction which will give their shareholders
a fair share of the value created by combining their two companies.
Speaking jointly, Milton H. Ward, Chairman and Chief Executive Officer
of Cyprus Amax, and Francis R. McAllister, Chairman and Chief Executive
Officer of Asarco, emphasized that the benefits to shareholders of the
Asarco Cyprus merger, include:
- A special cash payment of $5 per share immediately after the merger;
- Ownership in the largest publicly traded copper company in the world,
producing 2.0 billion pounds annually;
- 100% share in $275 million of annual cost savings which should enhance
earnings and cash flow substantially; and
31
<PAGE> 39
- Ownership in a company with a strong balance sheet and the operational
advantages of a 50 cent per pound cash cost and a net earnings
break-even price at 65 cents per pound of copper.
Cyprus Amax and Asarco warned stockholders that Phelps Dodge's
unsolicited, hostile attempt to break up the fully negotiated Asarco Cyprus
merger seeks to leave Asarco and Cyprus Amax stockholders with only 43% of
a three-way enterprise.
The companies stated, "We believe this percentage ownership is
inequitable, as evidenced by the stark contrast of the much greater
contributions Asarco and Cyprus Amax stockholders are being asked to make
to such a three-way enterprise. Specifically:
- 57% of the production
- 61% of the ore reserves
- 4 of the 5 lowest cost mines
- 60% of the copper margin
- 92% of the synergies
- 91% of the cash
- Lower cash costs
Cyprus Amax and Asarco also warned shareholders: "The Phelps Dodge
proposal is subject to numerous conditions which cannot be fulfilled by
September 30, including Phelps Dodge's own stockholder approval. We urge
our stockholders to beware this effort to break up our value-creating
merger, beware Phelps Dodge's 'spin campaign' of letters, lawsuits and
public relations and beware that Phelps Dodge cannot guarantee when or if
either of its hostile transactions will close. In contrast, our Board of
Directors are committed to creating the premier public copper investment in
the world on September 30, and will do so with the approval of our
stockholders -- which we are vigorously seeking."
Cyprus Amax and Asarco urged their stockholders to vote for the merger
by signing, dating and mailing the white proxy card sent to them by Asarco
or Cyprus Amax.
Actual results may vary materially from any forward-looking statement
the Company makes. Refer to the Cautionary Statement and Risk Factors
contained in Cyprus Amax's and Asarco's 1998 Form 10Ks.
On September 8, 1999, Asarco and Cyprus Amax issued the following
press release:
DENVER, CO., and NEW YORK, NY, September 8, 1999 -- Cyprus Amax
Minerals Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today
announced that their respective Boards of Directors unanimously rejected
Phelps Dodge's exchange offers to their shareholders as inadequate and not
in the best interests of their shareholders. The Boards also unanimously
recommended that their shareholders reject the exchange offers and not
tender their shares, and unanimously reaffirmed that the terms of the
Asarco Cyprus business combination are fair to, and in the best interests
of, their shareholders.
In their recommendations to their shareholders, the Cyprus Amax and
Asarco Boards cited, among other things:
- The advantages to the shareholders of becoming shareholders in Asarco
Cyprus, including, that they retain 100% of the $275 million of annual
savings created by the combination.
- The Phelps Dodge exchange offers are inadequate and fail to compensate
Cyprus Amax and Asarco shareholders for their relative contribution to
a three-way combination with Phelps Dodge.
- The opinion, rendered on September 8, 1999, of their respective
financial advisors that the consideration offered to the shareholders
is inadequate to such holders from a financial point of view.
32
<PAGE> 40
- The special $5.00 per share cash payment to the stockholders of Asarco
Cyprus immediately following the combination provides them with
immediate and significant value.
- A three-way combination raises substantial issues under the antitrust
laws. The Boards noted that the Phelps Dodge exchange offers are
conditioned on the expiration of the Hart-Scott antitrust waiting
period but Phelps Dodge has not even filed the required notification
yet. In contrast, the applicable waiting period for the Asarco Cyprus
combination has already expired.
- The highly conditional nature of the Phelps Dodge exchange offers,
including with respect to antitrust regulatory approval and Phelps
Dodge's own stockholder approval which is not being sought until
after the Cyprus Amax and Asarco September 30 shareholder meeting
date.
Accordingly, each Board recommends to its shareholders that they do
not tender their shares to Phelps Dodge and strongly urges them to vote in
favor of the Asarco Cyprus combination on September 30.
Milton H. Ward, Chairman and Chief Executive Officer of Cyprus Amax
and Francis R. McAllister, Chairman and Chief Executive Officer of Asarco,
speaking together said, "It is absolutely clear from Phelps Dodge's actions
over the course of the last few weeks that it is trying to coerce Cyprus
Amax and Asarco shareholders into a situation that is not in their best
interests. First, Phelps Dodge's opportunistic and inadequate exchange
offers do not give our shareholders their fair ownership interest in the
combined entity. Second, a three-way combination with Phelps Dodge raises
substantial antitrust issues that Phelps Dodge has not yet begun to
address. Third, Phelps Dodge has never offered any persuasive reason why it
would walk away if our shareholders approve our two-way combination, if in
fact Phelps Dodge is sincere in wanting to merge with both companies."
Messrs. Ward and McAllister went on to say that "The Boards of Cyprus
Amax and Asarco are committed to achieving the best value for their
shareholders and will not sacrifice their shareholders' interest for Phelps
Dodge's own agenda, which is to maximize value for Phelps Dodge and its
shareholders. It is for this reason that we strongly recommend shareholders
vote for the Asarco Cyprus transaction on September 30."
Cyprus Amax and Asarco also announced today that they were each filing
with the Securities and Exchange Commission, and will mail to their
shareholders, a Solicitation/Recommendation Statement on Schedule 14D-9
setting forth the Board's formal recommendation with respect to the Phelps
Dodge exchange offer and the reasons for the recommendation. Additional
information with respect to each Board's decision to recommend that
shareholders reject the Phelps Dodge offer is contained in the Schedule
14D-9.
Actual results may vary materially from any forward-looking statements
the companies make. Refer to the cautionary statement risk factors
contained in Cyprus Amax's and Asarco's 1998 Form 10K's.
33
<PAGE> 41
On September 22, 1999, Phelps Dodge amended its exchange offers for Asarco
and Cyprus Amax common shares and issued the following press release:
PHELPS DODGE INCREASES OFFERS TO ACQUIRE ASARCO AND CYPRUS AMAX;
ADDS SUBSTANTIAL CASH COMPONENT TO BOTH OFFERS
OFFERS PROVIDE 40% PREMIUMS TO ASARCO, CYPRUS AMAX SHAREHOLDERS
PHOENIX, AZ, September 22, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has increased its offers to acquire Asarco
Incorporated (NYSE: AR) and Cyprus Amax Minerals Company (NYSE: CYM) and
added a substantial cash component to both offers. The revised offers would
provide approximately 40% premiums to the shareholders of both Asarco and
Cyprus Amax, based on the unaffected stock prices of all three companies.
Phelps Dodge is now offering to acquire all shares of Asarco for $9.00
in cash and 0.2880 Phelps Dodge shares per Asarco share on a fully prorated
basis. Based on Phelps Dodge's closing share price yesterday, the revised
offer currently values Asarco at $25.47 per share, or a total equity value
of $1.01 billion, based on approximately 39.8 million Asarco shares
outstanding.
Phelps Dodge is now offering to acquire all shares of Cyprus Amax for
$6.89 in cash and 0.2203 Phelps Dodge shares per Cyprus Amax share on a
fully prorated basis, maintaining the Asarco/Cyprus Amax announced exchange
ratio of 0.765. Based on Phelps Dodge's closing share price yesterday, the
revised offer currently values Cyprus Amax at $19.49 per share, or a total
equity value of $1.76 billion, based on approximately 90.5 million Cyprus
Amax shares outstanding.
In the revised offers, shareholders of Asarco and Cyprus Amax will
have the right to elect to receive all cash or all Phelps Dodge shares. The
all-cash election for Asarco shareholders is $25.90 per Asarco share and
the all-stock election is 0.4413 Phelps Dodge shares per Asarco share,
subject to proration to maintain the overall cash/stock allocation. The
all-cash election for Cyprus Amax shareholders is $19.81 per Cyprus Amax
share and the all-stock election is 0.3376 Phelps Dodge shares per Cyprus
Amax share, subject to proration to maintain the overall cash/stock
allocation. The stock portion of the consideration received will be
tax-free to shareholders of both companies.
Phelps Dodge expects the revised three-way merger to remain
immediately and substantially accretive to its cash flow and significantly
accretive to its earnings per share beginning in the second year after
closing, based on the current portfolio of the combined companies and
analysts' estimates of copper prices of $0.80 to $0.85 per pound in 2001.
Based on its strong balance sheet, Phelps Dodge expects to finance the
approximately $1 billion cash portion of the offers primarily through
existing credit facilities and cash on hand.
"With these substantial increases, there can be no question that our
offers provide clearly superior value to Asarco and Cyprus Amax
shareholders compared to the no-premium two-way merger," said Douglas C.
Yearley, Chairman and Chief Executive Officer of Phelps Dodge. "It is now
time for Asarco and Cyprus Amax to come to the table. With their
cooperation, we will be in a position to close this compelling three-way
merger immediately following the October 13 Phelps Dodge shareholder
meeting."
Yearley added: "The Asarco and Cyprus Amax shareholder votes on
September 30 will be a clear-cut referendum. If shareholders approve the
two-way no-premium merger, we will immediately withdraw our clearly
superior offers and will not bid further."
34
<PAGE> 42
On September 22, 1999, Phelps Dodge sent the following letter to Messrs.
McAllister and Ward:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
September 22, 1999
Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Mr. Milton H. Ward
Chairman, Chief Executive and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
In an effort to reach a definitive agreement now to combine our three
companies, Phelps Dodge is significantly enhancing its proposal to you and
the shareholders of Asarco and Cyprus Amax. Under our revised proposal,
shareholders would, subject to the election feature described below,
receive in the case of (i) each Asarco share, $9.00 in cash and 0.2880
Phelps Dodge shares and (ii) each Cyprus Amax share, $6.89 in cash and
0.2203 Phelps Dodge shares. This revised offer reflects premiums of
approximately 40% for Asarco and Cyprus Amax shareholders over the price of
their shares immediately prior to the announcement of our initial proposal.
The stock portion of our transaction would be tax-free for your
shareholders. Our revised proposal allocates the additional value we are
offering proportionately between the shareholders of your two companies and
preserves the value ratio between the companies that you have set in your
proposed no-premium merger transaction. It remains our intention to
continue the current $2.00 per share annual dividend for Phelps Dodge
common stock.
Our proposal is compelling. It pays a full and highly attractive
premium to your shareholders. And, most importantly, it creates a
world-class global copper company in which your shareholders can maintain a
continuing interest and participate in its upside potential.
We know our proposal is consistent with what we have been hearing from
your shareholders and ours. Now is the time for each of you to meet with us
to conclude a merger agreement in the interests of all. We remain prepared
to meet with you or your management at any time.
Should you decide not to meet with us, we assume your Boards will
review and revise their recommendations to your shareholders with respect
to your existing Asarco/Cyprus-Amax no-premium offer and allow your
shareholders to decide what is in their own best interests at your
September 30 meetings. We believe that this proposal is clearly a superior
offer for your shareholders.
You will note that in the exchange offer material we send you
concerning our revised proposals that we offer an election feature that
will allow individual shareholders to express a preference for receipt of
cash or Phelps Dodge shares, subject to proration in the event of over
subscription of either. We are certain your shareholders will find such an
election to be appealing.
35
<PAGE> 43
While our strong preference is to do a three-way merger, we remain
ready to complete a transaction with either company separately.
Very truly yours,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
------------------------------------------ ------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
cc: Boards of Directors of Asarco and Cyprus Amax
36
<PAGE> 44
On September 24, 1999, the Federal Trade Commission granted Phelps Dodge
early termination of the waiting periods under the Hart-Scott-Rodino Act for its
offers to acquire Asarco and Cyprus Amax.
Also on September 24, 1999, at the request of Asarco and Cyprus Amax,
Messrs. Yearley and Whisler, of Phelps Dodge, Messrs. McAllister and Morano, of
Asarco, and Mr. Ward and Gerald J. Malys, of Cyprus Amax, met in New York City.
At the meeting, Asarco and Cyprus Amax indicated that they were unwilling to
negotiate a three way business combination unless Phelps Dodge offered a price
reflecting a premium of 55% above their unaffected share prices prior to the
August 20 public announcement of Phelps Dodge's initial proposal. Phelps Dodge
rejected this proposal and reiterated its willingness to proceed at prices
representing premiums of 40% to the unaffected share prices of Asarco and Cyprus
Amax.
Later on September 24, 1999, Messrs. Yearley and Whisler sent a proposed
form of merger agreement to Messrs. McAllister and Ward, together with the
following letter:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
September 24, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Dear Frank and Milt:
In order to avoid any further misunderstandings concerning the terms
of our proposal, we are enclosing a form of merger agreement we would be
prepared to sign immediately. You will note that the agreement is a mark-up
of your existing merger agreement and maintains the same representations,
warranties and closing conditions as your existing merger agreement. The
draft agreement contains the economic terms that we previously discussed
and that are contained in our exchange offers to your respective
shareholders. It also contains a "hell or high water" covenant with respect
to regulatory matters, honors the provisions of Sections 5.5 and 5.6 of
your existing merger agreement, contains a "no shop" covenant with a
fiduciary out and provides for break-up fees of 2% of each of ASARCO and
Cyprus Amax's respective market capitalization.
Sincerely,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- ------------------------------ ------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
On the evening of September 24, 1999, Grupo Mexico, S.A. de C.V. ("Grupo
Mexico") announced that it planned to commence a tender offer to acquire all
outstanding Asarco shares at $26.00 per share.
37
<PAGE> 45
On September 27, 1999, Asarco announced that it would explore strategic
alternatives to maximize shareholder value. Separately, Cyprus Amax announced
that it would explore alternatives to the Asarco/ Cyprus Amax merger.
On September 27, 1999, Grupo Mexico commenced a tender offer to acquire all
outstanding Asarco shares at $26.00 per share. Also on September 27, 1999, the
Chancery Court in Delaware, while denying Phelps Dodge's motion for injunctive
relief, stated that it was troubled by the termination fee and "no-talk"
provisions of the Asarco/Cyprus Amax Merger Agreement (see "The
Offer -- Litigation"). Thereafter, Phelps Dodge sent the following letter to
Asarco:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
September 27, 1999
Mr. Francis R. McAllister
Chairman and Chief Executive Officer
Board of Directors
c/o Francis R. McAllister
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Dear Frank and Members of the Board:
In light of the ruling of the Chancery Court in Delaware regarding the
exercise of your fiduciary duties (a copy of the transcript is enclosed)
and the disclosure by Grupo Mexico in its Schedule 14D-1 (a copy of the
relevant portion also enclosed) that their all cash bid was a direct
response to your specific price guidance, we believe you are required to
treat us fairly in the auction process in which you are now engaged.
We remain determined to acquire ASARCO and are prepared to meet with
you to discuss a revised proposal superior to those you are now
considering. We expect that in those discussions you will share with us any
information shared with any other bidder, including identical guidance as
to price or any other terms.
As you know, we have responded fully and favorably to each of your
contract requests previously.
We look forward to meeting with you at your earliest convenience.
Very truly yours,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- ------------------------------------ ------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
On September 28, 1999, Asarco and Cyprus Amax announced that they had
amended the Asarco/ Cyprus Amax Merger Agreement to allow them, for a period
ending on October 5, 1999, to negotiate with other parties and to unilaterally
terminate the Asarco/Cyprus Amax Merger Agreement for any reason, subject to
payment of a termination fee of $45 million, in the case of termination by
Cyprus Amax, and $40 million, in the case of termination by Asarco.
38
<PAGE> 46
Also on September 28, 1999, representatives of Phelps Dodge and Cyprus Amax
began negotiating the Phelps Dodge/Cyprus Amax merger agreement.
On September 29, 1999, the board of directors of Phelps Dodge approved the
Phelps Dodge/Cyprus Amax merger agreement. At the board meeting, Morgan Stanley
& Co. Incorporated rendered its oral opinion, subsequently confirmed in writing,
that as of the date of its opinion, and based upon and subject to the various
considerations in its opinion, the consideration to be paid by Phelps Dodge
pursuant to the Phelps Dodge/Cyprus Amax merger agreement was fair from a
financial point of view to Phelps Dodge. On September 30, 1999, the board of
directors of Cyprus Amax approved the Phelps Dodge/Cyprus Amax merger agreement
and Cyprus Amax terminated its merger agreement with Asarco. The Phelps Dodge/
Cyprus Amax merger agreement was signed on September 30, 1999. Phelps Dodge and
Cyprus Amax issued the following press release:
PHELPS DODGE TO ACQUIRE CYPRUS AMAX
------------------------
PHOENIX, AZ and DENVER, CO, September 30, 1999 -- Phelps Dodge Corporation
(NYSE: PD) and Cyprus Amax Minerals Company (NYSE: CYM) today announced they
have signed a definitive merger agreement under which Phelps Dodge will acquire
Cyprus Amax for $7.61 in cash and 0.2203 Phelps Dodge shares per Cyprus Amax
share on a fully prorated basis.
Phelps Dodge is amending its exchange offer for Cyprus Amax, which will now
be scheduled to expire at midnight on October 15, 1999. Cyprus Amax shareholders
will have the right to elect to receive cash or Phelps Dodge shares for each
Cyprus Amax share. The all-cash election for Cyprus Amax shareholders is $20.54
per Cyprus Amax share and the all-stock election is 0.3500 Phelps Dodge shares
per Cyprus Amax share, subject to proration to maintain the overall cash/stock
allocation of approximately 63% stock and 37% cash. The stock portion of the
consideration received will be tax-free to Cyprus Amax shareholders.
Based on Phelps Dodge's closing share price yesterday, the agreement
currently values Cyprus Amax at $19.80 per share, or a total equity value of
approximately $1.8 billion, based on approximately 90.7 million Cyprus Amax
shares outstanding.
Phelps Dodge expects the transaction to be immediately and substantially
accretive to its cash flow per share and accretive to its earnings per share
beginning in 2001, based on the current portfolio of the combined companies and
analysts' estimates of copper prices of $0.80 to $0.85 per pound in 2001. Based
on its strong balance sheet, Phelps Dodge expects to finance the $690 million
cash portion of the offer through existing credit facilities and cash on hand.
Phelps Dodge has already received U.S. antitrust approval for the
acquisition. Completion of the exchange offer is subject to a majority of Cyprus
Amax's shares being tendered and not withdrawn, approval of Phelps Dodge
shareholders at a special meeting on October 13, 1999, and customary closing
conditions.
Prior to entering into the agreement with Phelps Dodge, Cyprus Amax
terminated its merger agreement with Asarco Incorporated (NYSE: AR) in
accordance with the procedures agreed to with Asarco earlier this week.
The combination of Phelps Dodge and Cyprus Amax will create a world-class,
lower-cost global copper producer and provide significant opportunities to
integrate operations in the southwestern United States, administrative
functions, and exploration and development activities. Consistent with
demonstrated Phelps Dodge standards, all properties will be operated to earn
more than the cost of capital over the copper cycle.
39
<PAGE> 47
"We are extremely pleased that we were able to reach a negotiated agreement
with Cyprus Amax that is clearly in the best interest of both companies," said
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge. "We
will move quickly to close this compelling transaction and to begin realizing
the strategic and financial benefits of the combination."
Yearley added, "Phelps Dodge remains interested in acquiring Asarco to
realize the additional benefits of a three-way combination -- if we can do so on
terms that make economic sense for our shareholders. Our 40% premium exchange
offer remains on the table, and we hope to have further discussions with
Asarco."
Milton H. Ward, Chairman, President and Chief Executive Officer of Cyprus
Amax, said, "This premium transaction provides significant current value to
Cyprus Amax shareholders as well as the opportunity to participate in what we
believe is the substantial upside potential of the combination. We are confident
that Cyprus Amax customers will be well served, and our shareholders and
employees will benefit from being part of a world-class global copper producer."
Phelps Dodge expects to achieve annual cash cost savings of at least $100
million from the combination, to be fully phased in by the end of 2001, through
reductions in SG&A expenses, operating improvements and efficiencies in
exploration.
J. Steven Whisler, President and Chief Operating Officer of Phelps Dodge,
said, "We have done a great deal of advance planning and, working closely with
representatives of Cyprus Amax, our integration teams will move swiftly to
realize the full benefits of this combination."
Morgan Stanley Dean Witter served as financial advisor to Phelps Dodge and
Merrill Lynch served as financial advisor to Cyprus Amax. Shearman & Sterling
and Debevoise & Plimpton served as legal advisors to Phelps Dodge and Wachtell,
Lipton, Rosen & Katz served as legal advisor to Cyprus Amax.
On October 1, 1999, representatives of Phelps Dodge and Asarco began
discussions relating to a possible Phelps Dodge/Asarco merger agreement.
On October 4, 1999, representatives of Asarco informed Phelps Dodge that
Asarco wished to receive Phelps Dodge's best offer for Asarco no later than 6:00
p.m., Eastern Daylight Time, on October 5, 1999.
On the morning of October 5, 1999, Asarco announced that its board of
directors recommended that Asarco stockholders reject both the then-current
Phelps Dodge exchange offer and the cash tender offer by Grupo Mexico. Asarco
said its board had authorized management to initiate a process designed to
elicit the best possible transaction for shareholders. In the meantime,
representatives of Phelps Dodge and Asarco continued discussions relating to a
business combination between Phelps Dodge and Asarco.
In the afternoon of October 5, 1999, Phelps Dodge extended its exchange
offer for Asarco common shares until October 13, 1999.
Also in the afternoon of October 5, 1999, the Phelps Dodge board of
directors authorized the Phelps Dodge management to submit to Asarco an amended
proposal for a business combination between Phelps Dodge and Asarco and approved
the Phelps Dodge/Asarco merger agreement and an amended exchange offer to Asarco
shareholders. At the board meeting, Morgan Stanley & Co. Incorporated rendered
its oral opinion, subsequently confirmed in writing, that as of the date of its
opinion, and based upon and subject to the various considerations in its
opinion, the consideration to be paid by Phelps Dodge pursuant to the Phelps
40
<PAGE> 48
Dodge/Asarco merger agreement was fair from a financial point of view to Phelps
Dodge. Later that afternoon, Messrs. Yearley and Whisler sent the following
letter to the Asarco board of directors:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
October 5, 1999
The Board of Directors
ASARCO Incorporated
c/o J. Michael Schell, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Dear Sirs:
In response to your request for our bid to acquire ASARCO, Phelps
Dodge is offering $14.75 in cash and 0.2513 Phelps Dodge shares per ASARCO
share on a prorated basis. We are enclosing a mark-up of the draft merger
agreement setting forth our offer. We are prepared to sign the merger
agreement as submitted. Our Board has approved the transaction and we have
full authority to execute it, subject only to the approval of our
stockholders expected at a meeting scheduled to be held on October 13. We
understand the terms of the merger agreement have already been negotiated
with your lawyers. Our offer is irrevocable and will remain open until
10:00 a.m. New York City time on Thursday, October 7.
Our bid represents a value of $29.50 per ASARCO share, or a premium of
59.5%, based on the unaffected share prices for ASARCO and Phelps Dodge as
of August 20, the time our offers for ASARCO and Cyprus Amax were first
disclosed publicly. We believe Phelps Dodge's stock price has been under
short-term pressure since that time due to the uncertainty of the situation
as well as technical factors. We would note that the value of our proposal
based on the average of the closing prices for Phelps Dodge shares over the
period from August 20 through October 4, is $29.10 per ASARCO share.
We believe the cash/stock election feature of our offer adds to its
attractiveness by giving stockholders a choice reflecting their tax posture
and desire to participate in the upside of the combined companies. In
addition to the very substantial premium we are offering, we believe a deal
with Phelps Dodge will permit your shareholders to participate not only in
the benefits of the deal your directors approved with Cyprus Amax, but also
to participate in the substantial incremental benefits brought to the
combination by Phelps Dodge. As you had articulated in advocating your
two-way deal with Cyprus Amax, we agree that the opportunity for your
shareholders to participate in a rationalization of the industry and to
benefit from an upswing in the copper price cycle, is very attractive. We
believe that your shareholders will understand the benefits of the
combination of Phelps Dodge, Cyprus Amax and ASARCO, and we believe that
the market will react favorably to a definitive merger agreement between
Phelps Dodge and ASARCO based on the economic terms of our proposal.
As you know, we already have cleared the Hart-Scott-Rodino waiting
period. We could complete our exchange offer by October 20 if your Board
accepts our offer this evening.
You will note that our proposed merger agreement provides for a $30
million break-up fee, approximately 2.5% of the equity value of our offer.
This fee is well within the accepted range for such offers and materially
below the fees provided for in both your original Cyprus Amax merger
agreement and in the amendment you agreed to last week. We believe this
reduced fee is appropriate in the context of this offer.
We have also enclosed a firm commitment letter from Citibank, N.A.,
part of the proceeds of which will be used to fund the cash portion of our
offer.
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Our offer is submitted in reliance upon the rules forwarded to us by
ASARCO this morning, most particularly that our offer will not be disclosed
to any other party.
Very truly yours,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- ------------------------------ ------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
In the evening of October 5, 1999, the board of directors of Asarco
approved the business combination between Phelps Dodge and Asarco pursuant to
Phelps Dodge's amended proposal. The Phelps Dodge/Asarco merger agreement was
signed late that evening.
Early in the morning of October 6, 1999, Phelps Dodge issued to following
press release:
PHELPS DODGE TO ACQUIRE ASARCO; THREE-WAY COMBINATION WITH
CYPRUS AMAX WILL CREATE LEADING GLOBAL COPPER PRODUCER
PHOENIX, October 6, 1999 -- Phelps Dodge Corporation (NYSE: PD) today
announced it has signed a definitive merger agreement under which it will
acquire Asarco Incorporated (NYSE: AR) for $14.75 cash and 0.2513 Phelps
Dodge shares per Asarco share on a fully prorated basis.
Phelps Dodge is amending its exchange offer for Asarco, which will now be
scheduled to expire at midnight on October 21, 1999. Asarco shareholders
will have the right to elect to receive cash or Phelps Dodge shares for
each Asarco share. The all-cash election for Asarco shareholders is $29.50
per Asarco share and the all-stock election is 0.50266 Phelps Dodge shares
per Asarco share, subject to proration to maintain the overall allocation
of 50% stock and 50% cash. The stock portion of the consideration received
will be tax-free to Asarco shareholders.
Based on Phelps Dodge's closing share price yesterday, the agreement
currently values Asarco at $28.21 per share, or a total equity value of
approximately $1.1 billion, based on approximately 39.8 million Asarco
shares outstanding.
On September 30, 1999, Phelps Dodge announced that it had signed a
definitive agreement to acquire Cyprus Amax Mineral Company (NYSE: CYM) for
$7.61 in cash and 0.2203 Phelps Dodge shares per Cyprus Amax share on a
fully prorated basis.
Phelps Dodge expects the three-way combination with Asarco and Cyprus Amax
to be immediately and substantially accretive to its cash flow per share
and accretive to its earnings per share beginning in 2001, based on the
current portfolio of the combined companies and analysts' estimates of
copper prices of $0.80 to $0.85 per pound is 2001. Based on its strong
balance sheet, Phelps Dodge expects to finance the approximately $590
million cash portion of the Asarco offer primarily through existing credit
facilities and cash on hand.
Phelps Dodge expects to achieve annual cash cost savings of at least $200
million from the three-way combination with Asarco and Cyprus Amax, to be
fully phased in by the end of 2001, through reductions in SG&A expenses,
operating improvements and efficiencies in exploration.
Phelps Dodge has already received U.S. antitrust approval for the
acquisition. Completion of the exchange offer is subject to at least 80% of
Asarco's shares being tendered and not withdrawn, approval of Phelps Dodge
shareholders at a special meeting on October 13, 1999, and customary
closing conditions.
The three-way combination represents a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with
enhanced flexibility to excel through business cycles. It will also
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provide significant opportunities to integrate operations in the
southwestern United States, administrative functions in the U.S., Chile and
Peru, and worldwide exploration and development activities.
Consistent with demonstrated Phelps Dodge standards, all properties will be
operated to earn more than the cost of capital over the copper cycle.
"This compelling three-way combination positions Phelps Dodge to become the
leading global copper producer," said Douglas C. Yearley, Chairman and
Chief Executive Officer of Phelps Dodge. "We look forward to quickly
closing both transactions and beginning to realize the significant upside
potential of combining Phelps Dodge, Asarco and Cyprus Amax."
J. Stephen Whisler, President and Chief Operating Officer of Phelps Dodge,
said, "We are committed to optimizing the combined operations of the three
companies and delivering superior returns on capital throughout the entire
copper cycle. We now have unique opportunities for regional integration and
improved efficiencies. We will move swiftly to realize these benefits."
Morgan Stanley Dean Witter served as financial advisor to Phelps Dodge.
Shearman & Sterling and Debevoise & Plimpton served as legal advisors to
Phelps Dodge.
Also in the morning of October 6, 1999, Asarco issued the following press
release:
ASARCO BOARD APPROVES MERGER AGREEMENT WITH PHELPS DODGE
NEW YORK -- October 6, 1999 -- The Board of Directors of ASARCO
Incorporated (NYSE: AR) announced today that it has accepted an improved offer
from Phelps Dodge Corporation (NYSE: PD) which values the Company at $1.1
billion or $28.21 per share. Pursuant to the merger agreement signed by the
parties, Phelps Dodge will acquire Asarco for $14.75 in cash and 0.2513 Phelps
Dodge share for each Asarco common share on a fully prorated basis.
Francis R. McAllister, chairman and chief executive officer of Asarco,
said, "From the beginning it has been our aim to maximize shareholder value. We
believe this transaction represents good value for Asarco shareholders. We plan
to work closely with Phelps Dodge to ensure a smooth transition."
Under the agreement, Asarco shareholders can elect to receive cash or
Phelps Dodge shares for each Asarco share, subject to proration to maintain the
overall cash/stock allocation of approximately 50% stock and 50% cash. The stock
portion of the consideration received will be tax-free to Asarco shareholders.
Based on Phelps Dodge closing share price yesterday, the agreement
currently values Asarco at $28.21 per share, or a total equity value of
approximately $1.1 billion, based on approximately 40 million Asarco shares
outstanding. Based on share prices at the time of Phelps Dodge's original offer
on August 20, 1999, the agreement values Asarco at $29.50 per share or
approximately a 60% premium.
Completion of the exchange offer is subject to 80% of Asarco shares being
tendered and not withdrawn, approval of Phelps Dodge shareholders at a special
meeting on October 13th and customary closing conditions. The closing should be
completed on October 22nd.
On October 7, 1999, Grupo Mexico announced that it was increasing the price
in its tender offer for Asarco shares to $29.50 per Asarco common share.
On October 8, 1999, Phelps Dodge issued the following press release:
PHELPS DODGE WILL NOT RAISE OFFER FOR ASARCO
PHOENIX, AZ, October 8, 1999 -- Phelps Dodge Corporation (NYSE: PD) today
issued the following statement in response to the revised Grupo Mexico, S.A. de
C.V. offer to acquire Asarco Incorporated (NYSE: AR) for $29.50 per share in
cash: "Phelps Dodge took seriously the Asarco Board of Directors' request to
submit best and final offers -- and we did exactly that. Phelps Dodge will not
raise its offer for Asarco, and we're confident that shareholders of Phelps
Dodge and Cyprus Amax will understand and appreciate the financial discipline
behind our decision. We remain committed to shareholder value."
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Also on October 8, 1999, Asarco notified Phelps Dodge that it intended to
enter into discussions with Grupo Mexico and issued the following press release:
NEW YORK -- October 8, 1999 -- ASARCO Incorporated (NYSE: AR) announced
that the Board of Directors of Asarco met to consider the revised proposal
contained in a letter from Grupo Mexico of October 7, 1999. In its revised
proposal, Grupo Mexico offered to acquire all of the outstanding shares of
Asarco common stock at a price of $29.50 per share in cash.
At the meeting, the Asarco Board of Directors considered, together with
advice from its financial and legal advisors, the terms of Grupo Mexico's
revised offer, Asarco's rights and obligations under the Phelps Dodge merger
agreement and its fiduciary duties to stockholders of Asarco under applicable
law. In accordance with the terms of its merger agreement with Phelps Dodge, the
Board of Directors determined in good faith, after consultation with its legal
and financial advisors, that it was necessary in order to comply with its
fiduciary duties under the applicable law to modify its recommendation of the
pending transaction with Phelps Dodge and, if necessary, to furnish information
to Grupo Mexico pursuant to a customary confidentiality agreement and to
participate in discussions or negotiations regarding the Grupo Mexico revised
proposal. The Board has notified Phelps Dodge that it intends to participate in
discussions with Grupo Mexico concerning the proposal. Accordingly, the Asarco
Board recommends that stockholders not tender their shares in the Phelps Dodge
Exchange Offer at this time.
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THE OFFER
We are offering to exchange $14.75 net in cash plus 0.25133120 shares of
Phelps Dodge common stock for each outstanding share of Asarco Incorporated
common stock, on a fully prorated basis. You may elect to receive either $29.50
in cash or 0.50266 shares of Phelps Dodge common stock for each of your Asarco
common shares that are validly tendered and not properly withdrawn, subject, in
each case, to the election and proration procedures described in this prospectus
and the related letter of election and transmittal. This consideration has a
value of $28.21, based on the closing price of Phelps Dodge common stock on
October 5, 1999 of $53 9/16. If your receive all consideration in the form of
stock, at the exchange ratio of 0.50266 Phelps Dodge common shares per Asarco
share, your consideration would be worth $26.92, based on the same closing
price. We are making our offer through our wholly owned subsidiary, AAV
Corporation, which is a Delaware corporation. The term "expiration date" means
12:00 midnight, New York City time, on October 25, 1999, unless we extend the
period of time for which this offer is open, in which case the term "expiration
date" means the latest time and date on which the offer, as so extended,
expires. We are also making a separate offer to exchange $7.61176875 net in cash
plus 0.2203 shares of Phelps Dodge common stock for each outstanding common
share of Cyprus Amax Minerals Company on a fully prorated basis and subject to
the same election and proration procedures.
If you tender your shares, you will not be obligated to pay any charges or
expenses of the exchange agent or any brokerage commissions. Except as set forth
in the instructions to the letter of election and transmittal, transfer taxes on
the exchange of Asarco common stock pursuant to our offer will be paid by us or
on our behalf.
We are making this offer in order to acquire control of, and ultimately the
entire common equity interest in, Asarco. Pursuant to the Phelps Dodge/Asarco
merger agreement, as soon as possible after consummation of the offer, Asarco
will consummate the Phelps Dodge/Asarco merger in which each outstanding share
of Asarco common stock (except for Asarco common stock held by Asarco, us or any
of our subsidiaries) would be converted into the right to receive 0.25133120
shares of Phelps Dodge common stock and $14.75 in cash, without interest, on a
fully prorated basis.
If we obtain all of the shares of Asarco pursuant to our offer to you, and
all of the shares of Cyprus Amax pursuant to our separate offer to its
shareholders, former shareholders in Asarco and Cyprus Amax would own
approximately 11% and 23%, respectively, of the shares of common stock of Phelps
Dodge Corporation, based upon the number of shares outstanding of Phelps Dodge,
Asarco and Cyprus Amax on September 30, 1999, September 30, 1999 and September
28, 1999, respectively. If we obtain all of the common shares of Asarco pursuant
to our offer and do not acquire any Cyprus Amax common shares, former
shareholders of Asarco would own approximately 15% of the common stock of the
Phelps Dodge/Asarco combined entity.
Our obligation to exchange shares of Phelps Dodge common stock and cash for
Asarco shares pursuant to the offer is conditioned upon several conditions
referred to below under "Conditions of the Offer," including the Minimum Tender
Condition, the Phelps Dodge Stockholder Approval Condition, and other conditions
that are discussed below.
Our offer to acquire Asarco common stock is also an offer to acquire Asarco
preferred share purchase rights ("Asarco Rights"), and, when we refer to the
shares of Asarco common stock, we are also referring to the associated rights,
unless we indicate otherwise. In addition, all references to the rights include
the benefits to holders of those rights pursuant to the Asarco rights agreement
(the "Asarco Rights Agreement"), including the right to receive any payment due
upon redemption of those rights.
We have asked Asarco for its stockholder list and security position
listings to communicate with you and to distribute our offer to you. We may send
this prospectus, the related letter of election and transmittal and other
relevant materials to you and to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on Asarco's stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing so that we can
later send these materials to beneficial owners of Asarco shares after we
receive these lists from Asarco.
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DESCRIPTION OF ELECTION AND PRORATION PROCEDURES
These are the rules that will govern the allocation of the cash and stock
consideration in our offer.
CASE 1: MORE CASH CONSIDERATION IS ELECTED THAN THE AMOUNT OF CASH AVAILABLE FOR
PAYMENT
In this case, Phelps Dodge will calculate a proration factor for the Asarco
shares making a cash election. This cash proration factor will equal (1) the
total amount of cash available for payment, which will be $14.75 multiplied by
the total number of Asarco shares outstanding immediately prior to closing of
our offer, divided by (2) the total amount of cash that would have to be paid if
all cash elections were honored in full, which is determined by multiplying the
number of Asarco shares electing cash by $29.50.
- Each Asarco share electing to receive Phelps Dodge shares will be
exchanged for 0.50266 Phelps Dodge shares;
- Each Asarco share as to which no election has been made will be exchanged
for 0.50266 Phelps Dodge shares; and
- Each Asarco share electing cash will be exchanged for:
1. $29.50 in cash multiplied by the cash proration factor; and
2. a number of Phelps Dodge shares equal to 0.50266 multiplied by 1 minus
the cash proration factor.
For example, if 38 million Asarco shares are outstanding immediately prior
to closing of our offer and 70% of those shares elect cash, the cash proration
factor would be 71.43%, calculated as follows:
$560.5 million ($14.75 multiplied by 38 million), / $784.7 million
($29.50 multiplied by 26.6 million, the number of Asarco shares that
elected to receive cash)
Each of the Asarco shares electing to receive Phelps Dodge shares and each
of the Asarco shares as to which no election has been made, would receive
0.50266 Phelps Dodge shares. Each of the Asarco shares electing to receive cash
would receive $21.07 in cash, without interest, and 0.1436 Phelps Dodge shares.
CASE 2: MORE STOCK CONSIDERATION IS ELECTED THAN THE NUMBER OF PHELPS DODGE
SHARES AVAILABLE FOR ISSUANCE UNDER OUR OFFER
In this case, Phelps Dodge will calculate a proration factor for the Asarco
shares making a stock election. This stock proration factor will equal (1) the
total number of Phelps Dodge shares available for issuance in our offer, which
will be 0.25133120 multiplied by the total number of Asarco shares outstanding
immediately prior to closing of our offer, divided by (2) the total number of
Phelps Dodge shares that would have to be issued if all stock elections were
honored in full, which is determined by multiplying the number of Asarco shares
electing stock by 0.50266.
- Each Asarco share electing to receive cash will be exchanged for $29.50
in cash, without interest;
- Each Asarco share as to which no election has been made will be exchanged
for $29.50 in cash, without interest; and
- Each Asarco share electing stock will be exchanged for:
1. A number of Phelps Dodge shares equal to 0.50266 multiplied by the
stock proration factor; and
2. Cash equal to $29.50 multiplied by 1 minus the stock proration factor.
For example, if 38 million Asarco shares are outstanding immediately prior
to closing of our offer and 70% of those shares elect stock, the stock proration
factor would be 71.43%, calculated as follows:
9.55 million (0.25133120 multiplied by 38 million), / 13.37 million
(0.50266 multiplied by 26.6 million, the number of Asarco shares that
elected to receive stock).
Each of the Asarco shares electing to receive cash and each of the Asarco
shares as to which no election has been made, would receive $29.50 in cash,
without interest. Each of the Asarco shares electing to receive stock would
receive .3591 Phelps Dodge shares and $8.43 in cash, without interest.
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CASE 3: THE NUMBER OF ASARCO SHARES AS TO WHICH NO ELECTION IS MADE IS
SUFFICIENTLY LARGE SO THAT CASH CONSIDERATION ELECTED IS LESS THAN THE CASH
AVAILABLE FOR PAYMENT AND THE STOCK CONSIDERATION ELECTED IS LESS THAN THE
NUMBER OF PHELPS DODGE COMMON SHARES AVAILABLE FOR DELIVERY
In this case, Phelps Dodge will calculate a proration factor for the shares
that make no election. This non electing proration factor will equal (1) the
difference between the total number of Asarco shares that must receive cash less
the total number of Asarco shares that have elected cash, divided by (2) the
total number of shares as to which no election has been made. The total number
of shares that must receive cash is determined by dividing the total cash
consideration ($14.75 multiplied by the number of Asarco shares outstanding
immediately prior to closing of our offer) by $29.50.
- Each Asarco share electing cash will be exchanged for $29.50 in cash,
without interest;
- Each Asarco share electing stock will be exchanged for 0.50266 Phelps
Dodge shares; and
- Each Asarco share as to which no election has been made will be exchanged
for:
1. $29.50 multiplied by the non electing proration factor; and
2. a number of Phelps Dodge shares equal to 0.50266 multiplied by 1 minus
the non electing proration factor.
For example, if 38 million Asarco shares are outstanding immediately prior
to the closing of our offer and cash is elected with respect to 30% of those
shares, stock is elected with respect to 40% of those shares and no election is
made with respect to 30% of those shares, the non electing proration factor
would be 66.67%, calculated as follows:
$560.5 million ($14.75 multiplied by 38 million) / $29.50 = $19 million
19 million - 11.4 million = 7.6 million
7.6 million / 11.4 million = 0.6667
Each of the Asarco shares electing to receive cash will be exchanged for
$29.50 in cash, without interest and each Asarco share electing stock
consideration will be exchanged for 0.50266 Phelps Dodge shares. Each of the
Asarco shares as to which no election has been made will be exchanged for $19.67
in cash, without interest, and 0.1675 Phelps Dodge shares.
TIMING OF OUR OFFER
Our offer is scheduled to expire at 12:00 midnight, New York City time on
October 21, 1999. For more information, you should read the discussion under the
caption "Extension, Termination and Amendment."
We have called a special meeting of our stockholders to be held on October
13, 1999 so that we can obtain the approvals necessary to satisfy the Phelps
Dodge Stockholder Approval Condition.
LITIGATION
On August 24, 1999, Phelps Dodge and its directly owned subsidiary AAV
Corporation commenced an action by order to show cause in the Superior Court of
the State of New Jersey, Chancery Division, Mercer County, pursuant to N.J.S.A.
14A:5-28 to seek shareholder records from Asarco. This action is captioned
Phelps Dodge Corp. and AAV Corp. v. ASARCO Inc., Docket No. MER-C-81-99. In
connection with this action, Phelps Dodge made an application for summary
injunctive relief and the court ruled that shareholder lists and related
documents must be made available to Phelps Dodge and AAV within forty-eight
hours after the filing of their preliminary proxy materials with the SEC. Some
of these materials were delivered to Phelps Dodge on August 29, 1999, and others
have been delivered since then. On August 23, 1999, Phelps Dodge, through its
directly owned subsidiary CAV Corporation, sent a written demand to Cyprus Amax
for records of its shareholders, pursuant to Section 220 of the Delaware General
Corporation Law. Some of these materials were delivered to Phelps Dodge on
September 1, 1999, and others have been delivered since then.
In addition, Phelps Dodge commenced actions in the Superior Court of the
State of New Jersey and in the Court of Chancery of the State of Delaware
against Asarco and Cyprus Amax and their respective Boards
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of Directors for their breach of fiduciary duties including their refusals to
consider and to allow the shareholders of both companies to consider the Phelps
Dodge proposal. In particular, Phelps Dodge alleges that Cyprus Amax and Asarco
have entered into an illegal merger agreement that purports to prohibit the
companies from taking any action or entering into any discussions relating to a
takeover proposal. In light of these provisions of the Asarco/Cyprus Amax Merger
Agreement, Asarco and Cyprus Amax are incapable of evaluating meaningfully the
Phelps Dodge proposal and cannot make informed recommendations to their
shareholders. Phelps Dodge also challenged the termination or "break up" fee
payable by Asarco in certain circumstances as grossly excessive; that fee
amounts to more than 6% of Asarco's equity value as of July 15, 1999, the date
of the Asarco/Cyprus Amax merger agreement.
Furthermore, the Asarco/Cyprus Amax Merger Agreement includes corporate
governance provisions that disenfranchise shareholders by guaranteeing until
2002 the management positions of the chief executive officers of Asarco and
Cyprus Amax unless the provisions are changed with the approval of 75% of the
full board. The complaints also alleged that, in addition to their persistent
refusals to negotiate with Phelps Dodge, Asarco and Cyprus Amax have set their
shareholder meetings and record dates to favor their own merger and have
rewarded management with lavish compensation and benefit packages. These and
other efforts undertaken by the companies amount to an attempt to favor and
entrench management at the expense of shareholders.
Phelps Dodge sought injunctive relief to remedy these breaches of duty,
including court orders declaring that the boards of Asarco and Cyprus Amax
failed to make good faith efforts to obtain information about and adequately
consider the Phelps Dodge proposal and compelling the boards of those two
companies to consider the proposal and remove impediments preventing
consideration of the proposal.
On September 7, 1999, the Superior Court of the State of New Jersey stayed
the New Jersey action, and Phelps Dodge thereafter filed an amended complaint in
the Delaware Chancery Court, naming Asarco and its directors as defendants and
seeking the same relief as that sought in the New Jersey action. The Delaware
Chancery Court ordered expedited discovery and scheduled a hearing on Phelps
Dodge's motion for a preliminary injunction, in Wilmington, Delaware, on
September 27, 1999. At the hearing on September 27, 1999, the Chancery Court
denied Phelps Dodge's motion for a preliminary injunction, finding that Phelps
Dodge had not demonstrated that irreparable injury would ensue in the absence of
injunctive relief.
On September 20, 1999, Asarco filed a suit against Phelps Dodge in the U.S.
District Court for the Southern District of New York, alleging that Phelps
Dodge's proposed acquisition of Asarco and Cyprus Amax would violate the U.S.
antitrust laws, tortiously interferes with the proposed merger between Asarco
and Cyprus Amax and constitutes unfair competition. On October 4, 1999, Asarco
filed an amended complaint that, among other things, dropped the tortious
interference and unfair competition claims. Phelps Dodge believes this lawsuit
is without merit.
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right (subject to our merger agreement with
Asarco), in our sole discretion, at any time or from time to time, to extend the
period of time during which our offer remains open, and we can do so by giving
oral or written notice of such extension to the exchange agent. If we decide to
so extend our offer, we will make an announcement to that effect no later than
9:00 A.M., New York City time, on the next business day after the previously
scheduled expiration date. We are not making any assurance that we will exercise
our right to extend our offer, although we currently intend to do so until all
conditions have been satisfied or waived. During any such extension, all Asarco
shares previously tendered and not withdrawn will remain subject to the offer,
subject to your right to withdraw your Asarco shares. You should read the
discussion under the caption "Withdrawal Rights" for more details.
Subject to the SEC's applicable rules and regulations, we also reserve the
right (subject to our merger agreement with Asarco), in our sole discretion, at
any time or from time to time, (a) to delay acceptance for exchange of or,
regardless of whether we previously accepted Asarco shares for exchange,
exchange of any Asarco shares pursuant to our offer or to terminate our offer
and not accept for exchange or exchange any Asarco Shares not previously
accepted for exchange, or exchanged, upon the failure of any of the conditions
of the offer to be satisfied and (b) to waive any condition (other than the
Minimum Condition, the Phelps Dodge
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Stockholder Approval Condition and the condition relating to the effectiveness
of the Registration Statement) or otherwise amend the offer in any respect, by
giving oral or written notice of such delay, termination or amendment to the
exchange agent and by making a public announcement. We will follow any
extension, termination, amendment or delay, as promptly as practicable, with a
public announcement. In the case of an extension, any such announcement will be
issued no later than 9:00 A.M., New York City time, on the next business day
after the previously scheduled expiration date. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the offer be promptly sent to stockholders in a
manner reasonably designed to inform stockholders of such change) and without
limiting the manner in which we may choose to make any public announcement, we
assume no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
We confirm to you that if we make a material change in the terms of our
offer or the information concerning the offer, or if we waive a material
condition of the offer, we will extend the offer to the extent required under
the Exchange Act. If, prior to the expiration date, we change the percentage of
Asarco shares being sought or the consideration offered to you, that change will
apply to all holders whose Asarco shares are accepted for exchange pursuant to
our offer. If at the time notice of that change is first published, sent or
given to you, the offer is scheduled to expire at any time earlier than the
tenth business day from and including the date that such notice is first so
published, sent or given, we will extend the offer until the expiration of that
ten business-day period. For purposes of our offer, a "business day" means any
day other than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 A.M. through 12:00 midnight, New York City time.
EXCHANGE OF ASARCO SHARES; DELIVERY OF PHELPS DODGE COMMON STOCK AND CASH
Upon the terms and subject to the conditions of our offer (including, if
the offer is extended or amended, the terms and conditions of any such extension
or amendment), we will accept for exchange, and will exchange, Asarco shares
validly tendered and not withdrawn as promptly as practicable after the
expiration date. In addition, subject to applicable rules of the SEC, we
expressly reserve the right to delay acceptance for exchange or the exchange of
Asarco shares in order to comply with any applicable law. In all cases, exchange
of Asarco shares tendered and accepted for exchange pursuant to the offer will
be made only after timely receipt by the exchange agent of certificates for
those Asarco shares (or a confirmation of a book-entry transfer of those Asarco
shares in the exchange agent's account at The Depository Trust Company (which we
refer to as the "DTC")), a properly completed and duly executed letter of
election and transmittal (or a facsimile of that document) and any other
required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
Asarco shares validly tendered and not withdrawn as, if and when we notify the
exchange agent of our acceptance of the tenders of those Asarco shares pursuant
to the offer. The exchange agent will deliver cash and Phelps Dodge common stock
in exchange for Asarco shares pursuant to the offer and cash instead of
fractional shares of Phelps Dodge common stock as soon as practicable after
receipt of such notice. The exchange agent will act as agent for tendering
stockholders for the purpose of receiving Phelps Dodge common stock and cash
(including cash to be paid instead of fractional shares of Phelps Dodge common
stock) from us and transmitting such stock and cash to you. You will not receive
any interest on any cash that we pay you, even if there is a delay in making the
exchange.
If we do not accept any tendered Asarco shares for exchange pursuant to the
terms and conditions of the offer for any reason, or if certificates are
submitted for more Asarco shares than are tendered, we will return certificates
for such unexchanged Asarco shares without expense to the tendering stockholder
or, in the case of Asarco shares tendered by book-entry transfer of such Asarco
shares into the exchange agent's account at DTC pursuant to the procedures set
forth below under the discussion entitled "Procedure for Tendering," those
Asarco shares will be credited to an account maintained within DTC, as soon as
practicable following expiration or termination of the offer.
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CASH INSTEAD OF FRACTIONAL SHARES OF PHELPS DODGE COMMON STOCK
We will not issue certificates representing fractional shares of our common
stock pursuant to the offer. Instead, each tendering stockholder who would
otherwise be entitled to a fractional share of our common stock will receive
cash in an amount equal to such fraction (expressed as a decimal and rounded to
the nearest 0.01 of a share) multiplied by the closing price for shares of our
common stock on the NYSE Composite Tape on the date that we accept those Asarco
shares for exchange.
WITHDRAWAL RIGHTS
Your tender of Asarco shares pursuant to the offer is irrevocable, except
that Asarco shares tendered pursuant to the offer may be withdrawn at any time
prior to the expiration date, and, unless we previously accepted them pursuant
to the offer, may also be withdrawn at any time after November 2, 1999.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telegraphic, telex or facsimile transmission notice of withdrawal
at one of its addresses set forth on the back cover of this prospectus, and your
notice must include your name, the number of Asarco shares to be withdrawn and
the name of the registered holder, if it is different from that of the person
who tendered those Asarco shares.
A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for you. The financial institution
must be a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program, any of which are an "eligible institution," unless those
Asarco shares have been tendered for the account of any Eligible Institution. If
Asarco shares have been tendered pursuant to the procedures for book-entry
tender discussed under the caption entitled "Procedure for Tendering," any
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawn Asarco shares and must otherwise comply with
DTC's procedures. If certificates have been delivered or otherwise identified to
the exchange agent, the name of the registered holder and the serial numbers of
the particular certificates evidencing the Asarco shares withdrawn must also be
furnished to the exchange agent, as stated above, prior to the physical release
of such certificates. We will decide all questions as to the form and validity
(including time of receipt) of any notice of withdrawal, in our sole discretion,
and our decision shall be final and binding. Neither we, the exchange agent, the
Information Agent, the Dealer Manager nor any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or will incur any liability for failure to give any such
notification. Any Asarco shares properly withdrawn will be deemed not to have
been validly tendered for purposes of our offer. However, you may retender
withdrawn Asarco shares by following one of the procedures discussed under the
caption entitled "Procedure for Tendering" at any time prior to the expiration
date.
If you withdraw any of your Asarco shares, you automatically withdraw the
associated Asarco Rights. You may not withdraw Asarco Rights unless you also
withdraw the associated Asarco shares.
PROCEDURE FOR TENDERING
For you to validly tender Asarco shares pursuant to the offer, (a) a
properly completed and duly executed letter of election and transmittal (or
manually executed facsimile of that document), along with any required signature
guarantees, or an agent's message in connection with a book-entry transfer, and
any other required documents, must be transmitted to and received by the
exchange agent at one of its addresses set forth on the back cover of this
prospectus, and certificates for tendered Asarco shares must be received by the
exchange agent at such address or those Asarco shares must be tendered pursuant
to the procedures for book-entry tender set forth below (and a confirmation of
receipt of such tender received (we refer to this confirmation below as a
"Book-Entry Confirmation")), in each case before the expiration date, or (b) you
must comply with the guaranteed delivery procedures set forth below.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Asarco shares and, if applicable, Asarco
Rights,
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which are the subject of such Book-Entry Confirmation, that such participant has
received and agrees to be bound by the terms of the letter of election and
transmittal and that we may enforce that agreement against such participant.
The exchange agent will establish accounts with respect to the Asarco
shares at DTC for purposes of the offer within two business days after the date
of this prospectus, and any financial institution that is a participant in DTC
may make book-entry delivery of the Asarco shares by causing DTC to transfer
such Asarco shares into the exchange agent's account in accordance with DTC's
procedure for such transfer. However, although delivery of Asarco shares may be
effected through book-entry at DTC, the letter of election and transmittal (or
facsimile thereof), with any required signature guarantees, or an agent's
message in connection with a book-entry transfer, and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at one or more of its addresses set forth on the back cover of this
prospectus prior to the expiration date, or the guaranteed delivery procedures
described below. We cannot assure you, however, that book-entry delivery of
Asarco Rights will be available. If book-entry delivery is not available, you
must tender Asarco Rights by means of delivery of Asarco Rights certificates or
pursuant to the guaranteed delivery procedure set forth below.
Signatures on all letters of election and transmittal must be guaranteed by
an eligible institution, except in cases in which Asarco shares are tendered
either by a registered holder of Asarco shares who has not completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the letter of election and transmittal or for the
account of an eligible institution.
If the certificates for Asarco shares or Asarco Rights (if any) are
registered in the name of a person other than the person who signs the letter of
election and transmittal, or if certificates for unexchanged Asarco shares or
Asarco Rights (if any) are to be issued to a person other than the registered
holder(s), the certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the certificates, with the signature(s) on the
certificates or stock powers guaranteed in the manner we have described above.
THE METHOD OF DELIVERY OF ASARCO SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ENSURE TIMELY DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
RECEIVED PURSUANT TO OUR OFFER, YOU MUST PROVIDE THE EXCHANGE AGENT WITH YOUR
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY WHETHER YOU ARE SUBJECT TO
BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF ELECTION AND TRANSMITTAL. SOME STOCKHOLDERS
(INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND SOME FOREIGN INDIVIDUALS) ARE NOT
SUBJECT TO THESE BACKUP WITHHOLDING AND REPORTING REQUIREMENTS. IN ORDER FOR A
FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT RECIPIENT, THE STOCKHOLDER MUST
SUBMIT A FORM W-8, SIGNED UNDER PENALTIES OF PERJURY, ATTESTING TO THAT
INDIVIDUAL'S EXEMPT STATUS.
If you have previously tendered Asarco shares pursuant to the prospectus
dated September 2, 1999, you will be deemed not to have made an election. Such
shareholders must properly withdraw and re-tender their shares in order to make
an election. If you have previously tendered Asarco shares pursuant to the
prospectus dated September 22, 1999, you need not take any action unless you
wish to make or change any cash or stock election.
If you wish to tender Asarco shares pursuant to our offer and your
certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to
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the expiration date or cannot complete the procedure for book-entry transfer on
a timely basis, your Asarco shares may nevertheless be tendered, so long as all
of the following conditions are satisfied:
(a) you make your tender by or through an eligible institution;
(b) a properly completed and duly executed notice of guaranteed
delivery, substantially in the form made available by us, is received by
the exchange agent as provided below on or prior to the expiration date;
and
(c) the certificates for all tendered Asarco shares (or a confirmation
of a book-entry transfer of such securities into the exchange agent's
account at DTC as described above), in proper form for transfer, together
with a properly completed and duly executed letter of transmittal (or
facsimile thereof), with any required signature guarantees (or, in the case
of a book-entry transfer, an agent's message) and all other documents
required by the letter of election and transmittal are received by the
exchange agent within three NYSE trading days after the date of execution
of such notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
telegram, telex, facsimile transmission or mail to the exchange agent and you
must include a guarantee by an eligible institution in the form set forth in
that notice.
In all cases, we will exchange Asarco shares tendered and accepted for
exchange pursuant to our offer only after timely receipt by the exchange agent
of certificates for Asarco shares (or timely confirmation of a book-entry
transfer of such securities into the exchange agent's account at DTC as
described above), properly completed and duly executed letter(s) of election and
transmittal (or facsimile(s) thereof), or an agent's message in connection with
a book-entry transfer, and any other required documents. Accordingly, you may be
paid at different times depending upon when the exchange agent actually receives
certificates for Asarco shares or confirmations of book-entry transfers of those
shares.
By executing a letter of election and transmittal as set forth above, you
irrevocably appoint our designees as your attorneys-in-fact and proxies, each
with full power of substitution, to the full extent of your rights with respect
to your Asarco shares tendered and accepted for exchange by us and with respect
to any and all other Asarco shares and other securities issued or issuable in
respect of the Asarco shares on or after September 2, 1999. That appointment is
effective, and voting rights will be affected, when and only to the extent that
we deposit the shares of our common stock for Asarco shares that you have
tendered with the exchange agent. All such proxies shall be considered coupled
with an interest in the tendered Asarco shares and therefore shall not be
revocable. Upon the effectiveness of such appointment, all prior proxies that
you have given will be revoked, and you may not give any subsequent proxies
(and, if given, they will not be deemed effective). Our designees will, with
respect to the Asarco shares for which the appointment is effective, be
empowered, among other things, to exercise all of your voting and other rights
as they, in their sole discretion, deem proper at any annual, special or
adjourned meeting of Asarco's stockholders or otherwise. We reserve the right to
require that, in order for Asarco shares to be deemed validly tendered,
immediately upon our exchange of those Asarco shares, we must be able to
exercise full voting rights with respect to such Asarco shares.
We will determine questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Asarco
shares, in our sole discretion, and our determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of Asarco
shares that we determine are not in proper form or the acceptance of or exchange
for which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right (subject to our merger agreement with Asarco) to waive any of the
conditions of our offer (other than the Minimum Condition, Phelps Dodge
Stockholder Approval Condition and the condition relating to the effectiveness
of the Registration Statement) or any defect or irregularity in the tender of
any Asarco shares. No tender of Asarco shares will be deemed to have been
validly made until all defects and irregularities in tenders of Asarco shares
have been cured or waived. Neither we, the exchange agent, the Information
Agent, the Dealer Manager nor any other person will be under any duty to give
notification of any defects or irregularities in the tender of any Asarco shares
or will incur any liability for failure to give any such notification. Our
interpretation of the terms and conditions of our offer (including the letter of
transmittal and instructions thereto) will be final and binding.
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The tender of Asarco shares pursuant to any of the procedures described
above will constitute a binding agreement between us and you upon the terms and
subject to the conditions of the offer.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the anticipated material U.S. federal income tax
consequences of the acquisition of our common stock and/or cash by you, pursuant
to our offer and the Phelps Dodge/Asarco merger contemplated by this prospectus.
This discussion applies only to a "U.S. Holder," which is a term that we explain
below. It applies only to shares of Asarco common stock held as capital assets
and does not address aspects of U.S. federal income tax that may apply to
holders that are subject to special tax rules, including:
- insurance companies,
- tax-exempt organizations,
- financial institutions,
- dealers in securities,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- foreign persons,
- persons who acquired shares of Asarco common stock pursuant to an
exercise of employee stock options or rights or otherwise as
compensation, and
- persons who hold shares of Asarco common stock as part of a straddle,
conversion transaction, or constructive sale.
Also, this summary does not address state, local or foreign tax consequences of
our offer or the Phelps Dodge/ Asarco merger. This summary is based on current
law, and future legislative, judicial or administrative changes or
interpretations, which may be retroactive, could affect the accuracy of this
discussion.
For purposes of this discussion, a "U.S. Holder" means a holder of Asarco
shares that is
- a citizen or resident of the United States,
- a corporation organized in or under the laws of the United States or any
political subdivision thereof or therein,
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or
- a trust if a U.S. court can exercise primary supervision over the
administration of such trust and one or more U.S. persons has the
authority to control all of the substantial decisions of such trust.
Reorganization Treatment
In the opinion of Shearman & Sterling, special counsel to us, while not
entirely free from doubt, the exchange of Asarco common stock for our common
stock and/or cash pursuant to our offer and the Phelps Dodge/Asarco merger will
be treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code (the "Code"). This opinion is based on certain factual
assumptions and representations, including that (i) none of Asarco, Phelps Dodge
or any related party will acquire or redeem, in connection with the transaction,
shares of Phelps Dodge issued to Asarco shareholders pursuant to our offer or
the Phelps Dodge/Asarco merger or shares of Asarco, to the extent inconsistent
with the continuity of shareholder interest requirements for corporate
reorganizations; (ii) the value of our common stock issued pursuant to our offer
and the Phelps Dodge/Asarco merger will constitute more than 40% of the overall
consideration furnished to Asarco shareholders in the transaction (including to
Asarco shareholders who exercise dissenters' rights); (iii) Asarco will be
merged into AAV Corporation; (iv) Asarco and its successor will continue its
historic business or will use a significant portion of its historic business
assets in a business, and will continue to hold substantially all of its
pre-merger assets; and (v) our offer and the Phelps Dodge/Asarco merger will
generally be consummated as provided by this prospectus.
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The tax opinions referred to in this summary will not be binding on the
Internal Revenue Service (the "IRS") or the courts, and the parties do not
intend to request a ruling from the IRS with respect to the merger. Accordingly,
we cannot be certain that the IRS will not challenge the conclusions reflected
in those opinions or that a court will not sustain such challenge.
Assuming that the exchange of Asarco common stock for our common stock
pursuant to our offer and the Phelps Dodge/Asarco merger will be treated for
U.S. federal income tax purposes as an exchange pursuant to a plan of
reorganization within the meaning of Section 368(a) of the Code, as described
above, Shearman & Sterling is further of the opinion that the following
summarizes the material U.S. federal income tax consequences to a U.S. Holder of
the exchange of Asarco shares for our common stock and/or cash pursuant to our
offer and the Phelps Dodge/Asarco merger.
Receipt only of cash
In general, a U.S. Holder who receives only cash in exchange for Asarco
shares pursuant to our offer and the Phelps Dodge/Asarco merger will recognize
capital gain or loss equal to the difference between the amount of cash received
and such U.S. Holder's adjusted tax basis in the Asarco shares surrendered
(unless the U.S. Holder actually or constructively owns our common stock and the
receipt of cash has the effect of the distribution of a dividend for U.S.
federal income tax purposes as discussed below under "-- Receipt of Phelps Dodge
common stock and cash"). Such gain or loss will be long-term capital gain or
loss if, as of the effective date of Phelps Dodge/Asarco merger, the holding
period for such Asarco shares is more than one year.
Receipt only of Phelps Dodge common stock
A U.S. Holder who receives only our common stock in exchange for Asarco
shares pursuant to our offer and the Phelps Dodge/Asarco merger will not
recognize any gain or loss upon such exchange (except to the extent cash is
received in lieu of a fractional share of our common stock, which will be taxed
as discussed below). The aggregate adjusted tax basis of our common stock
received in such exchange, including any fractional interest in our common stock
for which cash is received, will be equal to the aggregate adjusted tax basis of
the Asarco shares surrendered therefor. The holding period of our common stock
will include the holding period of such Asarco shares.
Receipt of Phelps Dodge common stock and cash
A U.S. Holder who receives a combination of cash and our common stock in
exchange for Asarco shares pursuant to our offer and the Phelps Dodge/Asarco
merger will recognize gain, if any, with respect to the shares so exchanged but
only to the extent of the lesser of (a) the amount of gain realized with respect
to the Asarco shares and (b) the amount of cash received (other than cash
received in lieu of a fractional share of our common stock, which will be taxed
as discussed below). The amount of gain realized with respect to the Asarco
shares exchanged will equal the excess, if any, of the sum of the cash
(including cash received in lieu of a fractional share) and the fair market
value of our common stock received over the U.S. Holder's adjusted tax basis in
such Asarco shares. No loss will be recognized by a U.S. Holder who receives a
combination of cash and our common stock pursuant to our offer and the Phelps
Dodge/Asarco merger (except in connection with cash received in lieu of a
fractional share, as discussed below). Each Asarco share, or block of shares
acquired at the same price, will be treated as exchanged for a pro rata portion
of cash and our common stock.
Any gain recognized will be treated as capital gain unless, as discussed
below, the receipt of the cash has the effect of the distribution of a dividend
for U.S. federal income tax purposes, in which case such gain will be treated as
ordinary dividend income to the extent of the U.S. Holder's ratable share of
Asarco's accumulated earnings and profits. Any capital gain will be long-term
capital gain if, as of the date of the exchange, the holding period for the
Asarco shares exchanged is more than one year.
The adjusted tax basis of our common stock received by a U.S. Holder in
exchange for Asarco shares pursuant to our offer and the Phelps Dodge/Asarco
merger, including any fractional interest in a share of our common stock for
which cash is received, generally will be equal to the tax basis of the shares
surrendered therefor, decreased by the amount of cash received and increased by
the amount of gain or dividend income
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recognized, if any. The holding period of our common stock received will include
the holding period of the Asarco shares exchanged therefor.
The exchange will not have the effect of a dividend with respect to a U.S.
Holder if either the exchange is substantially disproportionate with respect to
the U.S. Holder or the exchange results in a meaningful reduction in the U.S.
Holder's interest in our stock. The exchange would be substantially
disproportionate with respect to the U.S. Holder if the U.S. Holder's percentage
interest in our stock (including stock constructively owned by such U.S. Holder)
immediately after the Phelps Dodge/Asarco merger is less than 80 percent of what
the percentage interest would have been if, hypothetically, the U.S. Holder had
elected to receive solely our common stock in exchange for all Asarco shares
owned or constructively owned by the U.S. Holder before the Phelps Dodge/Asarco
merger and no consideration other than shares of our common stock were received.
Whether an exchange would result in a meaningful reduction depends on the
particular U.S. Holder's facts and circumstances. However, the exchange should
generally result in a meaningful reduction if the U.S. Holder's percentage
interest in our stock, immediately after the Phelps Dodge/Asarco merger
(including shares owned and constructively owned), is minimal, the U.S. Holder
exercises no control over corporate affairs of Asarco or Phelps Dodge, and the
U.S. Holder's percentage interest in our common stock is actually reduced from
what the interest would have been if, hypothetically, the U.S. Holder had
elected to receive solely our common stock in exchange for all Asarco shares
owned or constructively owned by the U.S. Holder before the Phelps Dodge/Asarco
merger. In determining a U.S. Holder's interest in our stock, the U.S. Holder
would be deemed to own any shares of our stock owned, or constructively owned,
by certain persons related to such U.S. Holder or that are subject to an option
held by the U.S. Holder or a related person.
U.S. Holders should consult their own tax advisors as to the possibility
that all or a portion of any cash received in exchange for their Asarco common
stock will be treated as a dividend and with respect to the consequences
thereof, including the eligibility of U.S. Holders that are corporations for a
dividends received deduction and treatment of the dividend as an "extraordinary
dividend" under section 1059 of the Code.
Cash received in lieu of a fractional Phelps Dodge common share
A U.S. Holder who receives cash in lieu of a fractional share of our common
stock and who does not otherwise hold shares of our common stock generally will
recognize gain or loss equal to the difference between the amount of cash
received and the U.S. Holder's tax basis in such fractional share. Such gain or
loss will be long-term capital gain or loss if, as of the date of the exchange,
the holding period for such shares is more than one year. U.S. Holders who
separately hold shares of our common stock should consult their own tax advisors
concerning the treatment of cash received for a fractional share.
ASARCO RIGHTS
Because there is no specific binding authority dealing with securities such
as the Asarco Rights, Shearman & Sterling expresses no view with respect to the
U.S. federal income tax treatment of the Asarco Rights becoming separately
transferable apart from the Asarco shares (the date on which such event occurs
being the "Asarco Distribution Date"), the redemption of the Asarco Rights or
the acquisition by us of the Asarco Rights. Stockholders should consult their
tax advisors as to the tax consequences of transactions with respect to the
Asarco Rights.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS OF THE
TRANSACTION. ASARCO STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNION STATES TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM.
EFFECT OF OFFER ON MARKET FOR ASARCO SHARES; REGISTRATION UNDER THE EXCHANGE ACT
The exchange of Asarco shares pursuant to our offer will reduce the number
of holders of Asarco shares and the number of Asarco shares that might otherwise
trade publicly and could adversely affect the liquidity and market value of the
remaining Asarco shares held by the public. Asarco shares are listed and
principally traded on the NYSE and are also listed on the Boston, Cincinnati,
Philadelphia, Pacific and Chicago Stock
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Exchanges. Depending on the number of Asarco shares acquired pursuant to the
offer, following consummation of the offer, Asarco shares may no longer meet the
requirements of such exchanges for continued listing. For example, published
guidelines of the NYSE indicate that the NYSE would consider delisting the
outstanding Asarco shares if, among other things, (i) the number of publicly
held Asarco shares (exclusive of holdings of officers, directors and members of
their immediate families and other concentrated holdings of 10 percent or more)
should fall below 600,000, (ii) the number of record holders of 100 or more
Asarco shares should fall below 1,200 or (iii) the aggregate market value of
publicly held shares should fall below $5 million.
According to publicly available information, there were, as of August 19,
1999, approximately 39.8 million Asarco common shares outstanding.
If such exchanges were to delist the Asarco shares, the market for them
could be adversely affected. It is possible that Asarco shares would be traded
on other securities exchanges or in the over-the-counter market, and that price
quotations would be reported by such exchanges, or through the National
Association of Securities Dealers, Inc., Automated Quotations System ("Nasdaq")
or by other sources. The extent of the public market for the Asarco shares and
the availability of such quotations would, however, depend upon the number of
holders and/or the aggregate market value of the Asarco shares remaining at such
time, the interest in maintaining a market in the Asarco shares on the part of
securities firms, the possible termination of registration of Asarco shares
under the Exchange Act, as described below, and other factors.
The Asarco shares are presently "margin securities" under the regulations
of the Federal Reserve Board, which has the effect, among other things, of
allowing brokers to extend credit on the collateral of Asarco shares. Depending
on the factors similar to those described above with respect to listing and
market quotations, following consummations of the offer, the Asarco shares may
no longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations, in which event the Asarco shares would be ineligible
as collateral for margin loans made by brokers. For a description of the
treatment of Asarco shares in the Merger, you should refer to "Purpose of Our
Offer; the Phelps Dodge/Asarco Merger."
Asarco shares are currently registered under the Exchange Act. Asarco can
terminate that registration upon application to the SEC if the outstanding
shares are not listed on a national securities exchange and if there are fewer
than 300 holders of record of Asarco shares. Termination of registration of the
Asarco shares under the Exchange Act would reduce the information that Asarco
must furnish to its shareholders and to the SEC and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirement of furnishing a proxy statement
in connection with shareholders meetings pursuant to Section 14(a) and the
related requirement of furnishing an annual report to shareholders, no longer
applicable with respect to Asarco shares. Furthermore, the ability of
"affiliates" of Asarco and persons holding "restricted securities" of Asarco to
dispose of such securities pursuant to Rule 144 under the Securities Act may be
impaired or eliminated. If registration of the shares under the Exchange Act
were terminated, they would no longer be eligible for Nasdaq reporting or for
continued inclusion on the Federal Reserve Board's list of "margin securities."
PURPOSE OF OUR OFFER; THE PHELPS DODGE/ASARCO MERGER
We are making the offer in order to acquire control of, and ultimately the
entire common equity interest in, Asarco. The offer is the first step in our
acquisition of Asarco, and is intended to facilitate the acquisition of all
Asarco shares. You will not have appraisal rights as a result of consummation of
our offer. We intend, as soon as practicable after consummation of the offer, to
seek to merge Asarco with and into a wholly owned subsidiary. The purpose of the
Phelps Dodge/Asarco merger is to acquire all Asarco shares not tendered and
exchanged pursuant to the offer. In the Phelps Dodge/Asarco merger, each then
outstanding Asarco share (except for Asarco shares held in Asarco's treasury and
Asarco shares that we or one of our subsidiaries owns) would be converted into
the right to receive 0.25133120 shares of Phelps Dodge common stock and $14.75
in cash, without interest, on a fully prorated basis. If the cash component of
our offer is oversubscribed, each outstanding Asarco share will be converted in
the merger into 0.50266 Phelps Dodge shares. If the stock component of our offer
is oversubscribed, each outstanding Asarco share will be converted in the merger
into $29.50 in cash, without interest. If neither the cash nor the stock
component of our offer is oversubscribed, you
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will receive in the merger a prorated portion, the cost consideration and the
stock consideration based on the number of Asarco shares you own compared to the
total number of Asarco shares covered in the merger. The Phelps Dodge/Asarco
merger may be consummated pursuant to Section 14A:10-5.1 of the New Jersey
Business Corporation Act (the NJBCA). Under Section 14A:10-5.1 of the NJBCA, a
parent corporation owning at least 90% of the outstanding shares of each class
of a subsidiary corporation may merge the subsidiary corporation into itself
without the approval of the stockholders of the parent corporation or of the
board of directors or stockholders of the subsidiary corporation. Assuming the
Minimum Tender Condition is satisfied and we consummate the offer, we would have
sufficient voting power to effect the Phelps Dodge/ Asarco merger under Section
14A:10-3 of the NJBCA without the vote of any other stockholder of Asarco.
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which we do not believe would apply to the Phelps Dodge/Asarco merger if the
Phelps Dodge/Asarco merger occurred within one year of consummation of our
offer, would require, among other things, that some financial information
concerning Asarco, and some information relating to the fairness of the proposed
transaction and the consideration offered to stockholders of Asarco therein, be
filed with the SEC and disclosed to you prior to consummation of the Phelps
Dodge/Asarco merger.
In addition, we reserve the right to acquire, following the consummation or
termination of our offer, additional Asarco shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer,
or otherwise, upon such terms and at such prices as we decide, which may be more
or less favorable than those of the offer. We and our affiliates also reserve
the right to dispose of any or all Asarco shares acquired by us pursuant to the
offer or otherwise, upon such terms and at such prices as we shall determine.
Upon consummation of our offer, we intend to take appropriate actions to
optimize and rationalize the combined entities' assets, operations, exploration
activities, management, personnel general and administrative functions and
corporate structure. Except as we have otherwise discussed elsewhere in this
prospectus, while we may consider sales of non-core assets, we do not have any
plans or proposals right now that would result in an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, or sale of a
material amount of assets, involving Asarco or any of its subsidiaries, or any
material changes in Asarco's corporate structure or business, or any change in
its management. We have not had access to Asarco's books and records, however,
so we might decide upon such changes once we complete such a review.
As described under the caption entitled "Reasons for the Proposed
Combination" upon consummation of the Phelps Dodge/Asarco merger, we expect to
realize substantial cost savings in both administrative and operational areas.
Upon consummation of our offer, we may also elect or seek the election of
nominees of our choice to Asarco's Board of Directors.
CONDITIONS OF OUR OFFER
Our offer is subject to a number of conditions, which are described below:
MINIMUM TENDER CONDITION
There must be validly tendered, prior to the expiration of the offer and
not withdrawn, a number of Asarco shares which will constitute at least 80% of
the total number of outstanding Asarco shares on a fully diluted basis (as
though all options or other securities convertible into or exercisable or
exchangeable for Asarco shares had been so converted, exercised or exchanged) as
of the date that we accept the Asarco shares for exchange pursuant to our offer.
PHELPS DODGE STOCKHOLDER APPROVAL CONDITION
Pursuant to the rules of the NYSE (on which our common stock is listed),
the issuance of our common stock pursuant to the offer and the Phelps
Dodge/Asarco merger must be approved by the holders of a majority of the shares
voted at a meeting of such holders at which the total number of votes cast
represents over 50% in interest of all shares of our common stock entitled to
vote on the proposal, because the number of
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shares of our common stock to be issued will be equal to or in excess of 20% of
the shares outstanding prior to such issuance. We intend to seek this approval
at a special stockholders meeting scheduled for October 13, 1999.
OTHER CONDITIONS OF OUR OFFER
Notwithstanding any other provision of our offer, we shall not be required
to accept for exchange or exchange any Asarco shares, may postpone the
acceptance for exchange of or exchange for tendered Asarco shares, and may
(subject to our merger agreement with Asarco), in our sole discretion, terminate
or amend the offer as to any Asarco shares not then exchanged (a) if at the
expiration date, either the Minimum Tender Condition or the Phelps Dodge
Stockholder Approval Condition has not been satisfied or, with respect to the
Minimum Tender Condition, waived, or (b) if on or after the date of this
prospectus and at or prior to the expiration date, any of our other conditions
are not satisfied. Those conditions are as follows:
(a) The shares of our common stock which shall be issued to Asarco
stockholders in the offer and the Phelps Dodge/Asarco merger have been
authorized for listing on the NYSE, subject to official notice of issuance;
(b) The Registration Statement and any post-effective amendments
thereto shall be effective under the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued nor shall there have been proceedings for that purpose initiated or
threatened by the SEC and we shall have received all necessary state
securities law or "blue sky" authorizations;
(c) No temporary restraining order, preliminary or permanent
injunction or other order or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the offer or any of the other transactions contemplated
by this prospectus shall be in effect; no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any court, administrative agency or commission or other
governmental authority or instrumentality which prohibits, restricts or
makes illegal the consummation of our offer; nor shall there have been a
failure to obtain any required consent or approval under foreign laws or
regulations which would prohibit the consummation of the offer or would
have a material adverse effect on us or on Asarco;
(d) There shall not have been after the date of the Phelps
Dodge/Asarco merger agreement any (i) amendment of the Code, (ii) amendment
or adoption of final or temporary Treasury Regulations under the Code,
(iii) Internal Revenue Service revenue ruling, revenue procedures,
technical advice memorandums or notices, or (iv) final decisions of a court
of competent jurisdictions, in each case that would be inconsistent with
the Phelps Dodge/Asarco merger qualifying as a reorganization under Section
368(a) of the Code; and
(e) The representations and warranties of Asarco in the Phelps
Dodge/Asarco merger agreement shall be true and correct (without giving
effect to any qualification as to "materiality" or "Material Adverse
Effect" set forth therein) as of the date of the merger agreement and as of
the expiration date as though made on and as of the date of the merger
agreement and the expiration date except where the failure of such
representations and warranties to be so true and correct would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect (as defined therein) on Asarco; and Asarco shall
have performed or complied in all material respects with all the material
agreements and covenants required by the Phelps Dodge/Asarco merger
agreement.
The foregoing conditions are solely for our benefit and we may assert them
regardless of the circumstances giving rise to any such conditions (including
any action or inaction by us). We may waive these conditions in whole or in part
(other than the Minimum Condition, the Phelps Dodge Stockholder Approval
Condition and the condition relating to effectiveness of the Registration
Statement. The determination as to whether any condition has been satisfied
shall be in our judgment and will be final and binding on all parties. The
failure by us at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed a
continuing right which may be asserted at any time and from time to time.
Notwithstanding the fact that we reserve the right to assert the failure of a
condition following acceptance for exchange but prior to exchange in order to
delay exchange or cancel its obligation to exchange
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properly tendered Asarco shares, we will either promptly exchange such Asarco
shares or promptly return such Asarco shares.
SOURCE AND AMOUNT OF FUNDS
We estimate that the total amount of funds required pursuant to our offer
to pay the cash consideration in connection with the exchange of all Asarco
shares outstanding will be approximately $589 million. We expect to obtain these
funds from cash on hand; from borrowing under our amended and restated revolving
credit facility with The Chase Manhattan Bank, Bank of Nova Scotia, Bank of
Tokyo-Mitsubishi Trust Co., Citibank, N.A., Morgan Guaranty Trust Co., Bank of
America, Barclays Bank, Canadian Imperial Bank of Commerce, Deutsche Bank, First
Union National Bank, Wells Fargo, Industrial Bank of Japan and Royal Bank of
Canada & Mercantile Bank; and from borrowing under a revolving credit facility
that Citibank N.A. has committed to provide to us.
Our existing revolving credit facility allows us to borrow up to $1 billion
from time to time until its scheduled maturity on June 25, 2002. The agreement
allows for two, one-year renewals beyond the scheduled maturity date if we
request and receive approval from those lenders representing at least two-thirds
of the commitments provided by the facility. In the event of such approval,
total commitments under the facility would depend upon the willingness of other
lenders to assume the commitments of those lenders electing not to participate
in the renewal. Interest is payable at a fluctuating rate based on the agent
bank's prime rate, or a fixed rate, based on the LIBOR, or at fixed rates
offered independently by the several lenders, for maturities of between seven
and 360 days. This agreement provides for a facility fee of six and one-half
basis points (0.065 percent) on total commitments. The agreement requires us to
maintain a minimum consolidated tangible net worth of $1.1 billion and limits
indebtedness to 50 percent of total consolidated capitalization.
Citibank, N.A. has entered into a commitment letter with us dated October
5, 1999. Under that letter, Citibank has committed to provide us with a $1
billion revolving credit facility that we may use to pay cash consideration in
connection with our offer. We expect that Salomon Smith Barney Inc., an
affiliate of Citibank, will syndicate this credit facility to a group of banks.
Citibank's commitment is subject to customary conditions, including:
- each of us signing mutually acceptable loan documentation;
- absence of any material adverse change to us since December 31, 1998;
- absence of any material disruption or material adverse change in
financial, banking or capital markets conditions generally since October
5, 1999 that would, in the reasonable judgment of Salomon Smith Barney,
materially impair syndication of the credit facility; and
- accuracy and completeness of representations and warranties we make and
information we furnish, and our compliance with the terms of the
commitment letter.
Loans under the Citibank credit facility will be unsecured, and will bear
interest, at our option, at either (a) Citibank's base rate, or (b) LIBOR plus a
variable margin of between 0.40% and 2.00%, depending on our credit rating and
the amount we have outstanding under the facility. The facility is scheduled to
terminate 364 days after it is established.
Although we have not made definitive plans for the repayment of borrowings
under our existing revolving credit facility or our Citibank revolving credit
facility, we expect to repay the borrowings using internally generated funds,
including, if the Phelps Dodge/Asarco merger is completed, those of Asarco. We
may also use funds obtained from other sources, including future issuances of
debt securities and/or bank refinancings. Our decision as to how to repay the
borrowings will be based on our review of circumstances existing at that time,
including prevailing interest rates, financial and other economic conditions and
other factors that we consider appropriate.
RELATIONSHIPS WITH ASARCO
Except as set forth herein, neither we nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of Asarco, including, but not limited to, any contract,
arrangement, understand-
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ing or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies. Except as described herein, there have been no contacts, negotiations
or transactions since January 1, 1996, between us or, to the best of our
knowledge, any of our directors, executive officers or other affiliates, on the
one hand, and Asarco or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets. Except as set forth herein, neither we, nor, to the best of our
knowledge, any of our directors, executive officers or other affiliates, has
since January 1, 1996 had any transaction with Asarco or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the SEC applicable to the offer.
Phelps Dodge Overseas Capital Corporation, a wholly owned subsidiary of
Phelps Dodge, and Asarco are among the parties to an agreement among
stockholders, dated as of January 2, 1996, regarding their respective stock
holdings in Southern Peru Copper Corporation. The agreement gives each party the
right to nominate a number of SPCC directors in proportion with the party's
stock ownership, and requires each party to vote its stock to elect those
directors.
From 1995 through 1998, Phelps Dodge Sales Company Incorporated, a wholly
owned subsidiary of Phelps Dodge, was party to a contract with SPCC to purchase
4,800 metric tons of copper from 1995-1997 and 2,400 metric tons of copper in
1998 for $14,095,465 in 1995, $10,993,828 in 1996, $10,925,043 in 1997 and
$3,966,730 in 1998.
FEES AND EXPENSES
We have retained Innisfree M&A Incorporated to act as the information agent
in connection with our offer. The information agent may contact holders of
Asarco shares by mail, telephone, telex, telegraph and personal interviews and
may request brokers, dealers and other nominee stockholders to forward our offer
materials to beneficial owners of Asarco shares. The information agent will be
paid a customary fee for such services, plus reimbursement of out-of-pocket
expenses, and we will indemnify the information agent against certain
liabilities and expenses in connection with our offer, including liabilities
under federal securities laws.
Pursuant to a letter agreement dated August 16, 1999 (the "Letter
Agreement"), Morgan Stanley & Co. Incorporated ("Morgan Stanley") is providing
certain financial advisory services to Phelps Dodge in connection with our
offer. Under the terms of the Letter Agreement, Phelps Dodge has agreed to pay
Morgan Stanley for its financial advisory services, including its services as
Dealer Manager, in connection with our offer a financial advisory fee of (i)
$11.0 million per acquired company if Phelps Dodge acquires control, as defined
in the Letter Agreement, of Asarco or Cyprus Amax, with certain amounts payable
upon the announcement of defined events, and (ii) an additional $2.0 million if
Phelps Dodge acquires either Asarco or Cyprus Amax within two years of acquiring
the other. Phelps Dodge has also agreed to reimburse Morgan Stanley for its
out-of-pocket expenses, including the fees and expenses of its legal counsel
incurred in connection with this engagement, and has agreed to indemnify each of
Morgan Stanley and certain related persons and entities against certain
liabilities and expenses in connection with Morgan Stanley's engagement,
including certain liabilities under federal securities laws.
In addition to the fees to be received by Morgan Stanley in connection with
its engagement as financial advisor to Phelps Dodge, Morgan Stanley has in the
past rendered various investment banking and financial advisory services for
Phelps Dodge for which it has received customary compensation.
We will not pay any fees or commissions to any broker, dealer or other
persons (other than the dealer manager and the information agent) for soliciting
tenders of Asarco shares pursuant to our offer.
ACCOUNTING TREATMENT
The merger of Asarco into Phelps Dodge would be accounted for under the
purchase method of accounting under U.S. generally accepted accounting
principles, which means that Asarco's results of operations will be included
with ours from the closing date and its consolidated assets and liabilities will
be recorded at their fair values at the same date.
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STOCK EXCHANGE LISTINGS
Our common stock is listed on the NYSE, as well as on the Boston,
Cincinnati, Philadelphia, Pacific and Chicago Stock Exchanges. We will make an
application to list on the NYSE the common stock that we will issue pursuant to
our offer and the subsequent Phelps Dodge/Asarco merger. As described above
under "The Offer -- Conditions of Our Offer -- Phelps Dodge Stockholder Approval
Condition," pursuant to the rules of the NYSE, the issuance of our common stock
in the offer and the subsequent Phelps Dodge/Asarco merger must be approved by
the holders of a majority of the Phelps Dodge common stock voting at a meeting
at which the total number of votes cast represents over 50% in interest of all
shares of our common stock entitled to vote on the proposal.
REGULATORY MATTERS
Under the HSR Act, and the rules that have been promulgated thereunder (the
"Rules"), some acquisitions may not be consummated unless information has been
furnished to the Antitrust Division of the Department of Justice ("Antitrust
Division") and the Federal Trade Commission (the "FTC") and some waiting period
requirements have been satisfied. The acquisition of Asarco shares pursuant to
our offer is subject to the HSR Act. On September 10, 1999 we filed with the
Antitrust Division and the FTC Hart-Scott-Rodino Notification and Report Forms
with respect to our offers. On September 24, 1999, the FTC granted Phelps Dodge
early termination of the waiting period under the HSR Act for Phelps Dodge's
offers to acquire Asarco and Cyprus Amax. Federal and state antitrust
enforcement agencies frequently scrutinize under the antitrust laws transactions
such as our acquisition of Asarco shares pursuant to our offer. At any time
before or after we acquire Asarco shares, any such agency could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Asarco shares pursuant
to the offer or otherwise or seeking divestiture of Asarco shares acquired by us
or divestiture of assets of Phelps Dodge and/or Asarco. Private parties may also
bring legal action under the antitrust laws under some circumstances. Phelps
Dodge, Asarco and Cyprus Amax conduct operations in a number of jurisdictions
where other regulatory filings or approvals may be required or advisable in
connection with the completion of our offer. See "-- Other Conditions of Our
Offer."
Some large Asarco stockholders (those that would receive more than $15
million in Phelps Dodge shares or, in certain cases, more than 10% of Phelps
Dodge's shares) may be required to make separate filings with the FTC and
Antitrust Division under the HSR Act and the Rules in conjunction with the
receipt of shares of our common stock. If you must make such a filing, you will
then be required to observe applicable waiting periods under the HSR Act and the
Rules before receiving shares of Phelps Dodge common stock. If you are obligated
to make such a filing, we will hold in escrow the shares of our common stock to
be exchanged, pursuant to the Rules, pending expiration or early termination of
the waiting period.
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THE COMPANIES
PHELPS DODGE CORPORATION
Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions: (i) Phelps
Dodge Mining Company and (ii) Phelps Dodge Industries.
- Phelps Dodge Mining Company is a business segment that includes our
worldwide copper operations from mining through rod production, marketing
and sales, other mining operations and investments, and worldwide mineral
exploration and development programs.
- Phelps Dodge Industries includes our specialty chemicals segment, our
wire and cable segment, and, until they were sold in 1998, our wheel and
rim operations.
In 1998, Phelps Dodge Mining Company produced 874,000 tons of copper for
our account from worldwide mining operations, and an additional 178,700 tons of
copper for the accounts of our minority interest partners. Gold, silver,
molybdenum, copper chemicals and sulfuric acid are by-products of our copper
operations. Production of copper for our own account from our U.S. operations
constituted approximately 33 percent of the copper mined in the United States in
1998. Much of our U.S. cathode copper production, together with additional
copper purchased from others, is used to produce continuous-cast copper rod, the
basic feed for the electrical wire and cable industry.
Our international mining interests include Candelaria, a major copper mine
in Chile, and other operations and investments in Chile and Peru. These
operations produce a variety of metals and minerals including copper, gold,
silver, and zinc. We also explore for metals and minerals throughout the world.
In addition to our mining interests, we produce engineered products
principally for the global energy, telecommunications, transportation and
specialty chemicals sectors through Phelps Dodge Industries. Specialty chemicals
are produced at Columbian Chemicals Company which is among the world's largest
producers of carbon black. Carbon black is a reinforcing agent in natural and
synthetic rubber that increases the service life of tires, hoses, belting and
other products for the rubber industry. We also produce specialty carbon black
for other industrial applications such as pigments for printing, coatings,
plastics and other non-rubber applications.
Our wire and cable segment comprises Phelps Dodge Magnet Wire Company and
its subsidiaries and Phelps Dodge International Corporation and its affiliates.
This segment produces wire and cable products and specialty conductors at U.S.
and international operations. Phelps Dodge Magnet Wire Company produces magnet
wire and other copper products for sale principally to original equipment
manufacturers for use in electrical motors, generators, transformers and other
products. Phelps Dodge International Corporation manufactures telecommunication
and energy cables and specialty conductors.
Our company employed 13,193 people on June 30, 1999.
We have our principal executive offices at 2600 North Central Avenue,
Phoenix, Arizona 85004-3014 (telephone number (602) 234-8100).
ASARCO INCORPORATED
Asarco, a New Jersey corporation organized in 1899, is one of the world's
leading producers of copper. Asarco also produces specialty chemicals and
aggregates. Asarco's copper business includes integrated mining, smelting and
refining operations in North America and in Peru through its 54.3% owned
subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly owned
subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone. Asarco
also operates a custom lead smelting business, a silver mining business, a zinc
mining business and a specialty metals business. Asarco owns Encycle, Inc.,
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which operates a waste recycling facility and Hydrometrics, an environmental
consulting and construction firm. As of June 30, 1999, Asarco and its
subsidiaries employed approximately 10,100 employees.
Asarco has its principal executive offices at 180 Maiden Lane, New York,
New York 10038 (telephone number (212) 510-2000).
CYPRUS AMAX MINERALS COMPANY
Cyprus Amax, a Delaware corporation organized in 1969, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum, and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June of 1999. Cyprus Amax
still holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and
its subsidiaries employed approximately 4,600 employees.
Cyprus Amax has its principal executive offices at 9100 East Mineral
Circle, Englewood, Colorado 80112 (telephone number (212) 643-500).
THE PHELPS DODGE/ASARCO MERGER AGREEMENT
We believe this summary describes the material terms of the merger
agreement. However, we recommend that you read carefully the complete agreement
for the precise legal terms of the merger agreement and other information that
may be important to you.
THE OFFER
Conditions. Our obligation to complete the offer is subject to the
following conditions:
- at least 80% of the outstanding shares of Asarco shall have been tendered
and not withdrawn (the "Minimum Condition");
- the approval by our stockholders of the issuance of our common stock in
the offer and the merger;
- such shares of our common stock shall have been authorized for listing on
the NYSE, subject to official notice of issuance;
- the effectiveness of the registration statement for such common stock;
- no legal restraint such as an injunction shall be in effect that would
prevent consummation of the offer;
- no change in tax law that would be inconsistent with the merger
qualifying as a reorganization under Section 368(a) of the Code;
- accuracy of representations and warranties of Asarco, unless failure to
be accurate would not reasonably be expected to have a material adverse
effect on Asarco; and
- compliance by Asarco in all material respects with material agreements
and covenants in the merger agreement.
We expressly reserve the right to waive any condition (other than the
Minimum Condition, the Phelps Dodge Stockholder Approval Condition and the
condition relating to the effectiveness of the Registration Statement) or to
increase the consideration per share of Asarco common stock payable in our
offer, provided however, that no charge may be made which decreases the
consideration per share of Asarco common stock payable in our offer or which
reduces the maximum number of shares of Asarco common stock to be acquired in
our offer.
Consideration and Election Procedure. The merger agreement provides for
the consideration that we will pay in the offer, including the election and
proration procedures. For a description of those matters, refer
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to the discussion under "The Offer," including under the caption "-- Description
of Election and Proration Procedures."
Expiration or Termination of Amended Offer. We have agreed to extend the
offer at any time up to March 31, 2000 for one or more periods of not more than
10 business days, if at the expiration date of the Asarco offer, or any
extension thereof, any of the conditions to the offer is not satisfied or
waived; provided, however, that if all the conditions to the offer are satisfied
or waived but the number of Asarco shares tendered is 85% or more, but less than
90%, of the then outstanding number of Asarco shares, then we may extend the
offer for an aggregate period of not more than three business days beyond the
expiration date.
FORM OF MERGER
If all the conditions to the merger are satisfied or waived in accordance
with the merger agreement, AAV Corporation, a wholly owned subsidiary of Phelps
Dodge, will merge with Asarco, with AAV Corporation surviving (the "Surviving
Corporation"). As a result of the merger, the identity and separate existence of
Asarco shall cease. The merger will become effective when the applicable
certificates of merger are filed with the Secretaries of State of the States of
Delaware and New Jersey. It is currently anticipated that the merger will become
effective during the fourth quarter of 1999.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time the merger becomes effective,
Conversion of Asarco Common Stock. Subject to no fractional shares being
issued, each issued and outstanding share of Asarco common stock (other than
shares to be canceled in accordance with the merger agreement) shall be
converted into the Asarco Consideration, the Asarco Cash Consideration or a
combination thereof, determined pursuant to provisions of the merger agreement
(such consideration is referred to herein as the "Merger Consideration"). If
there is an excess of cash elections with respect to the offer, each outstanding
share of Asarco common stock will be converted in the merger into the right to
receive 0.50266 Phelps Dodge common shares (the "Asarco Stock Consideration").
If there is an excess of stock elections with respect to the offer, each
outstanding share of Asarco common stock will be converted in the merger into
the right to receive $29.50 net in cash, without interest (the "Asarco Cash
Consideration"). If there is not an excess of cash or stock elections, each
outstanding share of Asarco common stock will be converted in the merger into
(i) an amount of cash equal to the Asarco Merger Cash Amount (as hereinafter
defined), without interest, and (ii) a number of shares of Phelps Dodge common
stock equal to the Asarco Merger Stock Amount (as hereinafter defined). The
Asarco Merger Cash Amount and the Asarco Merger Stock Amount will be determined
as follows:
1. The aggregate amount of Asarco Cash Consideration actually paid in
the Offer will be subtracted from the Total Asarco Available Cash (as
hereinafter defined) to determine the amount of cash available to be paid
in the merger (the "Aggregate Asarco Merger Cash Consideration"). "Total
Asarco Available Cash" equals (i) the number of shares of Asarco common
stock exchanged in the offer plus the number of shares of Asarco common
stock to be converted in the Asarco Merger, multiplied by (ii) $14.75.
2. The Aggregate Asarco Merger Cash Consideration will be divided by
the number of shares of Asarco common stock to be converted in the merger,
to determine the amount of cash consideration to be paid in respect of each
such share of Asarco common stock in the merger (the "Asarco Merger Cash
Amount").
3. The aggregate number of shares of Phelps Dodge common stock
actually issued as Asarco Stock Consideration in the offer will be
subtracted from the Total Asarco Available Stock (as hereinafter defined)
to determine the number of shares of Phelps Dodge common stock available to
be paid in the merger (the "Aggregate Asarco Merger Stock Consideration").
"Total Asarco Available Stock" equals (i) the number of shares of Asarco
common stock exchanged in the offer plus the number of shares of Asarco
common stock to be converted in the merger, multiplied by (ii) 0.25133120.
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4. The Aggregate Asarco Merger Stock Consideration will be divided by
the number of shares of Asarco Amax common stock to be converted in the
merger, to determine the number of shares of Phelps Dodge common stock to
be issued in respect of each such share of Asarco common stock in the
merger (the "Asarco Merger Stock Amount").
As of the effective time of the merger, all such shares of Asarco 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 or
certificates which immediately prior to the effective time represented
outstanding shares of Asarco common stock shall cease to have any rights
with respect thereto, except the right to receive (x) if the Merger
Consideration includes Phelps Dodge common stock, (i) Phelps Dodge
certificates, (ii) certain dividends and other distributions in accordance
with the merger agreement, and (iii) cash instead of fractional shares of
Phelps Dodge common stock in accordance with the merger agreement, without
interest, and (y) if the Merger Consideration includes cash, the
appropriate cash amounts.
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
Exchange Agent. At the time the merger becomes effective, Phelps Dodge
shall enter into an agreement with a bank or trust company that is reasonably
satisfactory to Asarco, with which Phelps Dodge shall deposit cash and
certificates representing the number of whole shares of Phelps Dodge common
stock issuable pursuant to the merger agreement in exchange for outstanding
shares of Asarco common stock. Soon after the completion of the merger, we will
send a letter to each person who was a Asarco stockholder at the time the merger
became effective. The letter will contain instructions on how to surrender
Asarco stock certificates to the exchange agent and receive shares of Phelps
Dodge and cash. See "-- Consideration to be Received in the Merger."
Dividends. Holders of Asarco common stock will not be entitled to receive
any dividends or other distributions payable by Phelps Dodge until they exchange
their Asarco stock certificates for certificates representing shares of Phelps
Dodge common stock. Once they deliver their Asarco stock certificates to the
exchange agent, those stockholders will receive, subject to applicable laws,
accumulated dividends and distributions, without interest.
Fractional Shares. No fractional shares of Phelps Dodge common stock will
be issued upon the surrender of certificates representing shares of Asarco
common stock. No dividend or other distribution of Phelps Dodge will relate to
any such fractional shares and no such fractional shares will entitle the owner
thereof to any voting or other rights of a stockholder of Phelps Dodge.
Holders of Asarco common stock otherwise entitled to fractional shares of
Phelps Dodge common stock will receive a cash payment instead of such fractional
shares. Following the effective time, the exchange agent will determine the
excess of the number of whole shares of Phelps Dodge common stock delivered to
the exchange agent by Phelps Dodge for distribution to Asarco stockholders over
the aggregate number of whole shares of Phelps Dodge common stock to be
distributed to Asarco stockholders. The exchange agent will then, on behalf of
the former stockholders of Asarco, sell the excess shares at then prevailing
prices on the New York Stock Exchange, all in the manner provided in the merger
agreement.
As soon as practicable after the determination of the amount of cash to be
paid to holders of Asarco common stock with respect to any fractional share
interests, the exchange agent will make available such amounts to such holders
of Asarco stock subject to and in accordance with the terms of the merger
agreement.
SURVIVING CORPORATION FOLLOWING THE MERGER
Name of Surviving Corporation. The name of the Surviving Corporation from
and after the effective time of the merger (the "effective time") shall be
"ASARCO Incorporated" until changed or amended in accordance with applicable
Law.
Charter Documents. At the effective time, the certificate of incorporation
and the bylaws of AAV Corporation, as in effect immediately prior to the
effective time, shall be the certificate of incorporation and bylaws,
respectively, of the Surviving Corporation.
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Directors and Officers. The directors of AAV Corporation at the effective
time shall be the directors of the Surviving Corporation until their respective
successors are duly elected and qualified, as the case may be. The officers of
AAV Corporation at the effective time shall be the officers of the Surviving
Corporation until their respective successors are duly appointed.
REPRESENTATIONS AND WARRANTIES IN THE MERGER AGREEMENT
In the merger agreement both parties make representations and warranties to
each other about their companies with respect to, among other things:
- their organization, existence, good standing, corporate power,
subsidiaries and similar corporate matters;
- their capitalization;
- their authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters;
- the recommendation by their boards of directors to their shareholders of
the merger agreement and the transactions contemplated thereby;
- the absence of conflicts, defaults or violations under their certificates
of incorporation and bylaws, certain other agreements and laws as a
result of the contemplated transactions, and related matters;
- filings with the SEC and the accuracy and completeness of the information
contained in such filings;
- environmental matters;
- employee benefit matters;
- this prospectus, the Phelps Dodge proxy statement, the registration
statement and other SEC filings and the accuracy of the information
contained therein;
- the inapplicability of the Asarco shareholder rights plan to the offer
and the merger;
- tax matters;
- the receipt of fairness opinions from our financial advisors;
- required stockholder approvals with respect to the contemplated
transactions;
- the absence of certain material changes in our businesses since December
31, 1998;
- the absence of undisclosed material liabilities;
- labor relations; and
- no prior activities conducted by AAV Corporation.
All representations and warranties of Phelps Dodge and Asarco expire at the
time the merger becomes effective.
COVENANTS IN THE MERGER AGREEMENT
The merger agreement provides that, until the merger has been completed,
neither of us will take certain actions without the consent of the other party
or as otherwise permitted by the merger agreement. More specifically, we have
agreed to the following with respect to ourselves and, where applicable, our
subsidiaries, except as otherwise permitted by the merger agreement:
- Conduct of Operations. We will conduct our business operations according
to their ordinary and usual course of business in substantially the same
manner as conducted prior to the merger agreement.
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- Preserve Organizations. We will use our reasonable best efforts to
preserve intact our business organizations and goodwill, keep available
the services of our current officers and other key employees, and
preserve our business relationships.
- Parties to Confer. We will confer with each other and report on material
operational matters and the general status of ongoing operations.
- Notice of Certain Events. We will notify each other of certain changes
or events which would have a material adverse effect on Phelps Dodge or
Asarco, as the case may be.
- Dividends and Reclassifications. We will not declare or pay any
dividends on or make any distribution with respect to our outstanding
shares of stock other than regular quarterly dividends on, in the case of
Phelps Dodge, its common stock, and, in the case of Asarco, its common
stock and preferred stock, and we will not split, combine or reclassify
any shares of our capital stock.
- Amendments to Plans. We will not enter into or amend our employee
benefit plans or employment agreements, except in the ordinary course of
business consistent with past practice, as otherwise provided in the
merger agreement or as required by law.
- Business Combinations; Assets. We will not enter into any business
combinations, acquisitions or dispositions of material amounts of assets
or securities, or release any material contract rights, in each case not
in the ordinary course of business.
- Governing Documents. We will not propose or adopt any amendments to our
corporate charters or by-laws.
- Issuance of Capital Stock. We will not issue or authorize the issuance
of any shares of our capital stock of any class, except that each of us
is permitted to issue shares of our common stock upon the exercise of
stock options or other rights outstanding on the date of the merger
agreement and in accordance with the terms of such options or other
rights in effect on the date of the merger agreement.
- Repurchase of Stock. We will not purchase or redeem any shares of our
stock or any rights, warrants or options to acquire any such shares,
except in the ordinary course of business in connection with employee
incentive and benefit plans or arrangements in existence on the date of
the merger agreement.
- Indebtedness. We will not incur, assume or prepay any indebtedness or
other material liabilities, other than indebtedness with a wholly owned
subsidiary or between wholly owned subsidiaries.
- Properties and Assets. We will not sell, lease, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any of our
properties or assets (including securitizations), other than in the
ordinary course of business consistent with past practice.
- Tax Treatment. We will not take any actions that would reasonably be
expected to cause the merger not to constitute transactions described in
Section 368(a) of the Internal Revenue Code.
- Tax Election. We will not make any material tax election or settle or
compromise any material tax liability, other than in the ordinary course
of business consistent with past practice.
- Agree to Take Actions. We agree not to take any of the foregoing actions
or take any action which would:
- make any of our representations or warranties contained in the merger
agreement untrue or incorrect, or
- result in any of the conditions to the merger set forth in the merger
agreement not being satisfied.
- Investigation. We have agreed that, subject to applicable laws or
regulations, prior to the time the merger becomes effective we will
afford one another's authorized representatives full and complete access
to our properties, books, contracts, commitments and records and any
document filed or received by us pursuant to applicable securities laws.
Also, we will each use our reasonable best efforts
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to cause our representatives to furnish promptly to one another any
additional information about our respective businesses and properties as
the other or its duly authorized representatives may reasonably request.
However, neither of us will be required to disclose information to the
other that would cause significant competitive harm to the disclosing
party or its affiliates if the merger is not completed. All confidential
information obtained by Phelps Dodge or Asarco will be kept confidential.
Confidential information will be used only in connection with
consummating the transactions contemplated by the merger agreement.
STOCKHOLDER APPROVALS AND OTHER COOPERATION
We have agreed that we will together:
- prepare and file with the SEC, as soon as is reasonably practicable, an
information statement to be sent to Asarco after the offer;
- use our reasonable best efforts to have the information statement cleared
by the SEC;
- amend as necessary the registration statement of which this prospectus is
a part;
- as soon as is reasonably practicable, take all actions required under
state blue sky or securities laws in connection with the issuance of
shares of Phelps Dodge common stock in the merger;
- promptly prepare and file stock exchange listing applications covering
the shares of Phelps Dodge common stock issuable under the merger
agreement and use our reasonable best efforts to obtain, prior to the
time the merger becomes effective, approval for the listing of Phelps
Dodge common stock, subject only to official notice of issuance;
- cooperate with one another in order to lift any injunctions or remove any
other impediment to the consummation of the contemplated transactions;
and
- cooperate with one another in obtaining opinions of Shearman & Sterling,
special counsel to Phelps Dodge, and Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel to Asarco, concerning certain tax matters.
Each of us has also agreed:
- that Phelps Dodge will cause an appropriate supplement to the Phelps
Dodge proxy statement to be mailed to its stockholders as promptly as
practicable after it is cleared by the SEC.
- that Asarco will cause the information statement to be mailed to its
stockholders as promptly as practicable after it is cleared by the SEC;
- as soon as practicable following the date of the merger agreement, to
duly call and hold a meeting of our respective stockholders to obtain
approval of the merger and the other contemplated transactions;
- subject to our ability to change our recommendation as described under
"--No Solicitation of Alternative Takeover Proposals" below, through our
boards of directors, to recommend to our respective stockholders that
they approve the merger and the other contemplated transactions;
- to use our best efforts to hold our stockholders meetings as soon as
practicable after the date of the merger agreement;
- that Phelps Dodge shall vote, or cause to be voted, all of the Asarco
common stock then owned by it or any of its subsidiaries, or over which
it has direct or indirect voting authority, in favor of the approval and
adoption of the merger agreement; and
- that after AAV Corporation has purchased shares of Asarco common stock
through the offer, Phelps Dodge will be entitled to designate a number of
directors on the Asarco Board that will give Phelps Dodge a percentage of
representation on the Asarco Board equal to the percentage of shares of
Asarco common stock that it then owns.
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- that the obligation of Phelps Dodge to obtain approvals under antitrust
laws is unconditional and not qualified by best efforts.
In addition, the merger agreement contains general covenants requiring each
of us to take any further action necessary or desirable to carry out the
purposes of the merger agreement and to use reasonable efforts to take all
actions necessary, proper or advisable to consummate the contemplated
transactions. These general requirements are limited so that neither of us will
be required to undertake divestitures which would have material adverse effects
on our companies.
NO SOLICITATION OF ALTERNATIVE TAKEOVER PROPOSALS
Asarco agreed that it will not, nor will it permit any of its subsidiaries
to, authorize or permit any of their respective directors, officers, employees
or any representative retained by Asarco or any of its subsidiaries to, directly
or indirectly through another person:
- solicit, initiate or encourage (whether by furnishing information or
otherwise), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes or reasonably
could be expected to lead to any Takeover Proposal (as defined below), or
- participate in any discussions or negotiations regarding any Takeover
Proposal.
A "Takeover Proposal" means, other than the transactions contemplated by
the merger agreement,
- any inquiry, proposal or offer, or any improvement, restatement,
amendment, renewal or reiteration of any such inquiry, proposal or offer,
from any person relating to any direct or indirect acquisition of a
business or equity securities of a Asarco or any of its subsidiaries,
- any tender offer or exchange offer that if consummated would result in
any person beneficially owning any class of equity securities of Asarco
or any of its subsidiaries, or
- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Asarco or any
of its subsidiaries.
Except as provided in the next two paragraphs, neither the board of
directors of Asarco nor any committee of such board will do any of the
following:
- withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse Phelps Dodge, the recommendation by the board of directors
or any committee of the merger or the merger agreement,
- approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal, or
- cause Asarco to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Takeover
Proposal.
However, if the board of directors of Asarco receives a Takeover Proposal
and the board of directors of Asarco determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to Asarco shareholders under applicable law,
the board of directors of Asarco may (x) take any of the actions described above
or (y) terminate the merger agreement (and concurrently with or after such
termination, if it so chooses, cause Asarco to enter into any acquisition
agreement with respect to any Takeover Proposal) but only after the fifth
business day following Phelps Dodge's receipt of written notice advising Phelps
Dodge that the board of directors of Asarco is prepared to accept a Takeover
Proposal, specifying the material terms and conditions of such Takeover Proposal
and identifying the person making such Takeover Proposal.
Notwithstanding any subsequent determination by the board of directors of
Asarco to change such recommendation, the merger agreement shall be submitted to
the stockholders of Asarco at the Asarco stockholder meeting for the purpose of
obtaining the Asarco stockholder approval and nothing contained in the merger
agreement shall be deemed to relieve Asarco of such obligation.
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The merger agreement does not prohibit us
- from taking and disclosing to our respective shareholders a position with
respect to a tender offer required by law, or
- from making any disclosure to our respective shareholders if, in the good
faith judgment of the board of directors, after consultation with outside
counsel, failure to disclose would be inconsistent with its obligations
under applicable law.
Asarco agreed to immediately notify us orally and in writing of any request
for information or of any Takeover Proposal, the material terms and conditions
of such request or proposal and the identity of the person making such request
or proposal, and will keep us reasonably informed of the status and details of
any such request or proposal.
STOCK OPTIONS AND OTHER STOCK-BASED AWARDS
Simultaneously with the merger, each outstanding option to purchase Asarco
common stock and each related stock appreciation right (SAR), if any, will be
converted into an option (together with an SAR, if applicable) to acquire the
number of shares of Phelps Dodge common stock equal to the number of shares of
Asarco common stock which could have been obtained upon the exercise of the
option immediately prior to the time the merger becomes effective multiplied by
the Asarco Stock Consideration.
In the case of an option to purchase Asarco common stock, the exercise
price per share of Phelps Dodge common stock will be adjusted to equal the
exercise price for such option as in effect immediately prior to the time the
merger becomes effective divided by the Asarco Stock Consideration. Phelps Dodge
will assume the obligations of Asarco with respect to such options. Phelps Dodge
will assume the obligations of Asarco under their respective option plans and,
except as described above, the terms of such options (and SARs) shall continue
to apply in accordance with the terms of the plans and agreements under which
they were issued, including any provisions for acceleration.
Simultaneously with the merger, each outstanding award (including
restricted stock, performance units, shares units and performance shares) under
any employee incentive or benefit plan or arrangement and non-employee director
plan presently maintained by Asarco will be converted into a similar instrument
of Phelps Dodge, with appropriate adjustments to preserve the inherent value of
the awards with no detrimental effects on the holders. The other terms of each
award will continue to apply, including any provisions which the restrictions
will have lapsed on or prior to the time the merger becomes effective, shares of
such previously restricted stock will be converted in accordance with the
conversion provisions applicable to other shares of common stock.
Following the completion of the business combination, Phelps Dodge will
reserve for issuance and delivery a sufficient number of shares of Phelps Dodge
common stock upon the exercise of any Asarco stock options.
BENEFITS MATTERS
It is the intention of the parties that for a period of one year following
the completion of the business combination, Phelps Dodge will maintain the
employee benefit plans of Asarco generally in accordance with its terms in
effect at the completion of the business combination, with only amendments that
are required by applicable law or permitted by the terms of that agreement, and
which do not adversely affect the rights of participants under such agreement.
In addition, following the completion of the business combination, Phelps Dodge
will guarantee the performance of certain existing employment agreements and
benefit plans of Asarco.
Phelps Dodge has also agreed that it will
- waive any limitations regarding pre-existing conditions and eligibility
waiting periods under any welfare or employee benefit plan maintained for
the benefit of Asarco employees following the completion of the business
combination;
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- provide employees of Asarco with credit for any co-payments and
deductibles paid in the calendar year prior to the completion of the
business combination; and
- generally, treat all service by employees of Asarco prior to the
completion of the business combination as service with Phelps Dodge under
all compensation and benefit plans and policies maintained for the
benefit of Asarco employees.
CHANGE OF CONTROL PAYMENTS
Asarco has entered into employment agreements with twelve of its executive
officers that provide for the payment of certain benefits upon a termination of
employment other than for "cause" or for "good reason" following a "change of
control," as those terms are defined in those agreements. Pursuant to the terms
of the merger agreement, a change of control for purposes of these employment
agreements will be deemed to have occurred upon completion of the business
combination. Phelps Dodge has agreed to take all appropriate steps necessary to
give reasonable advance notice of its intention to offer employment (including
the proposed terms of such offer), or not to offer employment, to each of these
twelve executive officers, and to make any offers sufficiently in advance of the
business combination to provide such offerees reasonable time prior to the
business combination to decide upon the offers.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
Phelps Dodge has agreed that all exculpation and indemnification provisions
now existing in favor of the current or former directors or officers of Asarco
as provided in its charter or bylaws or in any agreement will survive the
business combination. Phelps Dodge has agreed that, for six years from the time
the business combination becomes effective, it will indemnify such indemnified
parties to the same extent as they were entitled while working on behalf of
Asarco.
Phelps Dodge has also agreed that, for three years from the time the
business combination becomes effective, it will maintain in effect Asarco's
current directors' and officers' liability insurance policies for those persons
who are currently covered by the policies. However, Phelps Dodge will not be
required to expend in any one year more than 150% of the annual premiums
currently paid by Asarco. If the annual premiums of such insurance coverage
exceed the 150% limit, Phelps Dodge only will be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding the limit. Phelps
Dodge is entitled to meet its obligations under this paragraph by covering the
relevant persons under its own insurance policies.
LITIGATION
Prior to the effective time of the merger, each of the parties will
terminate all litigation commenced against the other in connection with the
business combination and the Phelps Dodge exchange offer for Asarco shares. Each
party will also use its reasonable best efforts to have lawsuits commenced by
third parties in connection with those transactions to be dismissed with
prejudice.
CONDITIONS PRECEDENT TO THE MERGER
The merger agreement contains certain conditions to both parties,
obligations to complete the merger. Neither party will be obligated to complete
the business combination unless at or prior to the time the business combination
becomes effective:
- Stockholder Approval. The approval of the stockholders of Phelps Dodge
and Asarco have been obtained in accordance with applicable law.
- Legality. No statute, rule, regulation, executive order, decree, ruling
or injunction by any tribunal or governmental authority prohibits or
makes illegal the consummation of the merger substantially on the terms
contemplated by the merger agreement.
- AAV Corporation shall have accepted for exchange all shares of Asarco
common stock validly tendered and not withdrawn pursuant to the offer;
provided, however, that this condition shall not be
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applicable to the obligations of AAV Corporation if, in breach of the
merger agreement, AAV Corporation fails to accept for exchange and
exchange any such shares validly tendered and not withdrawn pursuant to
such offer.
TERMINATION
The merger agreement may be terminated at any time prior to the time the
merger becomes effective, in any of the following circumstances:
- by our mutual written consent;
- by either of us if, without fault of either terminating party, the
purchase of Asarco common stock pursuant to the offer has not occurred on
or before March 31, 2000, which date can be extended by mutual written
consent;
- by either of us if the offer expires or is terminated or withdrawn
without any Asarco common stock being purchased; or
- by either of us if a court or governmental body has issued an order
(other than a temporary restraining order) enjoining or prohibiting the
purchase of Asarco common stock pursuant to the offer or the merger, if
such order has become final and nonappealable, so long as the party
seeking to terminate has used its reasonable best efforts to remove or
lift such order; or any statute, rule, regulation, order, injunction or
decree has been enacted, entered or promulgated which prohibits or makes
illegal the consummation of the merger substantially on the terms
contemplated by the merger agreement, and which order, injunction, or
decree has become final and nonappealable; or there shall have been a
failure to obtain any required consent or approval under foreign laws or
regulations which would prohibit or make illegal the consummation of the
offer or the merger or would have a material adverse effect on Phelps
Dodge or Asarco;
- by the Phelps Dodge board of directors, at any time prior to the purchase
of any shares of Asarco common stock pursuant to the offer, if (i) the
board of directors of Asarco shall have withdrawn or modified in a manner
which is adverse to Phelps Dodge its approval or recommendation of the
offer or the merger agreement, (ii) the Asarco board of directors shall
have recommended another Takeover Proposal, (iii) there is a public
disclosure of another Takeover Proposal and the Minimum Tender Condition
is not satisfied but all other conditions to the offer are satisfied, or
(iv) the representations and warranties of Asarco are not correct as of
the date of the merger agreement and as of the expiration date of the
offer as though made on and as of the date of the merger agreement and
the expiration date of the offer, except where the failure of such
representations and warranties to be so true and correct would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Asarco; and Asarco shall have performed or
complied in all material respects with all the material agreements and
covenants required by the merger agreement, and such condition is not
satisfied within 30 days of notice;
- by Asarco, at any time prior to the acceptance for payment shares of
Asarco common stock under the offer, if there is a material breach of any
of Phelps Dodge's representations, warranties or covenants contained in
the agreement which is not cured within 10 days of notice; and
- by Asarco in accordance with the provisions described under the caption
"-- No Solicitation of Alternative Takeover Proposals"; provided that
Asarco shall have complied with all provisions of such section and shall
have paid the termination fee described below to Phelps Dodge.
CLOSING
The closing of the Merger will take place within two business days after
the later of the Phelps Dodge shareholder meeting and the Asarco shareholder
meeting.
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TERMINATION FEES
Asarco is liable to Phelps Dodge for a termination fee of $30 million if
the merger agreement is terminated under certain circumstances.
In general, the termination fee is payable by Asarco if:
- prior to the date of the Asarco stockholder meeting a Takeover Proposal
is made known to Asarco or is made directly to its stockholders generally
or any person has publicly announced an intention (whether or not
conditional) to make a Takeover Proposal and thereafter the merger
agreement is terminated by either party pursuant to certain specified
provisions of the merger agreement.
However, no termination fee is payable unless within eighteen months of the
termination, Asarco or any of its subsidiaries enters into an agreement for or
consummates a transaction whereby a third party acquires twenty percent of any
class of stock of Asarco and its subsidiaries, or a business that constitutes
twenty percent or more of the revenues, net income or assets of the Asarco, or
otherwise consummates a Takeover Proposal.
The merger agreement also provides that if Asarco fails to pay any
termination fee which is judged to be due, Asarco must pay the costs and
expenses of any action taken to collect payment, together with interest on the
termination fee.
COSTS AND EXPENSES
Each of us will pay our own costs and expenses in connection with the
merger agreement and the contemplated transactions whether or not the merger is
completed, except that we will equally share
- the filing fee in connection with any HSR Act filing or any other
required statutory approval;
- the commissions and other out-of-pocket transaction costs, including the
expenses and compensation of the exchange agent, incurred in connection
with the sale of shares of Phelps Dodge common stock to generate cash to
pay in lieu of fractional shares;
- the expenses incurred in connection with the printing and mailing of a
joint proxy statement (including SEC filing fees); and
- all transfer taxes.
AMENDMENT
At any time before or after approval of the matters presented in connection
with the combination by our respective shareholders, the merger agreement may be
amended or supplemented in writing by Phelps Dodge and Asarco with respect to
any terms; provided, however, that following approval by Asarco stockholders
there shall be no amendment or change to the provisions relating to the Merger
Consideration or make any other change not permitted under applicable law
without further approval by the Asarco stockholders.
APPRAISAL RIGHTS
Asarco shareholders will not have appraisal rights in connection with the
combination. See "Comparison of Rights of Holders of Phelps Dodge Shares and
Asarco Shares -- Comparison of Certain Statutory Provisions" on page 108.
WAIVER
At any time prior to the effective time, the merger agreement permits
either of us in writing to:
- extend the time for the performance of any of the obligations or other
acts of the other party;
- waive any inaccuracies in the representations and warranties of the other
party; and
- waive compliance with any of the agreements or conditions of the other
party contained in the merger agreement.
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MARKET PRICES AND DIVIDENDS
The Phelps Dodge common shares are listed and principally traded on the
NYSE under the symbol "PD". The Asarco common shares are listed and principally
traded on the NYSE under the symbol "AR". The Cyprus Amax common shares are
listed and principally traded on the NYSE under the symbol "CYM". The following
table sets forth, for the periods indicated, (1) the high and low last reported
prices per Phelps Dodge share, Asarco share and Cyprus Amax share, in each case
as reported on the New York Stock Exchange Composite Transaction Tape; and (2)
the cash dividends per Phelps Dodge share, Asarco share and Cyprus Amax share.
<TABLE>
<CAPTION>
PHELPS DODGE COMMON STOCK ASARCO COMMON STOCK
---------------------------------- -----------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.............. $79 $68 $0.50 $32 1/2 $25 1/8 $0.20
Second Quarter............. 89 5/8 70 1/4 0.50 32 1/2 26 1/8 0.20
Third Quarter.............. 87 15/16 75 1/16 0.50 34 30 0.20
Fourth Quarter............. 79 13/16 59 7/8 0.50 31 7/8 21 3/4 0.20
1998
First Quarter.............. $69 1/4 $58 1/16 $0.50 $26 3/4 $20 1/2 $0.20
Second Quarter............. 71 3/4 56 1/8 0.50 27 13/16 21 3/8 0.20
Third Quarter.............. 62 9/16 43 7/8 0.50 24 15 7/16 0.20
Fourth Quarter............. 61 3/4 49 9/16 0.50 23 14 7/8 0.10
1999
First Quarter.............. $61 5/16 $41 7/8 $0.50 $18 3/8 $13 11/16 $0.05
Second Quarter............. 70 5/8 48 7/8 0.50 19 1/4 13 7/16 0.05
Third Quarter.............. 66 3/4 55 1/16 0.50 27 7/16 17 1/2 0.05
Fourth Quarter (through
October 6)............... 54 3/8 53 1/16 26 7/8 26 3/4
<CAPTION>
CYPRUS AMAX COMMON STOCK
-----------------------------------
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
1997
First Quarter.............. $24 7/8 $21 1/4 $0.20
Second Quarter............. 26 3/8 21 5/8 0.20
Third Quarter.............. 26 13/16 22 3/8 0.20
Fourth Quarter............. 25 14 7/16 0.20
1998
First Quarter.............. $17 7/8 $14 $0.20
Second Quarter............. 17 7/8 13 0.20
Third Quarter.............. 13 13/16 9 3/16 0.20
Fourth Quarter............. 14 3/8 9 0.20
1999
First Quarter.............. $13 1/8 $ 9 3/8 $0.20
Second Quarter............. 16 1/16 11 3/8 0.05
Third Quarter.............. 19 5/8 12 7/8 0.05
Fourth Quarter (through
October 6)............... 19 3/8 18 1/8
</TABLE>
On August 19, 1999, the last full trading day before Phelps Dodge publicly
announced its proposal to combine with Asarco and Cyprus Amax, the last reported
closing prices per Phelps Dodge common share, Asarco common share and Cyprus
Amax common share were $58 9/16, $18 7/16 and $14 1/2, respectively. On October
5, 1999, the most recent practicable date prior to the filing of this
prospectus, the last reported closing prices per Phelps Dodge common share,
Asarco common share and Cyprus Amax common share were $53 9/16, $26 3/4 and
$19 3/16, respectively. We urge you to obtain current market quotations before
making any decision with respect to our offer.
On August 19, 1999, the last full trading day before Phelps Dodge publicly
announced its proposal to combine with Asarco and Cyprus Amax, the closing
prices per Asarco common share and Cyprus Amax common share on an equivalent
share basis (based on 0.25133120 Phelps Dodge common shares plus $14.75 in cash
for each Asarco common share and 0.2203 Phelps Dodge common shares plus
$7.61176875 in cash for each Cyprus Amax common share) were as follows:
<TABLE>
<S> <C>
Asarco...................................................... $29.47
Cyprus Amax................................................. $20.51
</TABLE>
74
<PAGE> 82
PHELPS DODGE CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Phelps Dodge for each of the years in the five-year period ended December 31,
1998 and the six-month periods ended June 30, 1999 and 1998. This information is
derived from the selected audited financial data of Phelps Dodge contained in
Phelps Dodge's Annual Report on Form 10-K for the year ended December 31, 1998
and from the unaudited financial statements of Phelps Dodge contained in Phelps
Dodge's Quarterly Report on Form 10-Q for the period ended June 30, 1999, which
are incorporated by reference herein, and from Phelps Dodge's Quarterly Report
on Form 10-Q for the period ended June 30, 1998. See "Where You Can Find More
Information" on page vi. You should read this summary together with these
financial statements and their accompanying notes.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales................................ $1,354 $1,593 $3,063 $3,914 $3,787 $4,185 $3,289
Operating income (loss).............. (27)(a) 348(b) 423(c) 611(d) 713(e) 1,101(f) 400(g)
Earnings (loss) before minority
interests.......................... (61) 208 199 414 478 760 279
Minority interests................... -- (4) (8) (5) (16) (13) (8)
Net earnings (loss).................. (61) 204 191 409 462 747 271
Net earnings (loss) per Common Share:
-- Basic......................... $(1.04) $ 3.49 $ 3.28 $ 6.68 $ 7.02 $10.72 $ 3.84
-- Diluted....................... $(1.04) $ 3.48 $ 3.26 $ 6.63 $ 6.98 $10.66 $ 3.82
Cash dividend per Common Share....... $ 1.00 $ 1.00 $ 2.00 $ 2.00 $ 1.95 $ 1.80 $ 1.69
BALANCE SHEET DATA
Cash and marketable securities....... $ 144 $ 336 $ 222 $ 158 $ 470 $ 609 $ 287
Working capital...................... 196 516 329 350 736 950 558
Total assets......................... 4,902 5,061 5,037 4,965 4,816 4,646 4,134
Stockholders' Equity................. 2,373 2,621 2,587 2,510 2,756 2,678 2,188
OTHER FINANCIAL DATA
Book value per common share.......... $40.91 $44.66 $44.68 $42.81 $42.59 $39.04 $30.95
Debt as a % of capitalization(h)..... 30.5% 26.6% 27.6% 27.7% 18.8% 20.2% 23.6%
Cash provided from operating
activities......................... $ 46 $ 109 $ 378 $ 765 $ 838 $ 959 $ 543
</TABLE>
- ------------
(a) Includes non-recurring restructuring charges of $83.0.
(b) Includes before-tax gain of $186.1 from the disposition of a 90 percent
interest in Accuride Corporation.
(c) Includes before-tax gain of $198.7 from the disposition of the 100 percent
interest in Accuride Corporation and a non-recurring, before-tax provision
of $7.8 for curtailments and indefinite closures primarily at Phelps Dodge
Mining Company.
(d) Includes $45.9 charge primarily for additional provisions of $23.0 for
estimated future costs associated with environmental matters and $19.1 for a
voluntary early retirement program.
(e) Includes reclamation reserves of $10.0 for the court-ordered rescission of a
1986 sale of property in Maspeth, New York, by the Corporation to the United
States Postal Service.
(f) Includes before-tax gain of $26.8 from the disposition of a Phelps Dodge
Industries' operating facility.
(g) Includes $98.7 charge for environmental costs and a before-tax loss of $59.0
for the disposition of certain operating facilities and mining properties.
(h) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
75
<PAGE> 83
ASARCO INCORPORATED
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Asarco for each of the years in the five-year period ended December 31, 1998 and
the six-month periods ended June 30, 1999 and 1998. This information is derived
from the Form S-4 Registration Statement filed by Asarco Cyprus Incorporated in
connection with the proposed Asarco-Cyprus Amax merger. This information is only
a summary and should be read together with the financial statements and
accompanying notes contained in Asarco's Annual Report on Form 10-K for the year
ended December 31, 1998, Asarco's Quarterly Report on Form 10-Q for the period
ended June 30, 1999 and Asarco's Quarterly Report on Form 10-Q for the period
ended June 30, 1998. See "Where You Can Find More Information" on page vi.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ---------------------------
1999 1998 1998 1997 1996 1995(F) 1994
------ ------ ------ ------ ------ ------- ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales............................... $ 966 $1,186 $2,233 $2,721 $2,717 $ 3,198 $2,032
Operating income (loss)............. (49) (33) (118)(a) 275(b) 303(d) 487(g) 18(h)
Earnings (loss) before minority
interests......................... (52) (31) (104) 234 226 299 65
Minority interests.................. (4) (15) (27) (91) (88) (130) (1)
Net earnings (loss)................. (56) (46) (131) 143(c) 138(e) 169 64(i)
Earnings (loss) per Common Share:
Net earnings (loss) --
Basic............................. $(1.42) $(1.17) $(3.29) $ 3.42 $ 3.24 $ 4.00 $ 1.53
Net earnings (loss) --
Diluted........................... $(1.42) $(1.17) $(3.29) $ 3.42 $ 3.23 $ 3.98 $ 1.52
Cash Dividend per Common Share...... $ 0.10 $ 0.40 $ 0.70 $ 0.80 $ 0.80 $ 0.70 $ 0.40
BALANCE SHEET DATA
Cash and marketable securities...... $ 156 $ 285 $ 216 $ 416 $ 193 $ 281 $ 18
Working capital..................... 335 502 502 726 511 565 282
Total assets........................ 3,977 4,020 4,024 4,110 4,120 4,327 3,291
Inventories -- replacement cost in
excess of LIFO inventory costs.... 80 78 74 86 115 137 143
Stockholders' Equity................ 1,459 1,623 1,525 1,694 1,737 1,707 1,517
OTHER FINANCIAL DATA
Book value per common share......... $36.68 $40.92 $38.45 $42.71 $40.56 $40.11 $36.04
Debt as a % of capitalization (j)... 34.8% 30.0% 33.7% 28.3% 26.7% 34.1% 38.1%
Debt as a % of capitalization, net
of excess cash (j)................ 32.4% 24.3% 30.0% 20.2% 24.1% 32.1% 38.1%
Cash provided from (used for)
operating activities.............. $ 74 $ 65 $ 62 $ 321 $ 267 $ 489 $ (10)
</TABLE>
- ------------
(a) Includes charges of $20.0 to reflect the effect of the sale of Asarco's
Missouri Lead Division and $10.0 related to Southern Peru Copper
Corporation's $30.0 cost reduction program. Includes charges of $9.5 for the
three year suspension of operations at Asarco's copper smelter in El Paso,
Texas, $9.8 to write down the book value and provide for the closure costs
of Asarco's Black Cloud lead-zinc mine in Leadville, Colorado, $10.9 for the
transfer of Southern Peru Copper Corporation's ownership of the Ilo townsite
to its worker occupants and the city of Ilo, Peru and $7.7 to increase
reserves for certain employee benefit plans and for severance and other
costs related to Asarco's cost reduction program. Includes a charge of $33.2
($54 in charges offset by $20.8 in anticipated insurance and other
recoveries) to increase reserves for closed plants and environmental
matters.
(b) Environmental charges of $22.1 in 1997, include charges of $30.0 offset
entirely by anticipated insurance recoveries.
(c) Includes a $47.6 after-tax gain ($73.3 pre-tax) from the sale of shares of
Grupo Mexico, S.A. de C.V.
(d) Includes a $15.0 charge ($67.7 in charges offset by $52.7 in insurance
settlements and other recoveries) for closed plant and environmental
matters.
(footnotes continued on next page)
76
<PAGE> 84
(e) Includes a $39.0 after-tax gain ($60.1 pre-tax) from the sale of Asarco's
remaining interest in MIM and a $7.2 after-tax gain ($11.1 pre-tax) from the
sale of a 25% interest in Asarco's Silver Bell project.
(f) On April 5, 1995, ASARCO acquired an additional 10.7% interest in Southern
Peru Copper Corporation for $116.4 increasing its ownership from 52.3% to
63%. The additional shares acquired enabled Asarco to elect a majority of
the directors of Southern Peru Copper Corporation. As a result, Asarco has
consolidated Southern Peru Copper Corporation in its financial statements
based on its 52.3% ownership, effective January 1, 1995, and 63% ownership,
effective April 5, 1995. Asarco previously accounted for its investment in
Southern Peru Copper Corporation by the equity method. As of June 30, 1999,
Asarco's ownership interest in Southern Peru Copper Corporation was 54.3%.
(g) Includes a $139.4 charge to add to Asarco's reserve for closed plant and
environmental matters, to provide for asset impairments and plant closures
and to write down certain in-process inventory to net realizable value.
(h) Includes a $65.5 pre-tax charge to add to Asarco's reserve for closed plant
and environmental matters.
(i) Includes a $31.9 after-tax gain ($58.5 pre-tax) from the sale of Asarco's
remaining interest in Asarco Australia Limited.
(j) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
77
<PAGE> 85
CYPRUS AMAX MINERALS COMPANY
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Cyprus Amax for each of the years in the five-year period ended December 31,
1998 and the six-month periods ended June 30, 1999 and 1998. This information is
derived from the Form S-4 Registration Statement filed by Asarco Cyprus
Incorporated in connection with the proposed Asarco-Cyprus Amax merger. This
information is only a summary and should be read together with the financial
statements and accompanying notes contained in Cyprus Amax's Annual Report on
Form 10-K for the year ended December 31, 1998, Cyprus Amax's Quarterly Report
on Form 10-Q for the period ended June 30, 1999 and Cyprus Amax's Quarterly
Report on Form 10-Q for the period ended June 30, 1998. See "Where You Can Find
More Information" on page vi.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(a)
Revenue.............................. $ 561 $ 870 $1,661 $1,978 $1,584 $1,908 $1,540
Operating income (loss).............. (13) 18 52 249 63 485 202
Income (loss) from Continuing
Operations(b)...................... (77) (53) (134) 89 15 367 104
Net Income (loss)(c)................. (74) (32) (75) 69 77 124 175
Earnings (loss) per Common Share:
Income (loss) from Continuing
Operations(b).................... $(0.95) $(0.67) $(1.65) $ 0.76 $(0.04) $ 3.75 $ 0.92
Net earnings (loss)(c)............. $(0.92) $(0.44) $(1.02) $ .54 $ 0.62 $ 1.13 $ 1.69
Cash Dividend per Common Share....... $ 0.25 $ 0.40 $ 0.80 $ 0.80 $ 0.80 $ 0.80 $ 0.90
BALANCE SHEET DATA
Cash and Cash Equivalents............ $1,275 $ 180 $ 353 $ 250 $ 193 $ 191 $ 139
Working capital...................... 970 232 250 297 304 292 423
Total assets......................... 4,746 5,441 5,341 6,459 6,786 6,196 5,407
Long-Term Debt and Capital Lease
Obligations........................ 1,525 1,791 1,718 2,202 2,554 1,877 1,391
Stockholders' Equity................. 2,059 2,264 2,157 2,330 2,360 2,365 2,329
OTHER FINANCIAL DATA
Book Value Per Common Share.......... $20.17 $22.21 $21.32 $22.99 $23.43 $23.62 $23.39
Long-Term Debt/Total
Capitalization(d).................. 42.3% 43.8% 43.9% 46.9% 50.4% 42.6% 37.4%
Net Long-Term Debt/Total
Capitalization(d)(e)............... 10.7% 41.2% 38.4% 44.0% 48.4% 40.0% 34.9%
Cash Provided by Operating
Activities......................... $ 47 $ 129 $ 237 $ 481 $ 440 $ 675 $ 110
</TABLE>
- ---------------
(a) The Cyprus Amax historical consolidated income statement data has been
restated to reflect the Domestic Coal Division as a Discontinued Operation
due to its sale effective June 30, 1999.
(b) Income (loss) from Continuing Operations reflects net after-tax copper
charges of $94 for environmental remediation liabilities and write-downs,
net after-tax gains of $123 from the sale of the lithium business, an
Oakbridge coal mine in Australia, and real estate, a net after-tax charge of
$22 for legal settlements, a net after-tax charge of $37 for Cyprus Amax's
share of the Kinross asset impairment and the sale by Kinross of the
pre-merger Amax Gold hedging portfolio, and an after-tax charge of $4 for
various special items in 1998; an after-tax charge of $13 for the write-down
of Oakbridge's Clarence mine in Australia, favorable tax adjustments of $38,
an after-tax gain of $19 on the sale of Kubaka to Amax Gold, and an
after-tax charge of $5 for the costs of redeeming the 9 7/8% Notes in 1997;
an after-tax charge of $74 for environmental remediation liabilities, costs
to temporarily close a copper mine, the write-down of the net assets of the
Guanaco gold mine, and an unrelated favorable tax adjustment for Amax Gold
in 1996; an after-tax charge of $4 to write-down assets of an Oakbridge mine
in Australia in 1995; and an after-tax gain of $21 for various special items
in 1994.
(footnotes continued on next page)
78
<PAGE> 86
(c) Discontinued Operations for the six months ended June 30, 1999 included
earnings from the domestic coal business of $16 after-tax and a $13
after-tax loss on the sale of the coal assets. In addition, for the six
months ended June 30, 1998 and for the years 1994 through 1998, the results
have been restated to reflect the Domestic Coal Division as a discontinued
operation. Discontinued Operations included for the six months ended 1998
after-tax earnings of $21; after-tax earnings of $59 that reflects a loss on
the sale of certain eastern and midwestern coal properties of $12 and
favorable legal settlements of $5 for 1998; after-tax loss of $20 that
reflects charges of $66 for write-downs for 1997; after-tax earnings of $62
for 1996; after-tax loss of $243 that reflects a charge of $334 for the
write-down of certain coal assets and provisions for associated liabilities
for 1995; and after-tax earnings of $62 that reflects a write-down of $8 for
the Orchard Valley mine for 1994. Also in 1994 Discontinued Operations
included income from the Oil and Gas business for the first quarter of 1994
of $7 after-tax and a $2 after-tax gain on the sale of Cyprus Amax-owned oil
and gas assets.
(d) Total Capitalization includes Debt, Minority Interest and Stockholders'
Equity.
(e) Net Long-Term Debt includes Long-term debt less Cash and Cash Equivalents.
79
<PAGE> 87
PHELPS DODGE
COMPARATIVE PER SHARE INFORMATION
The following table presents historical per common share information for
Phelps Dodge and Asarco, and the pro forma and equivalent pro forma per common
share data giving effect to the combination of Phelps Dodge and Asarco and
Phelps Dodge, Asarco and Cyprus Amax, for the six months ended June 30, 1999 and
the year ended December 31, 1998. The pro forma combined per share information
does not purport to represent what the combined financial position or results of
operations would actually have been if the combinations had occurred at January
1, 1998, nor are they necessarily indicative of Phelps Dodge's future
consolidated results of operations or financial position. The information tabled
below should be read in conjunction with the historical financial statements of
the combining corporations incorporated by reference in this Registration
Statement, the "Selected Historical Financial Data" of Phelps Dodge, Asarco and
Cyprus Amax on pages 74 through 78, and the "Unaudited Pro Forma Combined
Financial Information" on page 81.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Per common share
Historical:
Phelps Dodge
Book value(1)..................................... $40.91 $44.68
Net income(loss)
Basic.......................................... (0.98) 3.28
Diluted........................................ (0.98) 3.26
Cash dividends.................................... 1.00 2.00
Asarco
Book value(1)..................................... 36.68 38.45
Net income(loss)
Basic.......................................... (1.42) (3.29)
Diluted........................................ (1.42) (3.29)
Cash dividends.................................... 0.10 0.70
Pro forma:
Combined Phelps Dodge and Asarco
Book value(1)..................................... 44.97 49.07
Income(loss) from continuing operations
Basic.......................................... (1.70) 0.86
Diluted........................................ (1.70) 0.86
Cash dividends(2)................................. 1.00 2.00
Asarco Equivalent(3)
Book value(1)..................................... 22.60 24.67
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.85) 0.43
Cash dividends.................................... 0.50 1.01
Combined Phelps Dodge, Asarco and Cyprus Amax
Book value(1)..................................... 47.28 51.63
Income(loss) from continuing operations--Basic and
Diluted........................................ (2.15) (1.08)
Cash dividends(2)................................. 1.00 2.00
</TABLE>
(footnotes on next page)
80
<PAGE> 88
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Asarco Equivalent(3)
Book value(1)..................................... 23.77 25.95
Income(loss) from continuing operations--Basic and
Diluted........................................ (1.08) (0.54)
Cash dividends.................................... 0.50 1.01
Cyprus Amax Equivalent(3)
Book value(1)..................................... 16.55 18.07
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.75) (0.38)
Cash dividends.................................... 0.35 0.70
</TABLE>
- ---------------
(1) Book value per share is determined as at June 30, 1999 and December 31,
1998.
(2) Pro forma combined cash dividends per share of Phelps Dodge common stock
reflect Phelps Dodge's historical dividend rate per share declared in the
periods presented.
(3) Pro forma combined equivalent per share of Asarco and Cyprus Amax common
stocks reflects the pro forma combined per share of Phelps Dodge's common
stock amount multiplied by the exchange ratio of 0.50266 and 0.3500 shares
of Phelps Dodge stock for each share of Asarco and Cyprus Amax,
respectively.
81
<PAGE> 89
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Information of Phelps Dodge
presented following is derived from the historical consolidated financial
statements of Phelps Dodge, Asarco and Cyprus Amax. The Unaudited Pro Forma
Combined Financial Information is presented under two separate scenarios
(collectively the "Transactions"): (i) the acquisition by Phelps Dodge of
Asarco; and (ii) the acquisition by Phelps Dodge of Asarco and Cyprus Amax. The
acquisitions of Asarco and Cyprus Amax are not dependent upon each other. Under
each of the scenarios, the Unaudited Pro Forma Combined Financial Information is
prepared using the purchase method of accounting, with Phelps Dodge treated as
the acquirer and as if the transactions had been completed as of January 1,
1998, for statement of operations purposes and on June 30, 1999, for balance
sheet purposes.
For a summary of the proposed business combinations, see "The Offer"
beginning on page 44 of this prospectus.
The Unaudited Pro Forma Combined Financial Information is based upon the
historical financial statements of Phelps Dodge, Asarco and Cyprus Amax adjusted
to give effect to the proposed business combinations. The pro forma assumptions
and adjustments for each transaction scenario are described in the accompanying
notes presented on the following pages. The assumptions and related pro forma
adjustments have been developed from information available to Phelps Dodge from
the December 31, 1998, Form 10-K filings and June 30, 1999, Form 10-Q filings of
Asarco and Cyprus Amax, the Form 8-K filing dated June 30, 1999 of Cyprus Amax,
the merger agreement with Cyprus Amax dated September 30, 1999 ("Cyprus Merger
Agreement") and the merger agreement with Asarco dated October 5, 1999 ("Asarco
Merger Agreement"). Such pro forma adjustments have been included only to the
extent known and reasonably available to Phelps Dodge.
Phelps Dodge also has reviewed the Form S-4 Registration Statement of
Asarco Cyprus Incorporated filed on August 20, 1999, in connection with the
proposed merger of Asarco and Cyprus Amax. Their filing included unaudited pro
forma combined financial information for Asarco and Cyprus Amax as if the merger
had occurred at specific assumed dates. Certain pro forma adjustments that
Phelps Dodge noted in reviewing this unaudited pro forma combined financial
information have not been incorporated in the accompanying Unaudited Pro Forma
Combined Financial Information because information necessary to make or assess
such adjustments is not available to Phelps Dodge.
Phelps Dodge has agreed to combine its business with Cyprus Amax pursuant
to the Cyprus Merger Agreement. Phelps Dodge has agreed to combine its business
with Asarco pursuant to the Asarco Merger Agreement. Phelps Dodge has not had
access to additional proprietary and confidential corporate financial and other
information of Asarco and Cyprus Amax and has not had an opportunity to
undertake any due diligence procedures. Such information and procedures may
provide Phelps Dodge with additional information that could materially affect
the purchase price paid for the acquisition of Asarco and/or Cyprus Amax, the
purchase price allocation and, accordingly, the assumptions and pro forma
adjustments. Identified factors which may have a significant impact on the basis
and results of the combinations are described in Note 2 of the accompanying
notes to the Unaudited Pro Forma Combined Balance Sheet and Combined Statements
of Operations for each scenario.
Furthermore, the ultimate determination of the purchase price paid for the
acquisition of Cyprus Amax and Asarco may change significantly from the current
estimate. For the purpose of this Unaudited Pro Forma Combined Financial
Information, the purchase price has been estimated based upon the market price
of $53.5625 for each Phelps Dodge common share, that being the closing market
price at October 5, 1999. The final purchase price will be based largely upon
the average market price of Phelps Dodge common stock at the earlier of the
dates the combinations are announced or consummated between Phelps Dodge, Asarco
and Cyprus Amax. As a result of these uncertainties, the final determination and
allocation of purchase price may differ from the amounts assumed in this
Unaudited Pro Forma Combined Financial Information and those differences may be
material.
82
<PAGE> 90
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the acquisitions of Asarco and/or Cyprus Amax
occurred on the respective dates assumed, nor is it necessarily indicative of
future consolidated operating results or financial position.
The Unaudited Pro Forma Combined Financial Information does not include the
realization of cost savings from operating efficiencies, synergies or other
restructurings resulting from the Transactions and does not contemplate the
liabilities that may be incurred in any related restructurings. Phelps Dodge
estimated consolidated annual cash cost savings of at least $200 million as a
result of synergies, reduced overhead costs and other actions resulting from the
combination of all three companies. Phelps Dodge believes that the Transactions
and the resulting activities would yield substantial cash cost savings of at
least $75 million beyond those that can be realized by Asarco Cyprus
Incorporated which were estimated to be $125 million in the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed on August 20, 1999.
There is no assurance that these cost savings can or will be realized. Also, the
Unaudited Pro Forma Combined Financial Information does not reflect the impact
of any potential sale of acquired assets.
This Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the separate historical consolidated financial statements and
accompanying notes of Phelps Dodge, Asarco and Cyprus Amax that are incorporated
by reference in this Registration Statement. You should not rely on the
Unaudited Pro Forma Combined Financial Information as an indication of the
consolidated results of operations or financial position that would have been
achieved if the business combinations had taken place earlier or of the
consolidated results of operations or financial position of Phelps Dodge after
the completion of such transactions.
83
<PAGE> 91
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues....................... $1,354 966 561 -- 2,881
------ ----- --- ------ -----
Operating costs and expenses
Cost of products sold.......... 1,073 855 428 -- 2,356
Depreciation, depletion and
amortization................ 144 73 104 (21)(I) 300
Selling and general
administrative expense...... 60 72 34 -- 166
Exploration and research
expense..................... 21 11 8 -- 40
Non-recurring charges and
provision for asset
dispositions*............... 83 4 -- -- 87
------ ----- --- ------ -----
1,381 1,015 574 (21) 2,949
------ ----- --- ------ -----
Operating income (loss).......... (27) (49) (13) 21 (68)
Interest expense............... (48) (38) (69) (13)(E)
(4)(A)
(3)(K) (175)
Capitalized interest........... -- -- 2 4(A) 6
Miscellaneous income and
expense, net................ (7) 10 (11) (1)(J)
6(A) (3)
------ ----- --- ------ -----
Income (loss) before taxes,
minority interests and equity
in net earnings of affiliated
companies...................... (82) (77) (91) 10 (240)
Provision for taxes on
income...................... 19 25 14 (1)(A)
(4)(F) 53
Minority interests in
consolidated subsidiaries... 1 (4) -- 1(J) (2)
Equity in net earnings (losses)
of affiliated companies..... 5 -- -- (5)(A) --
------ ----- --- ------ -----
Income (loss) from continuing
operations..................... (57) (56) (77) 1 (189)
Preferred stock dividends...... -- -- (9) 9(E) --
------ ----- --- ------ -----
Income (loss) from continuing
operations applicable to common
shares......................... $ (57) (56) (86) 10 (189)
====== ===== === ====== =====
Net earnings (loss) per share
Basic.......................... $(0.98) (2.15)
Diluted........................ $(0.98) (2.15)
Weighted average shares
outstanding
Basic.......................... 57.8 87.8
Diluted........................ 57.8 87.8
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
84
<PAGE> 92
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues......................... $3,064 2,233 1,660 (218)(A) 6,739
------ ----- ----- ------- ------
Operating costs and expenses
Cost of products sold............ 2,361 1,963 1,087 (200)(A) 5,211
Depreciation, depletion and
amortization................... 293 145 254 (7)(A)
(43)(I) 642
Selling and general
administrative expense......... 123 144 105 -- 372
Exploration and research
expense........................ 55 27 45 -- 127
Non-recurring charges and
provision for asset
dispositions*.................. (191) 72 118 -- (1)
------ ----- ----- ------- ------
2,641 2,351 1,609 (250) 6,351
------ ----- ----- ------- ------
Operating income (loss)............ 423 (118) 51 32 388
Interest expense................. (97) (68) (157) (28)(E)
(13)(A)
(5)(K) (368)
Capitalized interest............. 2 -- 2 13(A) 17
Miscellaneous income and expense,
net............................ 9 29 17 (6)(J)
(4)(A) 45
------ ----- ----- ------- ------
Income (loss) before taxes,
minority interests and equity in
net earnings of affiliated
companies........................ 337 (157) (87) (11) 82
Provision for taxes on income.... (134) 53 (11) (6)(F) (98)
Minority interests in
consolidated subsidiaries...... (8) (27) 1 8(J) (26)
Equity in net earnings (losses)
of affiliated companies........ (4) -- (53) 4(A) (53)
------ ----- ----- ------- ------
Income (loss) from continuing
operations....................... 191 (131) (150) (5) (95)
Preferred stock dividends........ -- -- (19) 19(E) --
------ ----- ----- ------- ------
Income (loss) from continuing
operations applicable to common
shares........................... $ 191 (131) (169) 14 (95)
====== ===== ===== ======= ======
Net earnings (loss) per share
Basic............................ $ 3.28 (1.08)
Diluted.......................... $ 3.26 (1.08)
Weighted average shares outstanding
Basic............................ 58.2 88.2
Diluted.......................... 58.5 88.2
------
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
85
<PAGE> 93
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............... $ 144 125 1,275 (1,280)(B)
114(E)
(41)(B)
(30)(C)
(7)(E) 300
Accounts receivable, net................ 396 404 37 -- 837
Inventories............................. 263 305 239 (127)(A)
84(D) 764
Supplies................................ 104 -- 55 127(A) 286
Prepaid expenses and other assets....... 15 135 74 5(D)
(33)(A) 196
Deferred income taxes................... 45 -- 32 33(A) 110
------ ----- ----- ------ ------
Current assets........................ 967 969 1,712 (1,155) 2,493
Investments and long-term accounts
receivable............................ 95 190 328 29(D)
(13)(J)
9(A) 638
Property, plant and equipment, net...... 3,501 2,592 2,546 (539)(D) 8,100
Other assets and deferred charges....... 339 226 160 (9)(A)
41(B)
7(E) 764
------ ----- ----- ------ ------
Total Assets..................... $4,902 3,977 4,746 (1,630) 11,995
====== ===== ===== ====== ======
LIABILITIES
Short-term debt......................... $ 214 16 249 -- 479
Current portion of long-term debt....... 62 31 79 -- 172
Accounts payable and accrued expenses... 456 496 324 74(L) 1,350
Dividends payable....................... 29 -- 9 -- 38
Accrued income taxes.................... 11 90 81 -- 182
------ ----- ----- ------ ------
Current liabilities..................... 772 633 742 74 2,221
Long-term debt.......................... 801 1,017 1,499 358(E)
(95)(D) 3,580
Deferred income taxes................... 493 28 14 (141)(F) 394
Other liabilities and deferred
credits............................... 376 306 412 52(D) 1,146
------ ----- ----- ------ ------
2,442 1,984 2,667 248 7,341
------ ----- ----- ------ ------
Minority interests in consolidated
subsidiaries............................ 86 534 20 (147)(J) 493
------ ----- ----- ------ ------
Shareholders' equity
Common shares........................... 362 525 1 (526)(H)
188(G) 550
Treasury shares......................... -- -- (86) 86(A) --
Preferred shares........................ -- -- 5 (5)(E) --
Capital in excess of par value.......... 5 -- 2,912 (86)(A)
43(B)
(2,826)(H)
1,422(G) 1,470
Retained earnings....................... 2,198 949 (768) 134(J)
(181)(H) 2,332
Accumulated other comprehensive income
(loss)................................ (183) (15) (5) 20(H) (183)
Other................................... (8) -- -- -- (8)
------ ----- ----- ------ ------
Total Shareholders' Equity....... 2,374 1,459 2,059 (1,731) 4,161
------ ----- ----- ------ ------
Total Liabilities and
Shareholders' Equity........... $4,902 3,977 4,746 (1,630) 11,995
====== ===== ===== ====== ======
</TABLE>
86
<PAGE> 94
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge, Asarco and
Cyprus Amax incorporated by reference into this prospectus. See Phelps Dodge
"Unaudited Pro Forma Combined Financial Information" on page 67 of this
prospectus.
The assumptions and related pro forma adjustments described below have been
developed from public historical information available to Phelps Dodge, the
Asarco Merger Agreement and the Cyprus Merger Agreement. Pro forma adjustments
have been included only to the extent known and reasonably available to Phelps
Dodge. Additional information may exist that could materially affect the
assumptions and related pro forma adjustments. Such information is not available
to Phelps Dodge because it is within the particular and singular knowledge of
Asarco and Cyprus Amax.
2. THE OFFER
Phelps Dodge is proposing a three-way business combination of Phelps Dodge,
Asarco and Cyprus Amax through separate offerings to exchange all the issued and
outstanding Asarco and Cyprus Amax common shares for a combination of Phelps
Dodge common shares and cash. See "The Offer" on page 38 of this prospectus.
Phelps Dodge is offering to exchange $14.75 net in cash plus 0.25133120
shares of Phelps Dodge common stock for each outstanding share of Asarco common
stock, on a fully prorated basis. Asarco shareholders may elect to receive
either $29.50 in cash or 0.50266 shares of Phelps Dodge common stock for each
Asarco common share that is validly tendered and not properly withdrawn, subject
to proration if the stock portion or the cash portion of the offer is
oversubscribed. Separately, Phelps Dodge is offering to exchange $7.611766875
net in cash plus 0.2203 shares of Phelps Dodge common stock for each outstanding
common share of Cyprus Amax, on a fully prorated basis. Cyprus Amax shareholders
may elect to receive either $20.54 in cash or 0.3500 shares of Phelps Dodge
common stock for each Cyprus Amax common share that is validly tendered and not
properly withdrawn, subject to proration.
The funds for the cash consideration in connection with the exchange of all
Asarco and Cyprus Amax common shares outstanding are expected to be obtained
from cash on hand, from borrowings under Phelps Dodge's existing revolving
credit facility, and from a bridge financing revolving credit facility for which
Phelps Dodge has obtained a letter of commitment from Citibank, N.A. The
existing revolving credit facility allows borrowings up to $1 billion until its
scheduled maturity on June 25, 2002 and allows for two, one-year renewals beyond
the scheduled maturity with approvals of those lenders representing at least
two-thirds of the commitments provided by the facility. The commitment for the
bridge financing revolving credit facility provides for borrowings up to $1
billion and a termination 364 days after it is established. Both revolving
credit facilities bear interest at variable rates which approximate 6.75 percent
on October 5, 1999. Phelps Dodge expects to replace the borrowings under the
bridge financing revolving credit facility with long-term financing after the
acquisitions of Asarco and Cyprus Amax.
87
<PAGE> 95
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
The transactions would be accounted for under the purchase method. The
purchase price for the business combinations is estimated as follows (dollars in
millions and shares in thousands except per share data):
<TABLE>
<CAPTION>
ASARCO CYPRUS AMAX COMBINED
---------- ----------- --------
<S> <C> <C> <C>
Common shares outstanding (as reported in Cyprus
Merger Agreement and the Asarco Merger
Agreement)......................................... 39,921 90,867
Exchange offer ratio of Phelps Dodge common shares
for each common share.............................. 0.25133120 0.2203
Phelps Dodge common shares to be issued.............. 10,032 20,018 30,050
Closing market price of each Phelps Dodge common
share on October 5, 1999........................... $53.5625
========
Fair value of Phelps Dodge common shares issued,
comprising par value of $188 ($6.25 per share) and
capital in excess of par of $1,422................. $ 1,610
Cash consideration of $14.75 for each Asarco common
share and $7.61176875 for each Cyprus Amax common
share.............................................. 1,280
Redemption of Cyprus Amax Series A Preferred Stock
(Note 3E).......................................... 244
Estimated fair value of Cyprus Amax outstanding
options (as reported in the Cyprus Merger
Agreement)......................................... 30
Estimated fair value of Asarco outstanding options
(as reported in the Asarco Merger Agreement)....... 13
Estimated transaction costs.......................... 30
--------
Purchase price....................................... $ 3,207
========
</TABLE>
The final purchase price could change materially from the purchase price
estimated above as a result of changes in the market price of common shares of
Phelps Dodge and/or the relative market price of Asarco and Cyprus Amax common
shares.
The final determination of the purchase price may differ from the amount
assumed in the Unaudited Pro Forma Combined Financial Information and that
difference may be material.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the proposed business combinations of Phelps Dodge, Asarco and Cyprus Amax as if
such combinations occurred on January 1, 1998, in the Unaudited Pro Forma
Combined Statements of Operations for the six-month interim period ended June
30, 1999, and for the year ended December 31, 1998, respectively, and on June
30, 1999, for the Unaudited Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combinations with Asarco and
Cyprus Amax occurred on the respective dates assumed, nor is it necessarily
indicative of future consolidated operating results or financial position.
Future cash cost savings, which Phelps Dodge estimated will be at least
$200 million annually, are not recognized in this Unaudited Pro Forma Combined
Financial Information. Non-recurring items related to 1998 and the six-month
interim period ended June 30, 1999, are included (see "Selected Historical
Financial Data" at pages 60 through 64 for a summary of non-recurring items and
special charges).
88
<PAGE> 96
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(A) Reclassifications have been made to the Asarco and Cyprus Amax
historical consolidated financial information to conform to Phelps Dodge's
presentation. The historical financial information of Cyprus Amax excludes
the results of operations and assets of its discontinued Coal segment as
reported for 1998 operations in Cyprus Amax's Form 8-K dated June 30, 1999,
and as reported as of and for the six months ended June 30, 1999, in its
Form 10-Q filing for such period. Cyprus Amax's historical financial
information for the year ended December 31, 1998, also has been adjusted to
exclude the identifiable results of recurring operations of its Lithium
segment which was sold in October 1998.
<TABLE>
<CAPTION>
BALANCE SHEET SIX MONTHS YEAR ENDED
AT JUNE 30, ENDED JUNE 30, DECEMBER 31,
(IN $ MILLIONS): 1999 1999 1998
- ----------------------------- ------------- -------------- ------------
<S> <C> <C> <C>
Asarco reclassification
adjustments:
Inventories................ (127)
Supplies................... 127
Deferred income taxes
(current asset)......... 33
Prepaid expenses and other
assets.................. (33)
Miscellaneous income and
expense, net............ (2) (4)
Equity in net earnings of
affiliated companies.... 2 4
Interest expense........... 4 13
Capitalized interest....... (4) (13)
Cyprus Amax reclassification
adjustments:
Investments and notes
receivable.............. 9
Other assets and deferred
charges................. (9)
Treasury shares............ 86
Capital in excess of par
value................... (86)
Miscellaneous income and
expense, net............ 8
Provision for taxes on
income.................. (1)
Equity in net earnings
(losses) of affiliated
companies............... (7)
Elimination of recurring
results from the disposed
Cyprus Amax Lithium
segment:
Sales and other revenues... (218)
Cost of products sold
(derived)............... (200)
Depreciation, depletion and
amortization expense.... (7)
</TABLE>
(B) This pro forma adjustment represents payment of the cash component
of the purchase price of $1,280 million, the estimated fair value of
outstanding stock options of $13 million and $30 million for
89
<PAGE> 97
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
Asarco and Cyprus Amax, respectively, and the funding of certain Cyprus
Amax employee benefits of $41 million.
(C) Phelps Dodge estimates it will incur approximately $30 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges. These
estimates are preliminary and therefore are subject to change.
(D) If the business combinations are consummated, they will be
accounted for using the purchase method of accounting in accordance with
generally accepted accounting principles. Accordingly, the assets and
liabilities of Asarco and Cyprus Amax would be recorded at their estimated
fair values.
Phelps Dodge has not had access to information that is within the
peculiar knowledge of Asarco and Cyprus Amax and has not performed its due
diligence necessary to determine the fair value of their assets or
liabilities or to identify unknown liabilities or obligations. Pro forma
adjustments to allocate the purchase price have been recorded in the
Unaudited Pro Forma Combined Financial Information on the basis of fair
values reported for certain assets and liabilities in public information of
Asarco and Cyprus Amax. Because fair value information for the remaining
assets and liabilities and any possible identifiable intangible assets are
not reasonably available to Phelps Dodge, the excess of the historical net
book values of Asarco's and Cyprus Amax's assets acquired over the
estimated purchase price has been allocated as a reduction of their
combined net property, plant and equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of the three companies. Phelps Dodge
has not developed formal plans for combining the three operations.
Accordingly, additional liabilities may be incurred in connection with the
business combinations and any ultimate restructuring. These additional
liabilities and costs have not been contemplated in the Unaudited Pro Forma
Combined Financial Information because information necessary to reasonably
estimate such costs and to formulate detailed restructuring plans is not
available to Phelps Dodge. Accordingly, the allocation of the purchase
price cannot be estimated with a reasonable degree of accuracy and may
differ materially from the amounts assumed in the Unaudited Pro Forma
Combined Financial Information.
The pro forma purchase price allocation adjustments are estimated as
follows (in millions):
<TABLE>
<S> <C>
Reduction of debt to fair value (as reported in Cyprus
Amax's June 30, 1999, Form 10-Q and the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed
August 20, 1999).......................................... $ 95
Restricted investment in Grupo Mexico (as reported in
Asarco's December 31, 1998, Form 10-K).................... $ 29
Increase in LIFO based inventory to replacement cost (as
reported in Asarco's June 30, 1999, Form 10-Q and in
Cyprus Amax's December 31, 1998, Form 10-K)............... $ 84
Excess projected benefit obligation over the fair value of
pension plan assets (as reported in Cyprus Amax's December
31, 1998, Form 10-K, comprising a $5 million reduction of
prepaid expenses and other assets and a $52 million
increase in other liabilities and deferred credits)....... $ 57
Excess fair value of pension plan assets over the projected
benefit obligation (as reported in Asarco's December 31,
1998, Form 10-K).......................................... $ 10
Reduction in deferred tax liabilities (Note F).............. $ 141
Reduction in net property, plant and equipment (derived).... $ 539
</TABLE>
(E) The pro forma adjustments reflect the issuance of $358 million of
debt to finance the acquisition, provide operating cash, and finance the
redemption of all 4,664,000 outstanding shares of
90
<PAGE> 98
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
Cyprus Amax's Series A Preferred Stock. Phelps Dodge has obtained bridge
financing of $1 billion with a one-year term as described in Note 2. The
bridge financing is expected to be replaced with long-term financing.
Ten-year debt has been assumed for purposes of the pro forma adjustments.
Interest is estimated to be fixed at 7.75% resulting in annual interest
expense of $28 million. The interest rate estimate was based upon current
ten-year treasury bill rates plus commercially indicative rate basis
points. A change in the interest rate on the debt by 1/8 percent would
impact annual interest expense by approximately $450,000. Debt issue costs
associated with the debt are estimated to be approximately $7 million with
annual amortization of approximately $700,000.
(F) The estimated income tax effect of the pro forma adjustments have
been recorded based upon the estimated effective tax rates of approximately
32% for Asarco and 15% for Cyprus Amax which rates have been derived from
public quarterly and annual filings of Asarco and Cyprus Amax. The business
combinations are expected to be tax-free transactions with Asarco's and
Cyprus Amax's historical tax bases surviving for income tax reporting
purposes.
Provisions for pro forma income tax expense have been recorded for pro
forma adjustments to the Pro Forma Combined Statements of Operations
resulting from pro forma purchase price allocation adjustments and other
items.
Cyprus Amax has reported $176 million of U.S. net operating loss
carryforwards through 1998, expiring from 1999 to 2012, which along with
other deferred tax assets are subject to an existing valuation allowance.
Asarco has reported $573.7 million of net loss carryforwards, which expire
if unused from 2008 through 2018. The net operating loss carryforwards may
be subject to annual limitations after the acquisitions because of the
change in ownership rules. The annual limits will be calculated as the
long-term tax exempt rate (currently 5.18%) times the separate fair market
values of Cyprus Amax and Asarco, with Asarco's value potentially
determined without SPCC. Once all facts are known, the annual limits may
necessitate an increase in the consolidated valuation allowance for
deferred tax assets.
Pro forma income tax expense and deferred tax allocations recorded
upon consummation of the business combinations could vary significantly
from the pro forma estimates because information regarding Asarco's and
Cyprus Amax's income tax reporting is not available to Phelps Dodge.
(G) This pro forma adjustment reflects the issue of 30,050,000 shares
of Phelps Dodge common stock in connection with the exchange offers for all
the outstanding common shares of Asarco and Cyprus Amax. The common stock
of Phelps Dodge represents common shares of $188 million at $6.25 per share
par value and capital in excess of par of $1,422 million.
(H) These pro forma adjustments eliminate the historical
shareholders' equity accounts of Asarco and Cyprus Amax.
(I) This pro forma adjustment records the estimated reduction in
depreciation, depletion and amortization expense related to the pro forma
reduction in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because neither fair value
nor book value information regarding the composition of Asarco's or Cyprus
Amax's property, plant and equipment is available to Phelps Dodge, actual
adjustments to depreciation, depletion and amortization expense could
differ substantially from these estimates.
(J) Phelps Dodge holds a 14.0% equity interest in Southern Peru
Copper Corporation (SPCC) which is accounted for as a cost basis investment
with a book value of $13.2 million at June 30, 1999. Asarco reports a 54.3%
equity interest in SPCC which it consolidated in both its June 30, 1999,
Form 10-Q and December 31, 1998, Form 10-K. As a result of Phelps Dodge's
increased ownership in SPCC that would arise through the acquisition of
Asarco, Phelps Dodge would qualify for use of the
91
<PAGE> 99
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
consolidation method of reporting for its investment in SPCC. Accordingly,
a pro forma adjustment is recorded to consolidate Phelps Dodge's interest
in SPCC including the elimination of Phelps Dodge's cost basis investment
in SPCC and its recognition of dividend income from SPCC, the reduction of
minority interests in consolidated subsidiaries representing Phelps Dodge's
14.0% interest, and the retroactive restatement of Phelps Dodge's retained
earnings.
(K) This pro forma adjustment recognizes imputed interest expense
resulting from the fair value adjustment of Asarco's long-term debt as
reported in the Form S-4 Registration Statement of Asarco Cyprus
Incorporated filed August 20, 1999. A pro forma adjustment to recognize
imputed interest resulting from the $42 million fair value adjustment of
Cyprus Amax's debt has not been provided because information necessary to
calculate such adjustment is not reasonably available to Phelps Dodge.
(L) This pro forma adjustment recognizes certain change of control
obligations arising from the merger of Asarco, Cyprus Amax and Phelps
Dodge.
(M) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
---------------- ----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps Dodge common
shares outstanding.................... 57.8 57.8 58.2 58.5
Anti dilutive pro forma potential common
shares................................ -- -- -- (0.3)
Phelps Dodge common shares to be issued
in connection with the business
combination (Note 2).................. 30.0 30.0 30.0 30.0
----- ----- ----- -----
87.8 87.8 88.2 88.2
===== ===== ===== =====
</TABLE>
The average number of common shares outstanding does not include
Asarco's and Cyprus Amax's outstanding stock options or other common stock
equivalents, which represent approximately 700,000 potential Phelps Dodge
common shares, because the impact on unaudited pro forma net loss per share
would be anti-dilutive.
92
<PAGE> 100
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND ASARCO COMBINED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
---------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO ADJUSTMENTS COMBINED
------------ ------ ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating
revenues.......................... $1,354 966 -- 2,320
------ ----- --- -----
Operating costs and expenses
Cost of products sold............. 1,073 855 -- 1,928
Depreciation, depletion and
amortization................... 144 73 (22)(J) 195
Selling and general administrative
expense........................ 60 72 -- 132
Exploration and research
expense........................ 21 11 -- 32
Non-recurring charges and
provision for asset
dispositions*.................. 83 4 -- 87
------ ----- --- -----
1,381 1,015 (22) 2,374
------ ----- --- -----
Operating income (loss)............. (27) (49) 22 (54)
Interest expense.................. (48) (38) (3)(K)
(23)(E)
(4)(A) (116)
Capitalized interest.............. -- -- 4(A) 4
Miscellaneous income and
expense, net................... (7) 10 (1)(F)
(2)(A) --
------ ----- --- -----
Income (loss) before taxes, minority
interests and equity in net
earnings of affiliated
companies......................... (82) (77) (7) (166)
Provision for taxes on income..... 19 25 2(G) 46
Minority interests in consolidated
subsidiaries................... 1 (4) 1(F) (2)
Equity in net earnings (losses) of
affiliated companies........... 5 -- 2(A) 7
------ ----- --- -----
Income (loss) from continuing
operations........................ $ (57) (56) (2) (115)
====== ===== === =====
Net earnings (loss) per share
Basic............................. $(0.98) (1.70)
Diluted........................... $(0.98) (1.70)
Weighted average shares outstanding
Basic............................. 57.8 67.8
Diluted........................... 57.8 67.8
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
93
<PAGE> 101
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND ASARCO COMBINED
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
--------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO ADJUSTMENTS COMBINED
------------ ------ ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues......... $3,064 2,233 -- 5,297
------ ----- ---- -----
Operating costs and expenses
Cost of products sold.................... 2,361 1,963 -- 4,324
Depreciation, depletion and
amortization.......................... 293 145 (44)(J) 394
Selling and general administrative
expense............................... 123 144 -- 267
Exploration and research expense......... 55 27 -- 82
Non-recurring charges and provision for
asset dispositions*................... (191) 72 -- (119)
------ ----- ---- -----
2,641 2,351 (44) 4,948
------ ----- ---- -----
Operating income (loss).................... 423 (118) 44 349
Interest expense......................... (97) (68) (5)(K)
(46)(E)
(13)(A) (229)
Capitalized interest..................... 2 -- 13(A) 15
Miscellaneous income and expense, net.... 9 29 (6)(F)
(4)(A) 28
------ ----- ---- -----
Income (loss) before taxes, minority
interests and equity in net earnings of
affiliated companies..................... 337 (157) (17) 163
Provision for taxes on income............ (134) 53 4(G) (77)
Minority interests in consolidated
subsidiaries.......................... (8) (27) 8(F) (27)
Equity in net earnings (losses) of
affiliated companies.................. (4) -- 4(A) --
------ ----- ---- -----
Income (loss) from continuing operations... $ 191 (131) (1) 59
====== ===== ==== =====
Net earnings (loss) per share
Basic.................................... $ 3.28 0.86
Diluted.................................. $ 3.26 0.86
Weighted average shares outstanding
Basic.................................... 58.2 68.3
Diluted.................................. 58.5 68.6
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
94
<PAGE> 102
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE AND ASARCO COMBINED
JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO ADJUSTMENTS COMBINED
------------ ------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................. $ 144 125 (589)(B)
589(E)
(12)(E)
(20)(C) 237
Accounts receivable, net.................. 396 404 -- 800
Inventories............................... 263 305 (127)(A)
80(D) 521
Supplies.................................. 104 -- 127(A) 231
Prepaid expenses and other assets......... 15 135 10(D)
(33)(A) 127
Deferred income taxes..................... 45 -- 33(A) 78
------ ----- ---- -----
Current assets.......................... 967 969 58 1,994
Investments and long-term accounts
receivable.............................. 95 190 29(D)
(13)(F) 301
Property, plant and equipment, net........ 3,501 2,592 (559)(D) 5,534
Other assets and deferred charges......... 339 226 12(E) 577
------ ----- ---- -----
Total Assets....................... $4,902 3,977 (473) 8,406
====== ===== ==== =====
LIABILITIES
Short-term debt........................... $ 214 16 -- 230
Current portion of long-term debt......... 62 31 -- 93
Accounts payable and accrued expenses..... 456 496 54(L) 1,006
Dividends payable......................... 29 -- -- 29
Accrued income taxes...................... 11 90 -- 101
------ ----- ---- -----
Current liabilities..................... 772 633 54 1,459
Long-term debt............................ 801 1,017 (53)(D)
589(E) 2,354
Deferred income taxes..................... 493 28 (141)(G) 380
Other liabilities and deferred credits.... 376 306 -- 682
------ ----- ---- -----
2,442 1,984 449 4,875
------ ----- ---- -----
Minority interests in consolidated
subsidiaries.............................. 86 534 (147)(F) 473
------ ----- ---- -----
Shareholders' equity
Common shares........................... 362 525 (525)(I)
63(H) 425
Capital in excess of par value.......... 5 -- 474(H)
13(B) 492
Retained earnings....................... 2,198 949 (949)(I)
134(F) 2,332
Accumulated other comprehensive income
(loss)............................... (183) (15) 15(I) (183)
Other................................... (8) -- -- (8)
------ ----- ---- -----
Total Shareholders' Equity......... 2,374 1,459 (775) 3,058
------ ----- ---- -----
Total Liabilities and Shareholders'
Equity........................... $4,902 3,977 (473) 8,406
====== ===== ==== =====
</TABLE>
95
<PAGE> 103
COMBINATION OF PHELPS DODGE AND ASARCO
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge and Asarco
incorporated by reference into this prospectus. See Phelps Dodge "Unaudited Pro
Forma Combined Financial Information" on page 67 of this prospectus.
The assumptions and related pro forma adjustments described below have been
developed from public historical information available to Phelps Dodge and the
Asarco Merger Agreement. Pro forma adjustments have been included only to the
extent known and reasonably available to Phelps Dodge. Additional information
may exist that could materially affect the assumptions and related pro forma
adjustments. Such information is not available to Phelps Dodge because it is
within the particular and singular knowledge of Asarco.
2. THE OFFER
Phelps Dodge is proposing a business combination with Asarco pursuant to
the Asarco Merger Agreement through an offering to exchange all the issued and
outstanding Asarco common shares for a combination of Phelps Dodge common shares
and cash.
Phelps Dodge is offering to exchange $14.75 net in cash plus 0.25133120
shares of Phelps Dodge common stock for each outstanding share of Asarco
Incorporated common stock, on a fully prorated basis. Asarco shareholders may
elect to receive either $29.50 in cash or 0.50266 shares of Phelps Dodge common
stock for each Asarco common share that is validly tendered and not properly
withdrawn, subject to proration if the stock portion or the cash portion of the
offer is oversubscribed.
The funds for the cash consideration in connection with the exchange of all
Asarco common shares outstanding are expected to be obtained from cash on hand,
from borrowings under Phelps Dodge's existing revolving credit facility, and
from a bridge financing revolving credit facility for which Phelps Dodge has
obtained a letter of commitment from Citibank, N.A. The existing revolving
credit facility allows borrowings up to $1 billion until its scheduled maturity
on June 25, 2002 and allows for two, one-year renewals beyond the scheduled
maturity with approvals of those lenders representing at least two-thirds of the
commitments provided by the facility. The commitment for the bridge financing
revolving credit facility provides for borrowings up to $1 billion and a
termination 364 days after it is established. Both revolving credit facilities
bear interest at variable rates which approximate 6.75 percent on October 5,
1999. Phelps Dodge expects to replace the borrowings under the bridge financing
revolving credit facility with long-term financing after the acquisition of
Asarco.
The transaction would be accounted for under the purchase method. The
purchase price for the business combination is estimated as follows (dollars in
millions and shares in thousands except per share data):
96
<PAGE> 104
COMBINATION OF PHELPS DODGE AND ASARCO
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
ASARCO
------------
<S> <C>
Common shares outstanding (as reported in the Asarco Merger
Agreement)................................................ 39,921
Exchange offer ratio of Phelps Dodge common shares for each
common share.............................................. 0.25133120
Phelps Dodge common shares to be issued..................... 10,032
Closing market price of each Phelps Dodge common share on
October 5, 1999........................................... $ 53.5625
============
Fair value of Phelps Dodge common shares issued, comprising
par value of $63 ($6.25 per share) and capital in excess
of par of $474............................................ $ 537
Cash consideration of $14.75 for each Asarco common share... 589
Estimated fair value of Asarco outstanding options (as
reported in the Asarco Merger Agreement).................. 13
Estimated transaction costs................................. 20
------------
Purchase price.............................................. $ 1,159
============
</TABLE>
The final purchase price could change materially from the purchase price
estimated above as a result of changes in the market price of common shares of
Phelps Dodge and/or the relative market price of Asarco common shares.
The final determination of the purchase price may differ from the amount
assumed in the Unaudited Pro Forma Combined Financial Information and that
difference may be material.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the proposed business combination of Phelps Dodge and Asarco as if such
combination occurred on January 1, 1998, in the Unaudited Pro Forma Combined
Statements of Operations for the six-month interim period ended June 30, 1999,
and for the year ended December 31, 1998, respectively, and on June 30, 1999,
for the Unaudited Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combination with Asarco occurred
on the respective dates assumed, nor is it necessarily indicative of future
consolidated operating results or financial position.
Future cash cost savings are not recognized in this Unaudited Pro Forma
Combined Financial Information. Non-recurring items related to 1998 and the
six-month interim period ended June 30, 1999, are included (see "Selected
Historical Financial Data" at pages 60 through 64 for a summary of non-recurring
items and special charges).
97
<PAGE> 105
COMBINATION OF PHELPS DODGE AND ASARCO
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
(A) Reclassifications have been made to the Asarco historical
consolidated financial information to conform to Phelps Dodge's
presentation.
<TABLE>
<CAPTION>
BALANCE SHEET AT SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1999 DECEMBER 31, 1998
---------------- ---------------- -----------------
(IN $ MILLIONS)
<S> <C> <C> <C>
Asarco
reclassification
adjustments:
Inventories......... (127)
Supplies............ 127
Deferred income
taxes (current
asset)........... 33
Prepaid expenses and
other assets..... (33)
Miscellaneous income
and expense,
net.............. (2) (4)
Equity in net
earnings (losses)
of affiliated
companies........ 2 4
Interest expense.... 4 13
Capitalized
interest......... (4) (13)
</TABLE>
(B) This pro forma adjustment represents payment of the cash component
of the purchase price of $589 million and the estimated fair value of
Asarco outstanding stock options of $13 million.
(C) Phelps Dodge estimates it will incur approximately $20 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges. These
estimates are preliminary and therefore are subject to change.
(D) If the business combination is consummated, it will be accounted
for using the purchase method of accounting in accordance with generally
accepted accounting principles. Accordingly, the assets and liabilities of
Asarco would be recorded at their estimated fair values.
Phelps Dodge has not had access to information that is within the
peculiar knowledge of Asarco and has not performed its due diligence
necessary to determine the fair value of its assets or liabilities or to
identify unknown liabilities or obligations. Pro forma adjustments to
allocate the purchase price have been recorded in the Unaudited Pro Forma
Combined Financial Information on the basis of fair values reported for
certain assets and liabilities in public information of Asarco. Because
fair value information for the remaining assets and liabilities and any
possible identifiable intangible assets are not reasonably available to
Phelps Dodge, the excess of the historical net book values of Asarco's
assets acquired over the estimated purchase price has been allocated as a
reduction of its combined net property, plant and equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of Asarco. Phelps Dodge has not
developed formal plans for combining the operations. Accordingly,
additional liabilities may be incurred in connection with the business
combination and any ultimate restructuring. These additional liabilities
and costs have not been contemplated in the Unaudited Pro Forma Combined
Financial Information because information necessary to reasonably estimate
such costs and to formulate detailed restructuring plans is not available
to Phelps Dodge. Accordingly, the allocation of the purchase price cannot
be estimated with a reasonable degree of accuracy and may differ materially
from the amounts assumed in the Unaudited Pro Forma Combined Financial
Information.
98
<PAGE> 106
COMBINATION OF PHELPS DODGE AND ASARCO
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
The merger agreement by and between Asarco and Cyprus Amax has been
terminated and Cyprus Amax has paid $45 million to Asarco upon such
termination. Accordingly, no such fee is required to be paid upon
consummation of Phelps Dodge's proposed acquisition of Asarco.
The pro forma purchase price allocation adjustments are estimated as
follows (in millions):
<TABLE>
<S> <C>
Reduction of debt to fair value (as reported in the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed
August 20, 1999).......................................... $ 53
Restricted investment in Grupo Mexico (as reported in
Asarco's December 31, 1998, Form 10-K).................... $ 29
Increase in LIFO based inventory to replacement cost (as
reported in Asarco's June 30, 1999, Form 10-Q)............ $ 80
Excess fair value of pension plan assets over the projected
benefit obligation (as reported in Asarco's December 31,
1998, Form 10-K).......................................... $ 10
Reduction in deferred tax liabilities (Note G).............. $141
Reduction in net property, plant and equipment (derived).... $559
</TABLE>
(E) The approximately $589 million cash consideration paid in
connection with the exchange of all Asarco common shares outstanding is
expected to be obtained from cash on hand and from borrowings under the
Corporation's revolving credit facility and its bridge financing revolving
credit facility as described in Note 2. Although the Corporation has not
made any definitive plans for the final form of such borrowings, for pro
forma purposes, future refinancing through the issuance of $589 million of
ten-year debt has been assumed. Interest is estimated to be fixed at 7.75%
resulting in annual interest expense of $46 million. The interest rate
estimate is based upon the ten-year Treasury bill rates for September 1999,
plus commercially indicative rate basis points. A change in interest rate
on the debt by 1/8 percent would impact annual interest expense by
approximately $740,000. Debt issue costs are estimated to be approximately
$12 million with annual amortization of approximately $1.2 million.
(F) Phelps Dodge holds a 14.0% equity interest in Southern Peru Copper
Corporation (SPCC) which is accounted for as a cost basis investment with a
book value of $13.2 million at June 30, 1999. Asarco reports a 54.3% equity
interest in SPCC which it consolidated in both its June 30, 1999, Form 10-Q
and December 31, 1998, Form 10-K. As a result of Phelps Dodge's increased
ownership in SPCC that would arise through the acquisition of Asarco,
Phelps Dodge would qualify for use of the consolidation method of reporting
for its investment in SPCC. Accordingly, a pro forma adjustment is recorded
to consolidate Phelps Dodge's interest in SPCC including the elimination of
Phelps Dodge's cost basis investment in SPCC and its recognition of
dividend income from SPCC, the reduction of minority interests in
consolidated subsidiaries representing Phelps Dodge's 14.0% interest, and
the retroactive restatement of Phelps Dodge's retained earnings.
(G) The estimated income tax effect of the pro forma adjustments has
been recorded based upon the estimated effective tax rate of approximately
32% for Asarco which rate has been derived from public quarterly and annual
filings. The business combination is expected to be a tax-free transaction
with Asarco's historical tax bases surviving for income tax reporting
purposes.
A provision for pro forma income tax expense has been recorded
for pro forma adjustments to the Pro Forma Combined Statements of
Operations resulting from pro forma purchase price allocation adjustments
and other items.
Asarco has reported $573.7 million of net loss carryforwards,
which expire if unused from 2008 through 2018. The net operating loss
carryforwards may be subject to annual limitations after the acquisitions
because of the change in ownership rules. The annual limits will be
calculated as the long-term tax exempt rate (currently 5.18%) times the
fair market value of Asarco, with Asarco's value
99
<PAGE> 107
COMBINATION OF PHELPS DODGE AND ASARCO
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
potentially determined without SPCC. Once all facts are known, the annual
limits may necessitate an increase in the consolidated valuation allowance
for deferred tax assets.
Pro forma income tax expense and deferred tax allocations
recorded upon consummation of the business combination could vary
significantly from the pro forma estimates because information regarding
Asarco's income tax reporting is not available to Phelps Dodge.
(H) This pro forma adjustment reflects the issue of 10,032,000 shares
of Phelps Dodge common stock in connection with the exchange offer for all
the outstanding common shares of Asarco. The common stock of Phelps Dodge
represents common shares of $63 million at $6.25 per share par value and
capital in excess of par of $474 million. No common shares have been
included for the potential share issues in connection with the outstanding
stock options of Asarco.
(I) These pro forma adjustments eliminate the historical shareholders'
equity accounts of Asarco.
(J) This pro forma adjustment records the estimated reduction in
depreciation, depletion and amortization expense related to the pro forma
reduction in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because neither fair value
nor book value information regarding the composition of Asarco's property,
plant and equipment is available to Phelps Dodge, actual adjustments to
depreciation, depletion and amortization expense could differ substantially
from these estimates.
(K) This pro forma adjustment recognizes imputed interest expense
resulting from the fair value adjustment of Asarco's long-term debt as
reported in the Form S-4 Registration Statement of Asarco Cyprus
Incorporated filed August 20, 1999.
(L) This pro forma adjustment recognizes certain change in control
obligations arising from the merger of Asarco and Phelps Dodge.
(M) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, 1999 DECEMBER 31, 1998
---------------------- ------------------
BASIC DILUTED BASIC DILUTED
------- --------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps
Dodge common shares
outstanding............... 57.8 57.8 58.2 58.5
Phelps Dodge common shares
to be issued in connection
with the business
combination (Note 2)...... 10.0 10.0 10.0 10.0
Pro forma potential common
shares.................... -- -- 0.1 0.1
---- ---- ---- ----
67.8 67.8 68.3 68.6
==== ==== ==== ====
</TABLE>
The average number of common shares outstanding for the six months
ended June 30, 1999 does not include Asarco's outstanding stock options or
other common stock equivalents, which represent approximately 100,000
potential Phelps Dodge common shares, because the impact on unaudited pro
forma net loss per share is anti-dilutive.
100
<PAGE> 108
DESCRIPTION OF PHELPS DODGE CAPITAL STOCK
The following description of the terms of the capital stock of Phelps Dodge
is not meant to be complete and is qualified by reference to Phelps Dodge's
Restated Certificate of Incorporation (the Phelps Dodge charter), which is
incorporated herein by reference. See "Where You Can Find Additional
Information."
AUTHORIZED CAPITAL STOCK
Under the Phelps Dodge charter, Phelps Dodge's authorized capital stock
consists of 200,000,000 shares of Phelps Dodge common stock, par value $6.25 per
share, and 6,000,000 shares of Phelps Dodge preferred stock, par value $1.00 per
share.
PHELPS DODGE COMMON STOCK
Phelps Dodge Common Stock Outstanding. The outstanding shares of Phelps
Dodge common stock are, and the shares of Phelps Dodge common stock issued
pursuant to the exchange offers will be, duly authorized, validly issued, fully
paid and nonassessable.
Voting Rights. Each holder of Phelps Dodge common stock is entitled to one
vote for each share of Phelps Dodge common stock held of record on the
applicable record date on all matters submitted to a vote of shareholders.
Dividend Rights; Rights upon Liquidation. The holders of Phelps Dodge
common stock are entitled to receive, from funds legally available for the
payment thereof, dividends when and as declared by resolution of the Phelps
Dodge Board of Directors, subject to any preferential dividend rights granted to
the holders of any outstanding Phelps Dodge preferred stock. In the event of
liquidation, each share of Phelps Dodge common stock is entitled to share pro
rata in any distribution of Phelps Dodge's assets after payment or providing for
the payment of liabilities and the liquidation preference of any outstanding
Phelps Dodge preferred stock.
Preemptive Rights. Holders of Phelps Dodge common stock have no preemptive
rights to purchase, subscribe for or otherwise acquire any unissued or treasury
shares or other securities.
PHELPS DODGE PREFERRED STOCK
Phelps Dodge Preferred Stock Outstanding. As of the date of this
prospectus, no shares of Phelps Dodge preferred stock were issued and
outstanding.
Authorized Preferred Stock. Under Phelps Dodge's charter, the Phelps Dodge
Board of Directors has the authority, without shareholder approval, to create
one or more classes or series within a class of preferred stock, to issue shares
of preferred stock in such class or series up to the maximum number of shares of
the relevant class or series of preferred stock authorized, and to determine the
preferences, rights, privileges and restrictions of any such class or series,
including the dividend rights, voting rights, the rights and terms of
redemption, the rights and terms of conversion, liquidation preferences, the
number of shares constituting any such class or series and the designation of
such class or series.
The Phelps Dodge Board of Directors has designated a series of preferred
stock as Junior Participating Cumulative Preferred Shares, and has issued rights
to purchase those shares which are exercisable only upon the occurrence of
certain events described below under "Comparison of Rights of Holders of Phelps
Dodge Shares and Asarco Shares -- Comparison of Charter and By-Law
Provisions -- Capitalization."
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the transfer and dividend
paying agent and registrar for the Phelps Dodge common stock.
101
<PAGE> 109
COMPARISON OF RIGHTS OF HOLDERS OF
PHELPS DODGE SHARES AND ASARCO SHARES
Upon completion of our proposed business combination, the shareholders of
Asarco will become shareholders of Phelps Dodge, rather than shareholders of
Asarco. As Phelps Dodge shareholders, the rights of former Asarco shareholders
will be governed by Phelps Dodge's charter and by-laws, which differ in certain
material respects from Asarco's charter and by-laws. In addition, New York is
the jurisdiction of incorporation of Phelps Dodge, while New Jersey is the
jurisdiction of incorporation of Asarco. As Phelps Dodge shareholders, the
rights of former Asarco shareholders will therefore be governed by the New York
Business Corporation Law (NYBCL) instead of the New Jersey Business Corporation
Act (NJBCA).
The following is a comparison of:
- the current rights of Asarco shareholders under the NJBCA and the Asarco
charter and by-laws; and
- the rights Asarco shareholders would have as Phelps Dodge shareholders
under the NYBCL and the Phelps Dodge charter and by-laws upon the
consummation of a business combination between Phelps Dodge and Asarco.
The comparison summarizes the material differences but is not intended to
list all differences and is qualified by reference to New York law, New Jersey
law, the Phelps Dodge charter and by-laws and the Asarco charter and by-laws.
The summary of the Asarco charter and by-laws is derived from the disclosure in
the Form S-4 filed by Asarco Cyprus Incorporated on August 20, 1999.
COMPARISON OF CHARTER AND BY-LAW PROVISIONS
<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
BOARD OF DIRECTORS
Classified Board Divided into three classes, Divided into three classes,
as nearly equal in number as as nearly equal in number as
possible, with each class possible, with each class
serving a staggered serving a staggered
three-year term. three-year term.
Removal of Directors A director may be removed A director may be removed by
only for cause, and only by the stockholders only for
the affirmative vote of a cause.
majority of the votes cast by
holders of the outstanding
voting stock.
Filling of Board Vacancies With some exceptions, Vacancies on the board of
vacancies on the board may be directors may be filled only
filled by majority vote of by vote of the directors.
the remaining directors then
in office.
Size of Board Board must consist of not Board must consist of not
less than 9 nor more than 15 less than 9 nor more than 12
directors, as fixed from time directors, as fixed from time
to time by resolution of the to time by resolution of the
board. The current number of board. The current number of
directors is 12. directors is 11.
STOCKHOLDER MEETINGS
Annual Meeting Held on the last Wednesday in Held on the first Wednesday
April (or, if that date is a in May, or on another date
legal holiday, the next fixed by the board from time
succeeding date that is not a to time.
legal holiday).
</TABLE>
102
<PAGE> 110
<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
Calling a Special Meeting Only the Chairman of the Only the board of directors
Board, the President or a or the Chairman of the Board
majority of the board of may call a special meeting.
directors may call a special
meeting, except that holders
of at least 10% of the voting
stock may apply to the New
Jersey Superior Court for an
order directing, for good
cause shown, a special
meeting to be called.
Quorum Requirements The presence, in person or by Generally, the presence, in
proxy, of the holder of person or by proxy, of the
record of shares entitled to holders of a majority of the
cast a majority of the votes shares entitled to vote at
at any meeting constitutes a the meeting constitutes a
quorum at such meeting. quorum for that meeting.
Certain Voting Requirements Stockholder action generally Phelps Dodge's charter and
requires the affirmative vote by- laws contain no
of a majority of votes cast, comparable supermajority
except for election of voting requirements. Under
directors and certain voting the NYBCL, the consummation
requirements applicable to by Phelps Dodge of a merger,
certain amendments of consolidation or disposition
organizational documents and of substantially all of its
certain transactions with the assets requires the approval
beneficial owner of more than of two- thirds of all the
10% of any class of capital shares of Phelps Dodge
stock of Asarco. Abstentions entitled to vote on the
have the effect of a vote proposal including, in
against a proposed matter certain situations, the
only if the affirmative vote affirmative vote by the
required is that of the holders of a majority of all
majority of the total votes outstanding shares of each
represented by the class or series of shares.
outstanding voting stock. Abstentions have the effect
of a vote against a proposed
Asarco's charter requires the matter only if the
vote of four-fifths of the affirmative vote required is
outstanding shares of voting that of the majority of the
stock entitled to vote for total votes represented by
the adoption of any plan or the outstanding voting stock.
agreement of merger or
consolidation (other than a
merger, meeting certain
conditions, with any Asarco
subsidiary), to authorize any
disposition of all or any
material part of Asarco's or
any of its subsidiaries'
assets, or to authorize any
issuance or transfer of
Asarco's securities upon
conversion of or in exchange
for the securities or
</TABLE>
103
<PAGE> 111
<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
assets of any other person or
entity, if (as of the date of
any action taken by the board
of directors with respect to
such transaction or as of any
record date for the
determination of shareholders
entitled to notice and to
vote with respect thereto or
immediately prior to the
consummation of such
transaction) the other party
to the transaction is the
beneficial owner, directly or
indirectly, of more than 10%
of any class of capital
stock. In addition, pursuant
to Asarco's charter, no
arrangement with or for the
benefit of a person who is or
has announced or publicly
disclosed a plan or intention
to become the beneficial
owner of 10% or more of
Asarco's voting stock, where
such arrangement involves
aggregate commitments of $10
million or more or
constitutes more than 1% of
the book value of Asarco's
total consolidated assets or
pursuant to which such person
has control over or
responsibility for the
management of any aspect of
the business or affairs of
Asarco, may be effected
unless approved by a majority
of directors not affiliated
or associated with such
person. The same restrictions
apply to any transaction that
has the effect of increasing
the proportionate share of
any class or series of
capital stock, among other
things, that is beneficially
owned by a person as
described in the preceding
sentence.
Stockholder Action by Written Stockholder action must be Stockholder action must be
Consent taken at an annual or special taken at an annual or special
meeting and not by written meeting and not by written
consent, except that the consent, except that the
NJBCA permits stockholder NYBCL permits stockholder
action by unanimous written action by unanimous written
consent. consent.
</TABLE>
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<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
Advance Notice for Stockholders may nominate one Generally, to bring a matter
Stockholder Nominations and or more persons for election (including the nomination of
Other Business as directors at an annual directors) before an annual
meeting if they deliver meeting, a stockholder must
written notice 90 days prior give notice not less than 60
to the anniversary of the days nor more than 90 days
prior year's annual meeting, prior to the meeting, but if
or at a special meeting if the meeting is scheduled for
they deliver written notice a day other than the first
by the tenth day following Wednesday in May and less
the day that notice of the than 70 days' notice is given
special meeting is given to or prior public announcement
stockholders. Asarco's is made to stockholders, a
by-laws contain requirements stockholder must give notice
as to the form and content of by the tenth day following
the notice. the date at which notice of
the annual meeting was mailed
or announcement thereof made.
If the number of directors to
be elected at the election
meeting is increased or there
is a vacancy to be filled at
the election meeting in a
class of directors whose
terms do not expire at the
election meeting and there is
no public announcement at
least 70 days prior to the
election meeting naming all
of the nominees for director
or specifying the size of the
increased board of directors
or the number of directors to
be elected, a nominating
stockholder's notice is
timely if given by the tenth
day following the date on
which the public announcement
is first made, but only with
respect to nominees for any
positions created by the
increase or vacancy. Phelps
Dodge's by-laws contain
requirements as to the form
and content of the
stockholder's notice.
AMENDMENTS TO ORGANIZATIONAL
DOCUMENTS
Certificate of Incorporation Generally may be amended by Under the NYBCL, subject to
the affirmative vote of the limited exceptions,
majority of votes cast by the amendments to Phelps Dodge's
holders of outstanding voting charter must be approved by
stock, except that (1) vote of a majority of all
affirmative vote of 80% of outstanding shares entitled
the outstanding to vote on the proposed
</TABLE>
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<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
voting stock is required for amendment, except that
amendment or deletion of charter provisions requiring
certain provisions relating a greater or class vote may
to certain transactions only be amended by such vote.
involving the beneficial In addition, an amendment
owner of more than 10% of any that negatively affects in
class of capital stock, and certain ways holders of
(2) affirmative vote of the shares of a class or series
holders of 80% of the requires authorization by a
outstanding voting stock majority of the votes of all
(including affirmative vote outstanding shares of the
of the majority of class or series.
outstanding voting stock not
owned by the 10% or greater
holder) required for the
amendment or repeal of
certain provisions regarding
affiliated transactions with
10% or greater holders
(generally unless the
amendment is declared
advisable by the affirmative
vote of 66 2/3% of the board
and submitted to stockholders
for their consideration). In
addition, some charter
provisions relating to the
composition and
classification of the board
of directors, procedures for
stockholder action and the
modification of Asarco's
by-laws may only be modified
by the affirmative vote of
80% of the outstanding voting
stock.
By-laws Generally may be amended by Phelps Dodge's by-laws permit
the affirmative vote of a the amendment of the by-laws
majority of the board, except by a vote of a majority of
that (1) generally may also all the directors at any
be amended by the affirmative regular or special meeting of
vote of the holders of a the board, except that
majority of the outstanding provisions relating to the
voting stock entitled to vote repurchase of stock by Phelps
and present or represented at Dodge may only be amended by
a stockholder meeting, (2) majority vote of the
amendments of certain stockholders. Generally,
by-laws, including provisions under the NYBCL, the by-laws
relating to special may also be amended by a
stockholder meetings, charter majority of the votes cast by
amendments, directorship the shares entitled to vote
vacancies, removal of in the election of any
directors, and the number, directors.
election and qualification of
directors, require the
affirmative vote of the
holders of 80% of the
outstanding voting stock, and
(3) generally, provisions
relating to
</TABLE>
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<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
indemnification of corporate
agents may be amended only by
action of the board approved
by the affirmative vote of
the votes cast by
stockholders entitled to vote
at a meeting of stockholders
for which proxies are
solicited in accordance with
applicable requirements of
the SEC.
CAPITALIZATION
Authorized Stock Common stock: 80 million Common stock: 200 million
shares; preferred stock: 10 shares; preferred stock: 6
million shares. million shares.
Preferred Stock The board is authorized to The board is authorized to
issue preferred stock from issue preferred stock from
time to time in one or more time to time in one or more
series, with terms to be series, with terms to be
fixed by the board. fixed by the board.
Rights Plans Asarco has a rights Phelps Dodge has a rights
agreement, dated as of agreement, dated as of
January 28, 1998. The rights February 5, 1998. The rights
agreement triggers upon the agreement triggers upon the
acquisition by a third party acquisition by a third party
of 15% of Asarco's of 20% of Phelps Dodge's
outstanding common stock. The outstanding common stock. The
board may redeem rights at board may redeem rights at
any time prior to the end of any time prior to the time
the tenth business day such an acquisition takes
following the date at which place.
time such an acquisition
takes place.
Share Repurchases Asarco may generally The NYBCL prohibits Phelps
repurchase its own shares. Dodge from repurchasing more
than 10% of its stock for
more than market value from a
stockholder who has held the
stock for less than two
years, unless the repurchase
is approved by the board and
by majority vote of the
outstanding voting stock.
Phelps Dodge's by-laws
provide that Phelps Dodge may
repurchase its stock only in
the regular course of
legitimate business or for
the purpose of retiring the
stock.
EXCULPATION AND Asarco's charter provides Phelps Dodge's charter
INDEMNIFICATION OF that no director will be provides that the personal
DIRECTORS, OFFICERS AND personally liable for damages liability of Phelps Dodge's
EMPLOYEES for breach of fiduciary duty, directors for any breach of
except in cases where the duty in such capacity is
director's acts or omissions eliminated to the fullest
breached his duty of loyalty extent permitted by the
to the corporation or its NYBCL. The NYBCL permits
Phelps Dodge
</TABLE>
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<PAGE> 115
<TABLE>
<CAPTION>
ASARCO PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
stockholders, were not in to eliminate or limit the
good faith or involved a personal liability of
knowing violation of law, or directors to Phelps Dodge or
provided an improper personal its shareholders for damages
benefit to the director. The for any breach of duty in
Asarco charter provides that such capacity except
protection against personal liability (i) of a director
liability to officers as well (a) whose acts or omissions
as to directors. were in bad faith, involved
intentional misconduct or a
Asarco's by-laws provide that knowing violation of law, (b)
the corporation will who personally gained a
indemnify any director, financial profit or other
officer or employee to the advantage to which he or she
fullest extent permitted by was not legally entitled or
law if such director, officer (c) whose acts violated
or employee is involved in certain provisions of New
litigation by reason of the York law or (ii) for acts or
fact that he is (or was) a omissions prior to the
director, officer or adoption in 1988 of Phelps
employee. Dodge's charter amendment.
Phelps Dodge's by-laws
provide that Phelps Dodge
will indemnify any person
involved in litigation by
reason of the fact that he is
or was a director or officer
of Phelps Dodge, unless the
director's or officer's acts
were committed in bad faith
or were the result of his
active and deliberate
dishonesty and were material
to the proceeding or the
director or officer
personally gained in fact a
financial profit or other
advantage to which he was not
legally entitled. Further,
Phelps Dodge's directors and
officers are covered by
insurance policies maintained
against certain liabilities,
including liabilities arising
under the Securities Act of
1933.
</TABLE>
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COMPARISON OF CERTAIN STATUTORY PROVISIONS
APPRAISAL RIGHTS
ASARCO STOCKHOLDER RIGHTS
Under New Jersey law, appraisal rights, or rights of a stockholder to
receive the fair value of his stock, are available in connection with a merger
or consolidation or any sale, lease or exchange or other disposition of all or
substantially all of a corporation's assets other than in the usual and regular
course of business, unless an exception applies or the corporate charter
provides otherwise. Asarco's charter does not provide otherwise.
Appraisal rights are not available under New Jersey law to stockholders of
a surviving corporation with respect to a merger if the merger did not require
stockholder approval.
In addition, unless provided for in the corporation's certificate of
incorporation, no appraisal rights are available in a merger or consolidation
with respect to shares:
- which are listed on a national securities exchange or are held of record
by at least 1,000 holders; or
- for which, pursuant to the merger or consolidation, the stockholder will
receive cash, shares, obligations or other securities of the kind
described by the previous bulleted item or cash and such securities.
Furthermore, unless provided in the corporation's certificate of
incorporation, no appraisal rights are available in a sale, lease, exchange or
other disposition of all or substantially all of a corporation's assets:
- with respect to shares which are listed on a national securities exchange
or are held of record by at least 1,000 holders; or
- from a dissolution transaction in which substantially all of a
corporation's net assets are to be distributed to its stockholders within
one year after the date of the transaction, so long as the transaction is
wholly for cash, shares, obligations or other securities which will be
listed on a national securities exchange or held of record by not less
than 1,000 holders or cash and such securities.
Since Asarco shares of common stock are listed on the New York Stock Exchange,
Asarco common stockholders will not be entitled to appraisal rights under the
NJBCA.
PHELPS DODGE STOCKHOLDER RIGHTS
Under New York law, appraisal rights are generally available in connection
with a merger or consolidation, except that no appraisal rights are available:
- to the stockholder of a parent corporation merging with its subsidiary
where the parent owns at least 90% of the subsidiary's outstanding stock
and certain additional requirements are met;
- to the stockholder of the surviving corporation in a merger (other than a
merger described in the previous bullet item) unless the merger adversely
affects rights of the shares held by the stockholder in a certain way; or
- to a shareholder of shares of any class or series of stock listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers.
Under the statutory provisions described above, since shares of Phelps Dodge
common stock are listed on the New York Stock Exchange, Phelps Dodge common
stockholders are not entitled to appraisal rights in connection with a merger or
consolidation.
Appraisal rights are also available under the NYBCL in connection with the
sale, lease, exchange or other disposition of all or substantially all of a
corporation's assets other than a transaction wholly for cash where shareholder
approval is conditioned upon the corporation's dissolution and the distribution
of all of the corporation's net assets within one year after the transaction.
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<PAGE> 117
Further, appraisal rights are available in connection with a share exchange
between two corporation as authorized by the NYBCL, except with respect to
shares of a subject corporation that are not acquired in the exchange or that
are listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers.
In addition, appraisal rights are available to a shareholder of a
subsidiary corporation that merges with its parent corporation, or is acquired
by it in a share exchange, where the parent owns at least 90% of the
subsidiary's outstanding stock and certain additional requirements are met.
Appraisal rights are also available to a shareholder who is not entitled to
vote with respect to a plan of merger or consolidation and whose shares will be
canceled or exchanged in the merger or consolidation for cash or other
consideration other than shares of the surviving or consolidated corporation or
another corporation.
CERTAIN BUSINESS COMBINATIONS
ASARCO STOCKHOLDER RIGHTS
New Jersey law restricts the ability of certain persons to acquire control
of a New Jersey corporation.
In general, a New Jersey corporation with its principal executive offices
or significant operations in New Jersey may not engage in a business combination
with an interested stockholder for a period of five years following the
interested stockholder's becoming such. Such a business combination would be
permitted where it is approved by the board of directors prior to the interested
stockholder's becoming such.
Covered business combinations include certain mergers, dispositions of
assets or shares and recapitalizations. An interested stockholder is generally a
stockholder owning at least 10% of the voting power of a corporation's
outstanding shares.
In addition, New Jersey corporations may not engage at any time with any
interested shareholder in a business combination other than:
- a business combination approved by the board of directors of such
corporation prior to the stock acquisition,
- a business combination approved by the affirmative vote of the holders of
66 2/3% of the voting stock not beneficially owned by such interested
shareholder at a meeting for such purpose, or
- a business combination in which the interested shareholder pays a formula
price designed to ensure that all other shareholders receive at least the
highest price per share paid by such interested shareholder.
A New Jersey corporation may not opt out of the foregoing provisions. The
Asarco board of directors has taken the necessary action to make the foregoing
provisions of New Jersey law inapplicable to the proposed business combination
with Phelps Dodge.
The Asarco charter provides that certain transactions, including a merger,
significant asset sales and certain issuances or transfers of securities, with
the beneficial owner of more than 10% of any class of capital stock of Asarco
generally require the affirmative vote of the holders of 80% of the outstanding
shares of all classes of stock, voting together as a single class.
The Asarco charter also provides that certain affiliated transactions with
an interested stockholder or any affiliate of an interested shareholder of
Asarco require, in addition to any vote required by law or in the Asarco charter
or by-laws, approval by a majority of the continuing directors.
Affiliated transactions as defined in Asarco's charter generally include
significant transactions involving aggregate fair market value or commitments of
more than $10 million or more than 1% of Asarco's consolidated assets, and
certain other material arrangements. Interested stockholder, as defined in the
Asarco charter, generally means a beneficial owner of voting stock representing
10% or more of the votes entitled to be cast by the holders of all then
outstanding shares of voting stock of Asarco. Continuing director, as defined in
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the Asarco charter, generally means a director who is not affiliated with the
interested stockholder and who was a director before the stockholder became an
interested stockholder.
The Asarco board of directors has taken the necessary action to make the
foregoing provisions of the Asarco charter inapplicable to the proposed business
combination with Phelps Dodge.
PHELPS DODGE STOCKHOLDER RIGHTS
New York law restricts the ability of certain persons to acquire control of
a Delaware corporation.
In general, a New York corporation may not engage in a business combination
with an interested stockholder for a period of five years following the
interested stockholder's becoming such. Such a business combination would be
permitted where it is approved by the board of directors prior to the interested
stockholder's becoming such, or within 30 days thereafter, if a good faith
proposal regarding a business combination is made in writing.
Covered business combinations include certain mergers and consolidations,
dispositions of assets or stock, plans for liquidation or dissolution,
reclassifications of securities, recapitalizations and similar transactions. An
interested stockholder is generally a stockholder owning at least 20% of a
corporation's outstanding voting stock.
In addition, New York corporations may not engage at any time with any
interested stockholder in a business combination other than:
- a business combination approved by the board of directors prior to the
stock acquisition, or where the acquisition of the stock had been
approved by the board of directors prior to the stock acquisition,
- a business combination approved by the affirmative vote of the holders of
a majority of the outstanding voting stock not beneficially owned by the
interested stockholder at a meeting for that purpose no earlier than five
years after the stock acquisition, or
- a business combination in which the interested stockholder pays a formula
price designed to ensure that all other stockholders receive at least the
highest price per share paid by the interested stockholder and that meets
certain other requirements.
Phelps Dodge is governed by the NYBCL, as described above. Phelps Dodge's
charter does not contain a provision regarding transactions with interested
stockholders.
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ASARCO AND CYPRUS AMAX INFORMATION
While we have included in this prospectus information concerning Asarco and
Cyprus Amax that is known to us based on publicly available information
(primarily filings by Asarco and Cyprus Amax with the SEC), we are not
affiliated with Asarco or Cyprus Amax and neither Asarco nor Cyprus Amax has
permitted us to have access to their books and records. Therefore, non-public
information concerning Asarco or Cyprus Amax was not available to us for the
purpose of preparing this prospectus. Although we have no knowledge that would
indicate that statements relating to Asarco or Cyprus Amax contained or
incorporated by reference in this prospectus are inaccurate or incomplete, we
were not involved in the preparation of those statements and cannot verify them.
Pursuant to rule 409 under the Securities Act of 1933 and rule 12b-21 under
the Securities Exchange Act of 1934, we are requesting that Asarco and Cyprus
Amax provide us with information required for complete disclosure regarding the
businesses, operations, financial condition and management of Asarco and Cyprus
Amax. We will amend or supplement this prospectus to provide any and all
information we receive from Asarco or Cyprus Amax, if we receive the information
before our offer expires and we consider it to be material, reliable and
appropriate. In addition, pursuant to rule 439 under the Securities Act, we are
requesting that PricewaterhouseCoopers LLP, the independent accountants of both
Asarco and Cyprus Amax, provide us with the consents required for us to
incorporate by reference into this prospectus the PricewaterhouseCoopers audit
reports included in Asarco's and Cyprus Amax's Annual Reports on Form 10-K for
the year ended December 31, 1998. If we receive those consents, we will promptly
file them as exhibits to our registration statement.
FORWARD-LOOKING INFORMATION
The U.S. securities laws provide a "safe harbor" for certain
forward-looking statements. This prospectus contains forward-looking statements,
including statements concerning the business, future financial position, results
of operations, business strategy, estimated cost savings and other benefits of
our proposed business combination, plans as to dividends and plans and
objectives of management for future operations of Phelps Dodge, Asarco and
Cyprus Amax. Forward-looking statements can be found, among other places, under
"The Proposed Combination," "Reasons for the Proposed Combination," "Background
of the Offer" and "Unaudited Pro Forma Combined Financial Information."
Generally, the words "will," "may," "should," "continue," "believes," "expects,"
"anticipates" or similar expressions identify forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those projected.
Statements regarding the expected benefits of our proposed business
combination with Asarco and Cyprus Amax, the expected commencement dates of
operations, projected quantities of future production, capital costs, production
rates and other operating and financial data are based on expectations that
Phelps Dodge believes are reasonable, but we can give no assurance that such
expectations will prove to have been correct. Factors that could cause actual
results to differ materially include, among others:
- risks and uncertainties relating to the timing of completion of the
proposed Phelps Dodge/Asarco/ Cyprus Amax business combination;
- the possibility that we will be unable to realize the expected cost
savings and other benefits from the combination,
- difficulties related to the integration of the businesses of Phelps
Dodge, Asarco and Cyprus Amax,
- the possibility that Phelps Dodge will not be able to combine with both
Asarco and Cyprus Amax,
- general U.S. and international economic, financial market and political
conditions,
- political and economic risks associated with operations outside the U.S.,
- the cyclical and volatile price of copper and other metals,
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<PAGE> 120
- unanticipated ground, water, weather or operating conditions or force
majeure events,
- unanticipated ore grade and geological problems or metallurgical and
other processing problems,
- delays in the receipt of or failure to receive necessary government
permits,
- changes in laws or regulations or the interpretation and enforcement
thereof,
- labor relations and accidents, and
- environmental risks.
These and other risk factors are discussed in more detail in this prospectus.
See "Risk Factors" beginning on page 6. Many such factors are beyond our ability
to control or predict. Readers are cautioned not to put undue reliance on
forward-looking statements. We disclaim any intent or obligation to update these
forward-looking statements, whether as a result of new information, future
events or otherwise.
LEGAL MATTERS
The validity of the Phelps Dodge common shares offered hereby will be
passed upon for Phelps Dodge by Debevoise & Plimpton, 875 Third Avenue, New
York, New York.
EXPERTS
The audited consolidated financial statements of Phelps Dodge incorporated
by reference in this Prospectus have been audited by PricewaterhouseCoopers LLP,
independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in auditing and accounting.
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<PAGE> 121
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF PHELPS DODGE CORPORATION
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
Phelps Dodge Corporation are set forth below. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Phelps Dodge and each individual has held such occupation for at least the last
five years. Each director and executive officer listed below is a citizen of the
United States.
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Archie W. Dunham Mr. Dunham has been a Phelps Dodge director since
Conoco, Inc. 1998. He has been Chairman of the Board of Conoco,
600 North Dairy Hartford Road Inc. (integrated energy company) since 1999 and
Houston, TX 77079-1175 President and Chief Executive Officer since January
1996. He was an Executive Vice President of E.I.
duPont de Nemours and Company (chemical materials
and energy company), Conoco's former parent, from
1995 to October 1998. He was a Senior Vice
President -- DuPont Polymers and DuPont Chemicals
and Pigments from 1987 to 1992, and an Executive
Vice President -- Exploration Production of Conoco
from 1992 to 1995. Mr. Dunham is a director of
Conoco Inc. and Louisiana Pacific Corporation. Age
60.
William A. Franke Mr. Franke has been a Phelps Dodge director since
Franke & Company, Inc. 1980. He has been Chairman and Chief Executive
2525 E. Camelback Road Officer of America West Holdings Corporation since
Suite 800 February 1997 and Chairman of the Board of its
Phoenix, AZ 85016 principal subsidiary, America West Airlines, Inc.
(airline carrier) since 1992. He was the
subsidiary's Chief Executive Officer from December
1993 until February 1997, and its President from
May 1996 until February 1997. He has been President
of Franke & Company, Inc., Phoenix, Arizona, an
investment firm, since 1987. He is a director of
America West Holdings Corporation, America West
Airlines, Inc., Central Newspapers, Inc., Beringer
Wine Estates, Mtel Latin America, Inc., AerFi Group
Plc, and the Air Transport Association of America.
Age 62.
Southwood J. Morcott Mr. Morcott has been a Phelps Dodge director since
Dana Corporation 1991. He has been Chairman of the Board of Dana
4500 Dort St. Corporation (manufacturer and distributor of
Toledo, OH 43615 automotive and vehicular parts) since 1990. From
1987 to 1995, he served as Chairman of Hayes-Dana
Inc. He was Chief Executive Officer of Dana
Corporation from 1989 until February 1999, and
Chief Operating Officer from 1986 until January
1997. He was President of Dana Corporation from
1986 to 1995. Mr. Morcott is a director of Dana
Corporation, CSX Corporation and Johnson Controls,
Inc. Age 61.
</TABLE>
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<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
J. Steven Whisler Mr. Whisler has been a Phelps Dodge director since
Phelps Dodge Corporation 1995 and has been Phelps Dodge's President and
2600 North Central Avenue Chief Operating Officer since December 1997, and
Phoenix, AZ 85004-3104 President of Phelps Dodge Mining Company, a
division of Phelps Dodge, from 1991 to October
1998. He was a Senior Vice President of Phelps
Dodge from 1988 to December 1997 and Vice President
of Phelps Dodge from 1987 until 1988. He was
General Counsel of Phelps Dodge from 1987 until
1991. He is a director of Burlington Northern Santa
Fe Corporation and Southern Peru Copper
Corporation. Age 44.
Robert N. Burt Mr. Burt has been a Phelps Dodge director since
FMC Corporation 1993. He has been Chairman of the Board and Chief
200 East Randolph Drive Executive Officer of FMC Corporation (chemicals and
Chicago, IL 60601 machinery for industry, agriculture and government)
since 1991. He is a director of FMC Corporation and
Warner-Lambert Company. Age 61.
Robert D. Krebs Mr. Krebs has been a Phelps Dodge director since
Burlington Northern Santa Fe Corporation 1987. He has been Chairman and Chief Executive
2650 Lou Menk Drive Officer of Burlington Northern Santa Fe Corporation
Fort Worth, TX 76131-2830 (transportation) since June 1, 1999. From April
1997 to May 31, 1999, he was Chairman, President
and Chief Executive Officer of Burlington Northern
Santa Fe Corporation. From September 1995 to April
1997, he was President and Chief Executive Officer
of Burlington Northern Santa Fe Corporation. From
June 1988 to January 1998, he was Chairman,
President and CEO of Santa Fe Pacific Corporation.
He is a director of Burlington Northern Santa Fe
Corporation. Age 57.
Douglas C. Yearley Mr. Yearley has been a Phelps Dodge director since
Phelps Dodge Corporation 1986 and has been Phelps Dodge's Chairman of the
2600 North Central Avenue Board and Chief Executive Officer since 1989. He
Phoenix, AZ 85004-3014 was President of Phelps Dodge from 1991 until
December 1997. He was President of Phelps Dodge
Industries, a division of Phelps Dodge, from 1988
until 1990, Executive Vice President of Phelps
Dodge from 1987 until 1989 and Senior Vice
President of Phelps Dodge from 1982 through 1986.
He is a director of J. P. Morgan & Co.,
Incorporated and its principal banking subsidiary,
Morgan Guaranty Trust Company of New York, Lockheed
Martin Corporation, USX Corporation and Southern
Peru Copper Corporation. Age 63.
</TABLE>
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<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Paul Hazen Mr. Hazen has been a Phelps Dodge director since
Wells Fargo Bank 1988. He has been Chairman of Wells Fargo & Co.
420 Montgomery Street since November 1998. He was Chairman and Chief
San Francisco, CA 94104 Executive Officer of Wells Fargo & Co., San
Francisco (bank holding company) and of Wells Fargo
Bank, N.A. (national banking association) from
January 1995 until November 1998. He was President
of Wells Fargo & Co. and of Wells Fargo Bank, N.A.
from 1984 to 1994. He is a director of Wells Fargo
& Co., Safeway, Inc., Shanghai Commercial Bank
Ltd., Vodaphone AirTouch Plc and E.piphany, Inc.
Age 57.
Manuel J. Iraola Mr. Iraola has been a Phelps Dodge director since
Phelps Dodge Corporation 1997 and has been President of Phelps Dodge
2600 North Central Avenue Industries, a division of Phelps Dodge, since 1995,
Phoenix, AZ 85004-3014 and a Senior Vice President of Phelps Dodge since
1995. From 1992 until 1995 he was President of
Phelps Dodge International Corporation. Age 51.
Marie L. Knowles Mrs. Knowles has been a Phelps Dodge director since
ARCO 1994. She has been Executive Vice President and
333 South Hope Street Chief Financial Officer of Atlantic Richfield
Los Angeles, CA 90071 Company (diversified energy company) since 1996.
From 1993 until 1996 she was Senior Vice President
of Atlantic Richfield Company, and President of
ARCO Transportation Company, a former subsidiary of
Atlantic Richfield Company. From 1990 to 1993 she
was Vice President and Controller of Atlantic
Richfield Company. Mrs. Knowles is a director of
Vastar Resources, Inc., URS Corporation and America
West Holdings Corporation. Age 53.
Gordon R. Parker Mr. Parker has been a Phelps Dodge director since
10101 East Dry Creek Road 1995. He was Chairman of Newmont Mining Corporation
Englewood, CO 80112 from 1986 until his retirement in 1994. He was
Chief Executive Officer from 1985 until 1993. Mr.
Parker is a director of Caterpillar, Inc., Gold
Fields of South Africa, Gold Fields Limited and The
Williams Companies, Inc. Age 63.
Ramiro G. Peru Mr. Peru has been Chief Financial Officer of Phelps
Phelps Dodge Corporation Dodge since May 1999 and has been a Senior Vice
2600 North Central Avenue President since 1997. He previously was appointed
Phoenix, AZ 85004-3014 Vice President of Phelps Dodge Mining Company in
1993 and Vice President and Treasurer of Phelps
Dodge in 1995.
</TABLE>
A-3
<PAGE> 124
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Timothy R. Snider Mr. Snider has been a Senior Vice President of
Phelps Dodge Corporation Phelps Dodge since 1998. He is also President of
2600 North Central Avenue Phelps Dodge Mining Company. Before becoming Senior
Phoenix, AZ 85004-3014 Vice President, he was a Vice President of Phelps
Dodge, a position he held since 1997. Prior to that
time, he was Vice President, Arizona operations, of
Phelps Dodge Mining Company. He previously served
as President of Phelps Dodge Morenci, Inc.
David L. Pulatie Mr. Pulatie joined Phelps Dodge as Senior Vice
Phelps Dodge Corporation President -- Human Resources in March 1999. Before
2600 North Central Avenue that, he was a Senior Vice President of Motorola
Phoenix, AZ 85004-3014 Inc.
S. David Colton Mr. Colton has been Vice President and General
Phelps Dodge Corporation Counsel of Phelps Dodge since April 1998. Before
2600 North Central Avenue that, he was Vice President and Counsel for Phelps
Phoenix, AZ 85004-3014 Dodge Exploration, a position he held since 1995.
Prior to that time he was Senior Exploration
Counsel for the exploration and development group
of Phelps Dodge Morenci, Inc.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF AAV CORPORATION
The present directors and executive officers of AAV Corporation are set
forth below, along with their respective positions with AAV. Each of these
individuals is an executive officer of Phelps Dodge Corporation. Further
information concerning each of them is set forth above.
<TABLE>
<S> <C>
Douglas C. Yearley Director and Chairman
J. Steven Whisler Director and President
Ramiro G. Peru Director, Vice President and Treasurer
S. David Colton Director, Vice President and Secretary
</TABLE>
A-4
<PAGE> 125
SCHEDULE B
ADDITIONAL INFORMATION REGARDING PHELPS
DODGE CORPORATION'S EXPLORATION AND MINING PROPERTIES
PD MINING -- EXPLORATION & DEVELOPMENT
Our exploration group's primary objectives are to increase copper reserves
through discoveries, acquisitions and joint ventures and, where appropriate, to
diversify into other metals, minerals and geographic areas. This group operates
in more than 30 countries and maintains offices in Australia, Austria, Brazil,
Canada, Chile, Eritrea, India, Indonesia, Madagascar, Mexico, Peru, the
Philippines, South Africa, the United States and Zambia.
The 1998 exploration program continued to place emphasis on the search for
and delineation of large scale copper, gold and other base metal deposits. We
expended $42.0 million on worldwide exploration during 1998, compared with $74.1
million in 1997 and $70.7 million in 1996. Approximately 26 percent of the 1998
expenditures occurred in the United States with 19 percent being spent at our
mine sites. This compares with 33 percent in 1997 (23 percent at mine sites) and
47 percent in 1996 (33 percent at mine sites). The balance of exploration
expenditures was spent principally in Australasia, Brazil, Canada, Chile,
Mexico, Peru and Madagascar.
During 1998, exploration efforts continued at our existing copper
operations. In New Mexico, additional mine-for-leach reserves were delineated in
the Tyrone area.
On May 7, 1997, we announced plans to resume production at our Ajo copper
mine in southern Arizona where mining operations have been suspended since 1984.
Environmental permitting is continuing while the project is on hold pending an
improvement in market conditions.
Environmental permitting is in progress to advance the development of our
Dos Pobres and San Juan deposits in the Safford District in eastern Arizona. The
Dos Pobres deposit contains a total of 286 million tons of leach material with a
grade of 0.39 percent copper. The San Juan deposit contains 272 million tons of
leach material with a grade of 0.28 percent copper. Additionally, the Dos Pobres
deposit contains 330 million tons of concentrator material with a grade of 0.65
percent copper.
Internationally, our explorations group completed a feasibility study on
the Ambatovy nickel/cobalt deposit in central Madagascar. Detailed drilling in
the district, which is located 80 kilometers east of the capital city of
Antananarivo, defined mineralized material of 210 million tons at 1.1 percent
nickel and 0.1 percent cobalt. Acid consumption by the ore is low, and the ore
is amenable to high pressure acid leach extraction for nickel and cobalt. The
feasibility study indicated there was a need for the price of nickel to increase
to make the project economical.
We completed a pre-feasibility study on our 70 percent-owned Piedras Verdes
property in Sonora, Mexico, in 1998. Results indicated leachable mineralized
material of 310 million tons at 0.37 percent copper. Metallurgical testwork is
continuing.
In 1998, we formed a Brazilian joint venture company with Companhia Vale do
Rio Doce (CVRD) under the name Mineracao Serra do Sossego S.A. (Sossego). The
venture agreement required us to spend approximately $4.5 million on exploration
and related activities in order to earn a 50 percent share in the venture.
Having completed our earn-in, the mineral rights and all initial investments
were transferred into the new company in December 1998. The deposit contains an
estimated 200 million tons at 1.2 percent copper with 0.31 grams of gold per
ton. Sossego is starting the necessary work to develop a pre-feasibility study
to further define the mineralized material and determine the viability of the
project.
B-1
<PAGE> 126
ORE RESERVES
Ore reserves at each of our active copper operations and at Safford, Ajo,
Ojos del Salado and Cobre have been estimated as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED AT DECEMBER 31, 1998 ESTIMATED AT DECEMBER 31, 1997
---------------------------------------------- -----------------------------------------------
MILLING LEACHING MILLING LEACHING
RESERVES RESERVES PHELPS RESERVES RESERVES PHELPS
---------------- ---------------- DODGE ---------------- ----------------- DODGE
MILLION % MILLION % INTEREST MILLION % MILLION % INTEREST
TONS COPPER TONS COPPER (%) TONS COPPER TONS COPPER (%)
------- ------ ------- ------ -------- ------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Morenci.................. 475.8 0.63 2,076.9 0.22 85.0 543.3 0.68 1,628.1 0.26 85.0
Chino.................... 350.3 0.62 483.0 0.30 66.7 368.9 0.62 520.8 0.30 66.7
Tyrone................... - - 466.3 0.32 100.0 - - 455.0 0.34 100.0
Cobre.................... 133.6 0.73 98.0 0.35 100.0 N/A N/A N/A N/A -
Candelaria*.............. 456.1 0.85 - - 80.0 475.8 0.88 - - 80.0
Safford**................ 330.0 0.65 558.2 0.34 100.0 330.0 0.65 285.0 0.39 100.0
Ajo...................... 150.0 0.56 - - 100.0 150.0 0.56 - - 100.0
Ojos del Salado*......... 18.7 1.32 - - 100.0 19.7 1.32 - - 100.0
</TABLE>
- ---------------
* The Candelaria and Ojos del Salado deposits also contained, respectively,
0.006 ounces and 0.008 ounces of gold per ton in 1998 and 1997.
** Safford deposit includes Dos Pobres and San Juan reserves in 1998 and Dos
Pobres reserves in 1997.
- --------------------------------------------------------------------------------
Our estimated share of aggregate ore reserves at the above named properties
at December 31 is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Milling reserves (billion tons)............................. 1.6 1.6 1.3 1.2 1.0
Leaching reserves (billion tons)............................ 3.2 2.5 2.2 1.8 1.7
Commercially recoverable copper (million tons).............. 14.5 13.7 12.1 12.3 10.6
</TABLE>
- --------------------------------------------------------------------------------
Ore reserves are those estimated quantities of ore that may be profitably
mined and processed for extraction of their constituent values. Estimates of our
reserves are based upon our engineering evaluations of assay values derived from
samplings of drill holes and other openings. In our opinion, the sites for such
samplings are spaced sufficiently close and the geologic characteristics of the
deposits are sufficiently well defined to render the estimates reliable. Stated
tonnages and grades of ore do not reflect waste dilution in mining or losses in
processing. Leaching reserves include copper estimated to be recoverable from
leach reserves remaining to be mined at Morenci, Chino, Tyrone, Cobre and
Safford. Commercially recoverable copper includes copper estimated to be
recoverable from milling and leaching reserves and from existing stockpiles of
leach material at Morenci, Chino, Tyrone, Cobre and Safford after taking into
consideration waste dilution and losses in processing.
B-2
<PAGE> 127
Ore reserves at each of our other mining operations and investments at
year-end 1998 are estimated as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORE PHELPS
RESERVES % DODGE
MILLION % CALCIUM INTEREST
TONS COPPER FLUORIDE (%)
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Southern Peru Copper Corporation*........................... 1.695.9 0.67 -- 13.9
Phelps Dodge Mining Limited................................. 27.9 -- 16.45 100.0
</TABLE>
- ---------------
* Southern Peru Copper Corporation deposits also contain approximately 790
million tons of leach material at a grade of 0.22 percent copper.
- --------------------------------------------------------------------------------
We hold various other properties containing mineral deposits that we
believe could be brought into production should market conditions warrant.
Permitting and significant capital expenditures would be required before
operations could commence at these properties. The deposits are estimated to
contain the following mineralized material as of December 31, 1998:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SULFIDE MATERIAL LEACH MATERIAL PHELPS
---------------- ------------------------- DODGE
MILLION % MILLION % % INTEREST
LOCATION TONS COPPER TONS COPPER NICKEL (%)
---------- ------- ------ ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
American Mountain........................ Arizona -- -- 140 0.25 -- 85.0
Cochise.................................. Arizona -- -- 210 0.40 -- 100.0
Copper Basin............................. Arizona 70 0.53 -- -- -- 100.0
Garfield................................. Arizona -- -- 1,000 0.27 -- 85.0
Lone Star................................ Arizona -- -- 1,600 0.38 -- 100.0
Sanchez.................................. Arizona -- -- 230 0.29 -- 100.0
Western Copper........................... Arizona 530 0.55 500 0.31 -- 85.0
Piedras Verdes........................... Mexico -- -- 310 0.37 -- 70.0
Southern Peru Copper Corporation......... Peru 370 0.62 -- -- -- 13.9
Ambatovy*................................ Madagascar -- -- 210 -- 1.10 100.0
</TABLE>
- ---------------
* Ambatovy deposit also contains 0.10 percent cobalt.
** Mineralized deposit or mineralized material is a mineralized body which has
been delineated by appropriately spaced drilling and/or underground sampling
to support a sufficient tonnage and average grade of metal(s). Such a deposit
does not qualify as a reserve, until comprehensive evaluation based upon unit
cost, grade, recoveries, and other material factors conclude legal and
economic feasibility.
- --------------------------------------------------------------------------------
B-3
<PAGE> 128
The letter of transmittal, certificates for Asarco shares and any other
required documents should be sent or delivered by each Asarco shareholder or his
or her broker, dealer, commercial bank, trust company or other nominee to the
Exchange Agent at one of its addresses set forth below.
The Exchange Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13 (th) Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Stop-Reorg
Ridgefield Park, NJ 07660
By Facsimile:
(for eligible institutions
only)
Fax: (201) 296-4293
</TABLE>
Confirm Facsimile by Telephone ONLY:
(201) 296-4860
Any questions or requests for assistance or additional copies of the
prospectus, the letter of transmittal and the notice of guaranteed delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your local
broker, commercial bank, trust company or nominee for assistance concerning the
offer.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20(th) Floor
New York, NY 10022
CALL TOLL-FREE: 1-877-750-5838
Banks and Brokers Call Collect: (212) 750-5833
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
1585 Broadway
New York, NY 10036
(212) 761-4000
<PAGE> 1
LETTER OF ELECTION AND TRANSMITTAL
TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
ASARCO INCORPORATED
FOR 0.50266 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $29.50 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED
IN THE PROSPECTUS AND THIS LETTER OF ELECTION AND TRANSMITTAL
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 21, 1999, UNLESS THE OFFER IS EXTENDED.
The Exchange Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13(th) Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Stop-Reorg
Ridgefield Park, NJ 07660
By Facsimile Transmission:
(for Eligible Institutions only)
Fax: (201) 296-4293
Confirm by Telephone:
(201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF ELECTION AND TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE
TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
YOU MUST SIGN THIS LETTER OF ELECTION AND TRANSMITTAL WHERE INDICATED BELOW AND
COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF ELECTION AND TRANSMITTAL
SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF ELECTION AND TRANSMITTAL IS
COMPLETED.
This Letter of Election and Transmittal is to be completed by shareholders
if certificates for Asarco Shares (including the Asarco Rights) (as each is
defined herein) are to be forwarded herewith or, unless an Agent's Message is
utilized, if delivery of Asarco Shares are to be made by book-entry transfer to
the account maintained by the Exchange Agent at The Depository Trust Company
(the "Book-Entry Transfer Facility"), pursuant to the procedures set forth under
"The Offer -- Procedure for Tendering" in the Prospectus. SHAREHOLDERS WILL BE
REQUIRED TO TENDER ONE ASARCO RIGHT FOR EACH ASARCO SHARE TENDERED IN ORDER TO
EFFECT A VALID TENDER OF ASARCO SHARES. UNLESS THE ASARCO DISTRIBUTION DATE (AS
DEFINED IN THE PROSPECTUS) OCCURS, A TENDER OF ASARCO SHARES WILL CONSTITUTE A
TENDER OF THE ASSOCIATED ASARCO RIGHTS. Shareholders who tender Asarco Shares by
book-entry transfer are referred to herein as "Book-Entry Shareholders" and
other shareholders are referred to herein as "Certificate Shareholders."
Shareholders whose certificates are not immediately available or who cannot
deliver their certificates and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date (as defined in the
Prospectus), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Asarco Shares according to the
guaranteed delivery procedures set forth under "The Offer -- Procedure for
Tendering" in the Prospectus. See Instruction 2. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT
FOR THIS OFFER (AS DEFINED HEREIN).
<PAGE> 2
BOX A: ELECTION
(SEE GENERAL INSTRUCTIONS 2, 12 AND 13)
Please list the number of Asarco Shares for which you wish to make the following
elections:
- ---------------
Number of Asarco Shares for which you are electing to receive cash:
- ---------------
Number of Asarco Shares for which you are electing to receive Phelps Dodge
Common Stock:
- ---------------
*Number of Asarco Shares for which you are not making any election:
- ---------------
Total Number of Asarco Shares held by you:
- ---------------
* If you previously tendered your shares pursuant to the Prospectus dated
September 2, 1999, you will be deemed not to have made an election. Such
shareholders must properly withdraw and re-tender their shares in order to
make an election. If you tendered your shares pursuant to our amended offer
(Prospectus dated September 22, 1999), you need not take any further
action, unless you wish to make or change any cash or stock election.
[ ] CHECK HERE IF ASARCO SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
----------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
---------------------------------------------------------------------------
[ ] CHECK HERE IF ASARCO SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE ACT WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
DTC Account Number
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF ASARCO SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) ASARCO SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
ASARCO SHARES
CERTIFICATE EVIDENCED BY ASARCO SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Asarco Shares
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Asarco Shares evidenced by a certificate(s) delivered to the
Exchange Agent are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby delivers to AAV Corporation, a Delaware corporation,
and a wholly owned subsidiary of Phelps Dodge Corporation, a New York
corporation ("Phelps Dodge"), the above-described shares of common stock, no par
value (each, an "Asarco Share" and, collectively, the "Asarco Shares"), of
ASARCO Incorporated, a New Jersey corporation ("Asarco"), including the
associated preferred share purchase rights (each, an "Asarco Right" and,
collectively, the "Asarco Rights") issued pursuant to the Rights Agreement,
dated as of January 28, 1998, as amended, between Asarco and The Bank of New
York, as Rights Agent, pursuant to Phelps Dodge's offer to exchange 0.25133120
shares of common stock, par value $6.25 per share, of Phelps Dodge (the "Phelps
Dodge Common Shares") plus $14.75 net to the seller in cash for each outstanding
Asarco Share, on a fully prorated basis, subject, in each case to the election
and allocation procedures and upon the terms and subject to the conditions set
forth in the Prospectus dated October 7, 1999 (the "Prospectus"), receipt of
which is hereby acknowledged, and in this Letter of Election and Transmittal
(which together with the Prospectus constitutes the "Offer"). The undersigned
elects to have each such Asarco Shares converted pursuant to one or more of the
following three election options, in the manner indicated in Box A above:
(A) CASH ELECTION: The right to receive cash equal to $29.50;
(B) STOCK ELECTION: The right to receive 0.50266 Phelps Dodge shares; or
(C) NO ELECTION: The right not to make any election.
Unless the context otherwise requires and unless and until the Asarco Rights are
redeemed, all references to Asarco Shares shall include the associated Asarco
Rights.
Upon the terms and subject to the conditions of the Offer, subject to, and
effective upon, acceptance of the Asarco Shares tendered herewith in accordance
with the terms of the Offer, the undersigned hereby sells, assigns and transfers
to, or upon the order of, Phelps Dodge, all right, title and interest in and to
all of the Asarco Shares that are being tendered hereby and any and all Asarco
Shares and other securities issued or issuable in respect thereof on or after
September 2, 1999 (collectively, "Distributions"), and appoints the Exchange
Agent the true and lawful agent and attorney-in-fact of the undersigned with
respect to such Asarco Shares (and any Distributions), (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver such Asarco Share Certificates (as defined herein) (and any
Distributions) or transfer ownership of such Asarco Shares (and any
Distributions) on the account books maintained by a Book-Entry Transfer
Facility, together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Phelps Dodge, (b) present
such Asarco Shares (and any Distributions) for transfer on the books of Asarco
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Asarco Shares (and any Distributions), all in accordance with
the terms and the conditions of the Offer.
THE UNDERSIGNED UNDERSTANDS THAT STOCKHOLDERS WILL BE REQUIRED TO TENDER
ONE ASARCO RIGHT FOR EACH ASARCO SHARE TENDERED IN ORDER TO EFFECT A VALID
TENDER OF ASARCO SHARES. UNLESS THE ASARCO DISTRIBUTION DATE (AS DEFINED IN THE
PROSPECTUS) OCCURS, A TENDER OF ASARCO SHARES WILL CONSTITUTE A TENDER OF THE
ASSOCIATED ASARCO RIGHTS. SEE INSTRUCTION 10.
The undersigned hereby irrevocably appoints the designees of Phelps Dodge,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or any substitute thereof shall deem proper in the sole discretion of
such attorney-in-fact and proxy or such substitute, and otherwise act (including
pursuant to written consent) with respect to all of the Asarco Shares tendered
hereby (and any Distributions) which have been accepted by Phelps Dodge prior to
the time of such vote or action, which the undersigned is entitled to vote at
any meeting of shareholders (whether annual or special and whether or not an
adjourned meeting), of Asarco or otherwise. This proxy and power of attorney is
coupled with an interest in the Asarco Shares and is irrevocable and is granted
in consideration of, and is effective upon, the acceptance of such Asarco Shares
(and any Distributions) by Phelps Dodge in accordance with the terms of the
Offer. Such acceptance for exchange shall revoke any other proxy granted by the
undersigned at any time with respect to such Asarco Shares (and any
Distributions) and no subsequent proxies will be given (or, if given, will not
be deemed effective) with respect thereto by the undersigned. The undersigned
understands that, in order for Asarco Shares to be deemed validly tendered
immediately upon Phelps Dodge's acceptance of such Asarco Shares (and any
Distributions) for exchange, Phelps Dodge or its designee must be able to
exercise full voting rights with respect to such Asarco Shares (and any
Distributions).
The undersigned understands that each election is subject to certain terms,
conditions and limitations that have been set forth in the Prospectus.
<PAGE> 4
The undersigned acknowledges that the Offer provides for proration if, as a
result of elections made by Asarco shareholders, either the fixed amount of cash
or aggregate number of Phelps Dodge Common Shares would otherwise be exceeded.
In such a case, the undersigned understands that the undersigned may receive a
combination of cash and Phelps Dodge Common Shares that differs from the
election(s) made in Box A.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Asarco Shares
(and any Distributions) tendered hereby and that when the same are accepted for
exchange by Phelps Dodge, Phelps Dodge will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or Phelps Dodge to be necessary or desirable to
complete the sale, assignment and transfer of the Asarco Shares (and any
Distributions) tendered hereby. In addition, the undersigned shall promptly
remit and transfer to the Exchange Agent for the account of Phelps Dodge any and
all Distributions in respect of the Asarco Shares tendered hereby, accompanied
by appropriate documentation of transfer.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successor and assigns of the undersigned. Subject to
the withdrawal rights set forth under "The Offer -- Withdrawal Rights" in the
Prospectus, the tender of Asarco Shares hereby made is irrevocable.
The undersigned understands that tenders of Asarco Shares pursuant to any
one of the procedures described under "The Offer -- Procedure for Tendering" in
the Prospectus and in the instructions hereto and acceptance of such Asarco
Shares will constitute a binding agreement between the undersigned and Phelps
Dodge upon the terms and subject to the conditions set forth in the Offer.
Unless otherwise indicated herein under "Special Issuance Instructions,"
please issue the shares of Phelps Dodge Common Shares and/or a check for cash,
and/or return any certificates for Asarco Shares not tendered or not accepted
for exchange in the name(s) of the registered holder(s) appearing above under
"Description of Asarco Shares Tendered." Similarly, unless otherwise indicated
under "Special Delivery Instructions," please mail the Phelps Dodge Common
Shares and/or a check for cash and cash in lieu of fractional Phelps Dodge
Common Shares and/or return any certificates for Asarco Shares not tendered or
not accepted for exchange (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing above under "Description of
Asarco Shares Tendered." In the event that both the Special Delivery
Instructions and the Special Issuance Instructions are completed, please issue
the Phelps Dodge Common Shares and/or a check for cash, and/or issue any
certificates for Asarco Shares not so tendered or accepted in the name of, and
deliver said certificates and/or return such certificates to, the person or
persons so indicated. The undersigned recognizes that Phelps Dodge has no
obligation to transfer any Asarco Shares from the name of the registered holder
thereof if Phelps Dodge does not accept any of the Asarco Shares so tendered.
<PAGE> 5
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Asarco Shares not tendered
or not accepted and/or the Phelps Dodge Common Shares, cash, or a
combination of cash and Phelps Dodge Common Shares are to be issued in the
name of someone other than the undersigned.
Issue Phelps Dodge Common Shares, cash, or a combination of cash and
Phelps Dodge Common Shares and/or certificate(s) to:
Name
----------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Asarco Shares not tendered
or not accepted and/or the Phelps Dodge Common Shares, cash, or a
combination of cash and Phelps Dodge Common Shares are to be sent to
someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail Phelps Dodge Common Shares, cash, or a combination of cash and Phelps
Dodge Common Shares and/or certificate(s) to:
Name
----------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE
------------------------------------------------------------
<PAGE> 6
IMPORTANT
SHAREHOLDERS SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated: , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted
herewith. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Name(s):
----------------------------------------------------------------------
----------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-----------------------------------------------
Tax Identification or Social Security No.:
-------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY ELIGIBLE INSTITUTIONS ONLY,
PLACE MEDALLION GUARANTEE IN SPACE BELOW
Authorized Signature:
----------------------------------------------------------
Name:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Name of Firm:
-----------------------------------------------------------------
Area Code and Telephone Number:
-----------------------------------------------
Dated:
--------------------------- , 1999
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Election and Transmittal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on
this Letter of Election and Transmittal need not be guaranteed (i) if this
Letter of Election and Transmittal is signed by the registered holder(s) of the
Asarco Shares (which term, for purposes of this document, shall include any
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Asarco Shares) tendered herewith and such
holder(s) have not completed the instruction entitled "Special Issuance
Instructions" on this Letter of Election and Transmittal or (ii) if such Asarco
Shares are tendered for the account of an Eligible Institution. See Instruction
5.
2. DELIVERY OF LETTER OF ELECTION AND TRANSMITTAL AND CERTIFICATES OR
BOOK-ENTRY CONFIRMATIONS. This Letter of Election and Transmittal is to be used
either if certificates are to be forwarded herewith or, unless an Agent's
Message is utilized, if tenders are to be made pursuant to the procedures for
tender by book-entry transfer set forth in "The Offer -- Procedure for
Tendering" in the Prospectus. Certificates for all physically tendered Asarco
Shares ("Asarco Share Certificates"), or confirmation of any book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility of Asarco
Shares tendered by book-entry transfer ("Book-Entry Confirmation"), as well as
this Letter of Election and Transmittal or facsimile thereof, properly completed
and duly executed with any required signature guarantees, and any other
documents required by this Letter of Election and Transmittal, must be received
by the Exchange Agent at one of its addresses set forth herein on or prior to
the Expiration Date (as defined in the Prospectus).
Shareholders whose certificates are not immediately available or who cannot
deliver their certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date or who cannot complete the procedures
for book-entry transfer on a timely basis may nevertheless tender their Asarco
Shares by properly completing and duly executing a Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedures set forth under "The Offer --
Procedure for Tendering" in the Prospectus. Pursuant to such procedures: (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form made available by Phelps Dodge must be received by the Exchange Agent on or
prior to the Expiration Date; and (iii) the Asarco Share Certificates for all
tendered Asarco Shares (or a Book-Entry Confirmation), in proper form for
transfer, together with a properly completed and duly executed Letter of
Election and Transmittal (or facsimile thereof) with any required signature
guarantees (or, in the case of a book-entry delivery, an Agent's Message) and
all other documents required by this Letter of Election and Transmittal, must be
received by the Exchange Agent within three New York Stock Exchange, Inc.
trading days after the date of execution of such Notice of Guaranteed Delivery.
IF ASARCO SHARE CERTIFICATES ARE FORWARDED SEPARATELY TO THE EXCHANGE
AGENT, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF ELECTION AND TRANSMITTAL
MUST ACCOMPANY EACH SUCH DELIVERY.
THE METHOD OF DELIVERY OF ASARCO SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, condition or contingent tenders will be accepted and no
fractional Asarco Shares will be accepted. All tendering shareholders, by
execution of this Letter of Election and Transmittal (or facsimile thereof),
waive any right to receive any notice of the acceptance of their Asarco Shares
for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Asarco Shares should be listed on a
separate schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Asarco Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Asarco Shares which are to
be tendered in the box entitled "Number of Asarco Shares Tendered." In such
cases, new certificate(s) for the remainder of the Asarco Shares that were
evidenced by your old certificate(s) will be sent to you, unless otherwise
provided in the appropriate box on this Letter of Election and Transmittal, as
soon as practicable after the Expiration Date. All Asarco Shares represented by
certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
<PAGE> 8
5. SIGNATURES ON LETTER OF ELECTION AND TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS. If this Letter of Election and Transmittal is signed by the
registered holder(s) of the Asarco Shares tendered hereby, the signature(s) must
correspond with the name(s) as written on the face of the certificates without
alteration, enlargement or any change whatsoever.
If any of the Asarco Shares tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Election and
Transmittal.
If any of the tendered Asarco Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Election and Transmittal as there are different
registrations of certificates.
If this Letter of Election and Transmittal or any certificates or stock
powers are signed by trustees, executors, administrators, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to Phelps Dodge of their authority so to act must be submitted.
If this Letter of Election and Transmittal is signed by the registered
holder(s) of the Asarco Shares listed and transmitted hereby, no endorsements of
certificates or separate stock powers are required unless Phelps Dodge Common
Share or certificates for Asarco Shares not tendered or accepted are to be
issued in the name of a person other than the registered holder(s). Signatures
on such certificates or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Election and Transmittal is signed by a person other than
the registered holder of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Phelps Dodge will pay or cause to be paid any
stock transfer taxes with respect to the transfer and sale of Asarco Shares to
it or its order pursuant to the Offer. If, however, delivery of the
consideration in respect of the Offer is to be made to, or (in the circumstances
permitted hereby) if certificates for Asarco Shares not tendered or accepted are
to be registered in the name of, any person other than the registered holder, or
if tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Election and Transmittal, the tendering holder
must provide satisfactory evidence of the payment of any applicable transfer
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer to such person prior to the delivery of the
consideration pursuant to the Offer. Except as provided in this Instruction 6,
it will not be necessary for transfer tax stamps to be affixed to the
certificates listed in this Letter of Election and Transmittal.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for Phelps
Dodge Common Shares and/or a check for cash, and/or certificates for Asarco
Shares not tendered or not accepted for exchange are to be issued in the name of
a person other than the person(s) signing this Letter of Election and
Transmittal or if certificates for Phelps Dodge Common Shares and/or a check for
cash, and cash in lieu of fractional Phelps Dodge Common Shares and/or
certificates for Asarco Shares not tendered or not accepted for exchange are to
be mailed to someone other than the person(s) signing this Letter of Election
and Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Election and Transmittal should be completed.
Shareholders tendering Asarco Shares by book-entry transfer may request that
Asarco Shares not accepted pursuant to the Offer be credited to such account
maintained at a Book-Entry Transfer Facility as such stockholder may designate
hereon. If no such instructions are given, such Asarco Shares not accepted will
be returned by crediting the account at the Book-Entry Transfer Facility
designated herein.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Prospectus, this
Letter of Election and Transmittal, the Notice of Guaranteed Delivery and other
exchange offer materials may be obtained from, the Information Agent or the
Dealer Manager at their respective addresses set forth below or from your
broker, dealer, commercial bank or trust company.
<PAGE> 9
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide
the Exchange Agent with a correct Taxpayer Identification Number ("TIN"),
generally the stockholder's social security or federal employer identification
number, on Substitute Form W-9 below. In addition, payments of cash in lieu of
fractional shares of Phelps Dodge Common Shares that are made to such
shareholder with respect to Asarco Shares accepted pursuant to the Offer may be
subject to backup withholding of 31%. The box in Part 3 of the form may be
checked if the tendering shareholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future. If the box in
Part 3 is checked and the Exchange Agent is not provided with a TIN within 60
days, the Exchange Agent must withhold 31% of all payments of cash thereafter
until a TIN is provided to the Exchange Agent. In addition, the Exchange Agent
may backup withhold during the 60 day period under certain circumstances. The
shareholder is required to give the Exchange Agent the social security number or
employer identification number of the record owner of the Asarco Shares or of
the last transferee appearing on the stock powers attached to, or endorsed on,
the Asarco Shares. If the Asarco Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional guidance
on which number to report.
10. TENDER OF ASARCO RIGHTS AFTER ASARCO DISTRIBUTION DATE. If the Asarco
Distribution Date occurs and separate certificates representing the Asarco
Rights are distributed by Asarco or the Rights Agent to holders of Asarco Shares
prior to the time a holder's Asarco Shares are tendered pursuant to the Offer,
certificates representing a number of Asarco Rights equal to the number of
Asarco Shares tendered must be delivered to the Exchange Agent, or, if
available, a Book-Entry Confirmation received by the Exchange Agent with respect
thereto, in order for such Asarco Shares to be validly tendered. If the Asarco
Distribution Date occurs and separate certificates representing the Asarco
Rights are not distributed prior to the time Asarco Shares are tendered pursuant
to the Offer, Asarco Rights may be tendered prior to a stockholder receiving the
certificates for Asarco Rights by use of the guaranteed delivery procedures
described under "The Offer -- Procedure for Tendering" in the Prospectus. If
Asarco Rights certificates are distributed but are not available to a
shareholder prior to the time Asarco Shares are tendered pursuant to the Offer,
a tender of Asarco Shares constitutes an agreement by the tendering shareholder
to deliver to the Exchange Agent pursuant to such guaranteed delivery
procedures, prior to the expiration of the period to be specified in the Notice
of Guaranteed Delivery and the related Letter of Election and Transmittal for
delivery of Asarco Rights certificates or a Book-Entry Confirmation for Asarco
Rights (the "Asarco Rights Delivery Period"), Asarco Rights certificates
representing a number of Asarco Rights equal to the number of Asarco Shares
tendered. Phelps Dodge reserves the right to require that it receive such Asarco
Rights certificates (or a Book-Entry Confirmation with respect to such Asarco
Rights) prior to accepting Asarco Shares for exchange.
Nevertheless, Phelps Dodge will be entitled to accept for exchange Asarco
Shares tendered by a stockholder prior to receipt of the Asarco Rights
certificates required to be tendered with such Asarco Shares or a Book-Entry
Confirmation with respect to such Asarco Rights and either (i) subject to
complying with applicable rules and regulations of the Securities and Exchange
Commission, withhold payment for such Asarco Shares pending receipt of the
Asarco Rights certificates or a Book-Entry Confirmation for such Asarco Rights
or (ii) exchange Asarco Shares accepted for exchange pending receipt of the
Asarco Rights certificates or a Book-Entry Confirmation for such Asarco Rights
in reliance upon the guaranteed delivery procedures. In addition, after
expiration of the Asarco Rights Delivery Period, Phelps Dodge may instead elect
to reject as invalid a tender of Asarco Shares with respect to which Asarco
Rights certificates or a Book-Entry Confirmation for an equal number of Asarco
Rights have not been received by the Exchange Agent. Any determination by Phelps
Dodge to make payment for Asarco Shares in reliance upon such guaranteed
delivery procedure or, after expiration of the Asarco Rights Delivery Period, to
reject a tender as invalid, shall be made, subject to applicable law, in the
sole and absolute discretion of Phelps Dodge.
11. LOST OR DESTROYED CERTIFICATES. If any Asarco Share certificate(s)
representing Asarco Shares has been lost or destroyed, the holders should
promptly notify Asarco's Transfer Agent. The holders will then be instructed as
to the procedure to be followed in order to replace the Asarco Share
certificates. This Letter of Election and Transmittal and related documents
cannot be processed until the procedures for replacing lost or destroyed Asarco
Share certificates have been followed.
12. REVOCATION OR CHANGE OF ELECTION. An election is irrevocable, except
that Asarco Shares tendered pursuant to the Offer may be withdrawn at anytime
prior to the Expiration Date and, unless previously accepted pursuant to the
Offer, may also be withdrawn at any time after November 2, 1999. After an
effective withdrawal you may change your election by submitting to the Exchange
Agent a completed replacement of this document and any other documents required
by the Offer for properly tendering Asarco Shares prior to the Expiration Date.
<PAGE> 10
13. ELECTION AND PRORATION PROCEDURES. To properly complete Box A you must
indicate the number of your Asarco Shares for which you are electing to receive
cash, stock, or for which you are not making any election and your name and
address must be set forth in the column under the heading "Name and Address of
Registered Holder(s)" and either (i) the number of each Asarco Share certificate
that you are surrendering with this document must be written in the column under
the heading "Certificate Number" or (ii) if you are using the guarantee of
delivery procedures, the number of shares represented by your stock certificates
to be delivered pursuant to such procedures must be written in the column under
the heading "Number of Shares Represented by Certificate."
If the elections by Asarco shareholders result in an oversubscription of
either the cash consideration or the stock consideration, the procedure for
proration set forth in the Prospectus will be followed by the Exchange Agent.
Accordingly, there can be no assurance that your election will result in your
receipt of your desired form or mix of consideration. However, in all events,
the desired form and mix of consideration you receive will be closer to your
desired choice than if you had made no election. If the elections by Asarco
shareholders result in an oversubscription of either the cash consideration or
the stock consideration and you do not make any election, you will receive
whatever consideration is not oversubscribed.
IMPORTANT: THIS LETTER OF ELECTION AND TRANSMITTAL OR A FACSIMILE COPY
HEREOF (TOGETHER WITH ASARCO SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Certain shareholders (including, among others, corporations and certain
foreign individuals) are not subject to backup withholding. In order for a
foreign individual to qualify as an exempt recipient, that stockholder must
submit a Form W-8 or successor form, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Exchange Agent. See the enclosed Guidelines for Certificate of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Backup withholding is not an additional tax. Rather, the tax liability of
person subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS
(SEE INSTRUCTION 9)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- ------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT --------------------------
FORMW-9 AND CERTIFY BY SIGNING AND DATED BELOW. SOCIAL SECURITY NUMBER(S)
OR
------------------------------
EMPLOYER IDENTIFICATION NUMBER(S)
----------------------------------------------------------------------------------------------
DEPARTMENT OF
THE TREASURY PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I PART 3
INTERNAL REVENUE CERTIFY THAT:
SERVICE AWAITING TIN [ ]
PAYER'S REQUEST FOR TAXPAYER (1) The number shown on this form is my correct Taxpayer
IDENTIFICATION Identification Number (or I am waiting for a number
NUMBER ("TIN") to be issued to me); and
(2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal Reve-
nue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (iii) the IRS has noti-
fied me that I am no longer subject to backup
withholding.
- ------------------------------------------------------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 if you have been notified by the IRS that you are
currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross out item (2).
- ------------------------------------------------------------------------------------------------------------------------------
SIGNATURE: -------------------------------------------------- DATE: --------------
NAME (PLEASE PRINT): ------------------------------------------------------------
ADDRESS: ------------------------------------------------------------------------
CITY, STATE AND ZIP CODE: -------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A PENALTY IMPOSED
BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31% OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9
<PAGE> 12
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (i) I have mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a Taxpayer Identification Number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a Taxpayer
Identification Number.
<TABLE>
<S> <C>
- ------------------------------------------------------------ --------------------------------
Signature Date
- ------------------------------------------------------------------------------------------------
Name (Please Print)
</TABLE>
The Information Agent for the Offer is:
Innisfree M&A Incorporated
501 Madison Ave., 20th Floor
New York, New York 10022
Bankers and Brokers Call Collect
(212) 750-5833
All Others Call Toll Free
1-877-750-5838
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
(212) 761-4000
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
ASARCO INCORPORATED
TO
PHELPS DODGE CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
As set forth under "The Offer -- Procedure for Tendering" in the Prospectus
dated October 7, 1999 (the "Prospectus"), this form or one substantially
equivalent hereto must be used to accept the Offer (as defined herein) if
certificates for shares of common stock, no par value (each, an "Asarco Share"
and, collectively, the "Asarco Shares"), of ASARCO Incorporated, a New Jersey
corporation ("Asarco"), including the associated preferred share purchase rights
(each, an "Asarco Right" and, collectively, the "Asarco Rights") issued pursuant
to the Asarco Rights Agreement, dated as of January 28, 1998, as amended,
between Asarco and The Bank of New York, as Rights Agent, are not immediately
available, if the certificates and all other required documents cannot be
delivered to the Exchange Agent prior to the Expiration Date (as defined in the
Prospectus), or if the procedure for book-entry transfer cannot be completed on
a timely basis. Such form may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution (as defined in the Prospectus). See "The
Offer -- Procedure for Tendering" in the Prospectus.
The Exchange Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13(th) Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Stop-Reorg
Ridgefield Park, NJ 07660
By Facsimile Transmission:
(for Eligible Institutions only)
Fax: (201) 296-4293
Confirm by Telephone:
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Election and Transmittal is required to be guaranteed by an Eligible
Institution under the instructions thereto, such signature guarantee must appear
in the applicable space provided in the signature box on the Letter of Election
and Transmittal.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to AAV Corporation, a Delaware corporation
and a wholly owned subsidiary of Phelps Dodge Corporation, upon the terms and
subject to the conditions set forth in the Prospectus dated October 7, 1999 and
in the related Letter of Election and Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Asarco Shares
shown below pursuant to the guaranteed delivery procedures set forth under "The
Offer -- Procedure for Tendering" in the Prospectus.
------------------------------------------------------------
Number of Asarco Shares:
------------------------------------------------------------
Number of Asarco Shares for which you are electing to receive cash:
------------------------------------------------------------
Number of Asarco Shares for which you are electing to receive Phelps Dodge
Common Shares:
------------------------------------------------------------
Number of Asarco Shares for which you are not making any election:
------------------------------------------------------------
Account Number:
------------------------------------------------------------
Certificate No(s). (if available):
------------------------------------------------------------
------------------------------------------------------------
If Asarco Share(s) will be tendered by book-entry transfer:
Name of Tendering Institution:
------------------------------------------------------------
Account Number:
----------------------------------------
at The Depository Trust Company
Date:
-----------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Name(s) of Record Holder(s):
------------------------------------------------------------
------------------------------------------------------------
Address(es):
------------------------------------------------------------
------------------------------------------------------------
Area Code and Telephone Number(s):
------------------------------------------------------------
Signature(s):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
2
<PAGE> 3
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program, guarantees
(a) that the above-named person(s) "own(s)" the Asarco Shares tendered hereby
within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended, (b) represents that such tender complies with Rule 14e-4 and (c)
guarantees to deliver to the Exchange Agent, at one of its addresses set forth
above, certificates representing the Asarco Shares tendered hereby, in proper
form for transfer, or confirmation of book-entry transfer of such Asarco Shares
into the Exchange Agent's accounts at The Depository Trust Company, in each case
with delivery of a properly completed and duly executed Letter of Election and
Transmittal (or a facsimile copy thereof), or an Agent's Message (as defined in
the Prospectus) in the case of book-entry transfer, and any other documents
required by the Letter of Election and Transmittal, within three New York Stock
Exchange, Inc. trading days of the date hereof.
<TABLE>
<S> <C>
Name of Firm:
-------------------------------- -----------------------------------------------
AUTHORIZED SIGNATURE
Address: Title:
-------------------------------------- ----------------------------------------
Name:
-------------------------------------- ----------------------------------------
Zip Code Please Print or Type
Area Code and Tel. No.:
----------------------- Dated:
--------------------------------- , 1999
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR ASARCO SHARES WITH THIS NOTICE. ASARCO SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF ELECTION AND TRANSMITTAL.
3
<PAGE> 1
MORGAN STANLEY & CO. INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
AMENDED OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
ASARCO INCORPORATED
FOR 0.50266 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $29.50 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED
IN THE PROSPECTUS AND THE RELATED LETTER OF ELECTION AND TRANSMITTAL.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON OCTOBER 21, 1999, UNLESS THE OFFER IS EXTENDED. ASARCO SHARES THAT ARE
TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION OF THE OFFER.
October 7, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Phelps Dodge Corporation, a New York corporation
("Phelps Dodge"), to act as Dealer Manager in connection with Phelps Dodge's
offer to exchange 0.25133120 shares of common stock, par value $6.25 per share,
of Phelps Dodge (the "Phelps Dodge Common Shares") plus $14.75 net to the seller
in cash for each outstanding share of common stock, no par value (each, an
Asarco Share" and, collectively, the "Asarco Shares"), of Asarco Incorporated, a
New Jersey corporation ("Asarco"), on a fully prorated basis, including the
associated preferred share purchase rights (each, an "Asarco Right" and,
collectively, the "Asarco Rights") issued pursuant to the Asarco Rights
Agreement, dated as of January 28, 1998, as amended, between Asarco and The Bank
of New York, as Rights Agent, upon the terms and subject to the conditions set
forth in the Prospectus, dated October 7, 1999 (the "Prospectus"), and in the
related Letter of Election and Transmittal (which together constitute the
"Offer"), enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE MINIMUM TENDER
CONDITION AND THE PHELPS DODGE STOCKHOLDER APPROVAL CONDITION (IN EACH CASE AS
DEFINED IN THE PROSPECTUS). SEE "THE OFFER -- CONDITIONS OF THE OFFER" IN THE
PROSPECTUS.
Phelps Dodge expressly reserves the right to (i) extend, amend or modify
the terms of the Offer in any manner and (ii) withdraw or terminate the Offer
and not accept for exchange any Asarco Shares if any of the conditions to the
Offer are not satisfied.
Shareholders will be required to tender one Asarco Right for each Asarco
Share tendered, in order to effect a valid tender of Asarco Shares. Unless the
Asarco Distribution Date (as defined in the Prospectus) occurs, a tender of
Asarco Shares will constitute a tender of the associated Asarco Rights. See "The
Offer -- Procedure for Tendering" in the Prospectus.
<PAGE> 2
For your information and for forwarding to your clients for whom you hold
Asarco Shares registered in your name or in the name of your nominee(s), or who
hold Asarco Shares registered in their own names, we are enclosing the following
documents:
1. Prospectus dated October 7, 1999;
2. Letter of Election and Transmittal (together with accompanying
Substitute Form W-9) to be used by holders of Asarco Shares in accepting
the Offer and tendering Asarco Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Asarco Shares are not immediately available, if time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined in the Prospectus) or if the procedure for
book-entry transfer cannot be completed on a timely basis;
4. A letter that may be sent to your clients for whose accounts you
hold Asarco Shares registered in your name or in the name of your
nominee(s), with space provided for obtaining such clients' instructions
with regard to the Offer; and
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
Phelps Dodge will not pay any fees or commissions to any broker or dealer
or any other person (other than the fees of the Dealer Manager and the
Information Agent as described in the Prospectus) in connection with the
solicitation of tenders of Asarco Shares and Asarco Rights pursuant to the
Offer. Phelps Dodge will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your clients. Phelps Dodge will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale of Asarco Shares to it or
its order pursuant to the Offer, except as otherwise provided in Instruction 6
of the Letter of Election and Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 21, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Election and Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message (as defined in the
Prospectus) in connection with a book-entry transfer, and any other required
documents, should be sent to the Exchange Agent, and certificates evidencing the
tendered Asarco Shares should be delivered or such Asarco Shares should be
tendered by book-entry transfer, all in accordance with the instructions set
forth in the Letter of Election and Transmittal and the Prospectus. If holders
of Asarco Shares wish to tender Asarco Shares, but it is impracticable for them
to forward their certificates or other required documents prior to the
Expiration Date, a tender may be effected by following the guaranteed delivery
procedures specified under "The Offer -- Procedure for Tendering" in the
Prospectus.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Prospectus.
Additional copies of the enclosed materials may be obtained from the
Information Agent, Innisfree M&A Incorporated, by calling 1-877-750-5838 (Toll
Free).
Very truly yours,
Morgan Stanley & Co. Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PHELPS DODGE, THE DEALER MANAGER, THE
EXCHANGE AGENT OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE
ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE> 1
AMENDED OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
ASARCO INCORPORATED
FOR 0.50266 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $29.50 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED
IN THE PROSPECTUS AND THE RELATED LETTER OF ELECTION AND TRANSMITTAL.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON OCTOBER 21, 1999, UNLESS THE OFFER IS EXTENDED. ASARCO SHARES WHICH ARE
TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION OF THE OFFER.
To Our Clients:
Enclosed for your consideration are the Prospectus dated October 7, 1999
(the "Prospectus") and the related Letter of Election and Transmittal (which
together constitute the "Offer") in connection with the Offer by Phelps Dodge
Corporation, a New York corporation ("Phelps Dodge"), to exchange 0.25133120
shares of common stock, par value $6.25 per share, of Phelps Dodge (the "Phelps
Dodge Common Shares") plus $14.75 net to the seller in cash for each outstanding
share of common stock, no par value (each, an "Asarco Share" and, collectively,
the "Asarco Shares"), of ASARCO Incorporated, a New Jersey corporation
("Asarco"), on a fully prorated basis, including the associated preferred share
purchase rights (each an "Asarco Right" and, collectively, the "Asarco Rights")
issued pursuant to the Asarco Rights Agreement, dated as of January 28, 1998, as
amended, between Asarco and The Bank of New York, as Rights Agent, upon the
terms and subject to the conditions set forth in the Offer.
Shareholders whose certificates evidencing Asarco Shares ("Asarco Share
Certificates") are not immediately available or who cannot deliver their Asarco
Share Certificates and all other documents required by the Letter of Election
and Transmittal to the Exchange Agent prior to the Expiration Date (as defined
in the Prospectus) or who cannot complete the procedure for delivery by
book-entry transfer to the Exchange Agent's account at a Book-Entry Transfer
Facility (as defined in "The Offer -- Exchange of Asarco Shares; Delivery of
Phelps Dodge Common Shares and Cash" in the Prospectus) on a timely basis and
who wish to tender their Asarco Shares must do so pursuant to the guaranteed
delivery procedure described in "The Offer -- Procedure for Tendering" in the
Prospectus. See Instruction 2 of the Letter of Election and Transmittal.
Delivery of documents to a Book-Entry Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures does not constitute delivery to the
Exchange Agent.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF ASARCO
SHARES HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE
HOLDER OF RECORD OF ASARCO SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH
ASARCO SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF ELECTION AND TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER ASARCO SHARES HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to (a) whether you wish to have us
tender on your behalf any or all of the Asarco Shares held by us for your
account, upon the terms and subject to the conditions set forth in the Offer,
and (b) what election you would like us to make in your behalf in respect of any
tendered Asarco Shares held by us for your account.
Please note the following:
1. Phelps Dodge is offering to acquire each outstanding Asarco Share
in exchange for 0.25133120 Phelps Dodge Common Shares plus $14.75 net to
seller in cash, on a fully prorated basis.
<PAGE> 2
2. The Offer is being made for all of the outstanding Asarco Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on October 21, 1999, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, the Minimum
Tender Condition and the Phelps Dodge Stockholder Approval Condition (in
each case as defined in the Prospectus). See "The Offer -- Conditions of
the Offer" in the Prospectus.
5. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Election and Transmittal, stock transfer taxes on the transfer of Asarco
Shares pursuant to the Offer.
The Offer is made solely by the Prospectus dated October 7, 1999 and the
related Letter of Election and Transmittal and any amendments or supplements
thereto and is being made to all holders of Asarco Shares. The Offer is not
being made to, nor will tenders be accepted from or on behalf of, holders of
Asarco Shares in any jurisdiction in which the making or acceptance thereof
would not be in compliance with the laws of such jurisdiction. However, Phelps
Dodge may, in its sole discretion, take such action as it may deem necessary to
make the Offer in any such jurisdiction and extend the Offer to holders of
Asarco Shares in such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Phelps Dodge by Morgan
Stanley & Co. Incorporated, as Dealer Manager, or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Asarco Shares, please so
instruct us by completing, executing, detaching and returning to us the
instruction form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Asarco
Shares, all such Asarco Shares will be tendered unless otherwise indicated in
such instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS
POSSIBLE TO ALLOW US AMPLE TIME TO TENDER ASARCO SHARES ON YOUR BEHALF PRIOR TO
THE EXPIRATION OF THE OFFER.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE AMENDED OFFER TO EXCHANGE
EACH OUTSTANDING SHARE OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE
PURCHASE RIGHTS)
OF
ASARCO INCORPORATED
FOR 0.50266 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $29.50 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED
IN THE PROSPECTUS AND THE RELATED LETTER OF ELECTION AND TRANSMITTAL.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus dated October 7, 1999 (the "Prospectus") and the related Letter of
Election and Transmittal (which together constitute the "Offer") relating to the
offer by Phelps Dodge Corporation, a New York corporation ("Phelps Dodge"), to
exchange 0.25133120 shares of common stock, par value $6.25 per share, of Phelps
Dodge plus $14.75 net to the seller in cash for each outstanding share of common
stock, no par value (each, an "Asarco Share" and, collectively, the "Asarco
Shares"), of ASARCO Incorporated, a New Jersey corporation ("Asarco"), on a
fully prorated basis, including the associated preferred share purchase rights
(each, an "Asarco Right" and, collectively, the "Asarco Rights").
You are instructed to tender to AAV Corporation, a Delaware corporation and
a wholly owned subsidiary of Phelps Dodge, the number of Asarco Shares indicated
below (or, if no number is indicated below, all Asarco Shares) that are held by
you for the account of the undersigned and to make the following elections in
respect of such Asarco Shares, upon the terms and subject to the conditions set
forth in the Offer.
Number of Asarco Shares to be Tendered:
- --------------------------------------------------------------------------
Number of Asarco Shares for which you are electing
to receive cash:
- --------------------------------------------------------------------------------
Number of Asarco Shares for which you are electing to receive
Phelps Dodge Common Stock:
- --------------------------------------------------------------------------------
Number of Asarco Shares for which you are not making any election:
- ---------------------------------------------
Total Number of Asarco Shares held by you:
- ----------------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s):
- --------------------------------------------------------------------------------
(Print Name(s)):
- --------------------------------------------------------------------------------
(Print Address(es)):
- --------------------------------------------------------------------------------
(Area Code and Telephone Number(s)):
- ---------------------------------------------------------------------------
(Taxpayer Identification or Social Security Number(s)):
- ----------------------------------------------
Unless otherwise indicated, it will be assumed that all of your Asarco Shares
held by us for your account are to be tendered and that you are not making any
election in respect of such Asarco Shares.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. TWO or more individuals (Joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under state law
6. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
7. A valid trust, estate or pension The legal entity
trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
8. Corporate The corporation
9. Partnership The partnership
10. Association, club, religious, The organization
charitable, or educational, or
other tax-exempt organization
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, Form
W-7, Application for IRS Individual Taxpayer Identification Number or Form SS-4,
Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees that may be exempt from backup withholding include the following:
- A corporation.
- A financial institution.
PAYEES THAT ARE EXEMPT FROM BACKUP WITHHOLDING INCLUDE THE FOLLOWING:
- An organization exempt from tax under Section 501(a) or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S., the
District of Columbia, or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a).
- A trust exempt from tax under Section 664 or described in Section 4947.
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
JOINT FOREIGN PAYEES
Backup withholding applies unless:
1. Every joint payee provides the statement regarding foreign status; or
2. Anyone of the joint payees who has not established foreign status
supplies a TIN.
If anyone of the joint payees who has not established foreign status supplies
a TIN, that number is the TIN that must be used for purposes of backup
withholding and information reporting.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, ENTER YOUR CORRECT TAXPAYER
IDENTIFICATION NUMBER IN PART I, WRITE "EXEMPT" IN PART II AND SIGN AND DATE THE
FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041(a), 6045
and 6050A.
PRIVACY ACT NOTICE.--Section 6109 of the Internal Revenue Code requires most
recipients of dividend, interest or other payments to give taxpayer
identification numbers to payers who must report the payments to the IRS. The
IRS uses the numbers for identification purposes. Payers must be given the
numbers whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividend and certain other payments
to a payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
among
PHELPS DODGE CORPORATION
AAV CORPORATION
and
ASARCO INCORPORATED
Dated as of October 5, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
THE ASARCO OFFER .................................................... 2
Section 1.1 The ASARCO Offer.................................... 2
Section 1.2 ASARCO Elections.................................... 3
Section 1.3 ASARCO Action....................................... 5
Section 1.4 Directors........................................... 6
ARTICLE II
THE ASARCO MERGER; CLOSING............................................. 7
Section 2.1 The ASARCO Merger................................... 7
Section 2.2 Closing............................................. 7
Section 2.3 Effective Time...................................... 8
Section 2.4 Effects of the ASARCO Merger........................ 8
Section 2.5 Directors and Officers.............................. 8
ARTICLE III
EFFECT OF THE ASARCO MERGER ON THE STOCK OF
ASARCO; EXCHANGE OF CERTIFICATES...................................... 9
Section 3.1 Effect on ASARCO Stock and SubA Stock............... 9
Section 3.2 Exchange of Certificates............................ 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES......................................... 15
Section 4.1 Organization, Qualification, Etc.................... 15
Section 4.2 Capital Stock....................................... 17
Section 4.3 Corporate Authority Relative to this Agreement...... 18
Section 4.4 Non-Contravention; Consents and Approvals........... 19
Section 4.5 Reports and Financial Statements.................... 20
Section 4.6 Environmental Matters............................... 21
Section 4.7 Employee Benefit Plans; ERISA....................... 23
Section 4.8 Information Statement;
Registration Statement; Other Information........... 27
i
<PAGE> 3
Section 4.9 ASARCO Rights Plan.................................. 27
Section 4.10 Tax Matters......................................... 28
Section 4.11 Opinion of Financial Advisors....................... 29
Section 4.12 Required Vote....................................... 30
Section 4.13 Absence of Certain Changes.......................... 30
Section 4.14 No Undisclosed Material Liabilities................. 32
Section 4.15 Labor Relations..................................... 32
Section 4.16 No Prior Activities................................. 32
ARTICLE V
COVENANTS AND AGREEMENTS .............................................. 33
Section 5.1 Conduct of Business Pending the Effective Time...... 33
Section 5.2 Investigation....................................... 35
Section 5.3 Shareholder Approvals and Other Cooperation......... 36
Section 5.4 Affiliate Agreements................................ 39
Section 5.5 ASARCO Employee Stock Options, Incentive and Benefit
Plans.............................................. 39
Section 5.6 Filings; Other Action............................... 41
Section 5.7 Further Assurances.................................. 43
Section 5.8 Takeover Statute.................................... 43
Section 5.9 No Solicitation by ASARCO........................... 43
Section 5.10 Public Announcements................................ 45
Section 5.11 Indemnification and Insurance....................... 45
Section 5.12 Accountants' "Comfort" Letters...................... 46
Section 5.13 Additional Reports.................................. 46
Section 5.14 Disclosure Schedule Supplements..................... 47
Section 5.15 Certain Litigation.................................. 47
Section 5.16 Shareholder Litigation.............................. 47
Section 5.17 Section 16(b)....................................... 47
Section 5.18 Change of Control Agreements........................ 48
ARTICLE VI
CONDITIONS TO THE ASARCO MERGER ....................................... 48
Section 6.1 Conditions to Each Party's Obligation to
Effect the ASARCO Merger............................ 48
ii
<PAGE> 4
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT ..................................... 49
Section 7.1 Termination or Abandonment.......................... 49
Section 7.2 Termination by Parent............................... 50
Section 7.3 Termination by ASARCO............................... 50
Section 7.4 Effect of Termination............................... 50
Section 7.5 Termination Fee. ................................... 51
Section 7.6 Amendment or Supplement............................. 51
Section 7.7 Extension of Time, Waiver, Etc...................... 52
ARTICLE VIII
MISCELLANEOUS .................................................... 52
Section 8.1 No Survival of Representations and Warranties....... 52
Section 8.2 Expenses............................................ 52
Section 8.3 Counterparts; Effectiveness......................... 53
Section 8.4 Governing Law....................................... 53
Section 8.5 Notices............................................. 53
Section 8.6 Assignment; Binding Effect.......................... 54
Section 8.7 Severability........................................ 54
Section 8.8 Enforcement of Agreement............................ 54
Section 8.9 Entire Agreement; Third-Party Beneficiaries......... 55
Section 8.10 Headings............................................ 55
Section 8.11 Definitions......................................... 55
Section 8.12 Finders or Brokers.................................. 55
iii
<PAGE> 5
LIST OF EXHIBITS
Exhibit A - Form of ASARCO Affiliate Letter
iv
<PAGE> 6
INDEX OF DEFINED TERMS
Defined Term Section
affiliates.................................................... 8.11
Aggregate ASARCO Merger Cash Consideration.................... 3.1(b)(i)
Aggregate ASARCO Merger Stock Consideration................... 3.1(b)(iii)
Agreement..................................................... Introduction
Antitrust Laws................................................ 5.6(b)(i)
ASARCO........................................................ Introduction
ASARCO Acquisition Agreement.................................. 5.9(b)
ASARCO Award.................................................. 5.5(b)
ASARCO Cash Consideration..................................... Introduction
ASARCO Cash Election Shares................................... 1.2(a)
ASARCO Cash Proration Factor.................................. 1.2(b)(i)
ASARCO Certificates........................................... 3.1(b)
ASARCO Common Stock........................................... 1.1(a)
ASARCO Designees.............................................. 1.4(a)
ASARCO Disclosure Schedule.................................... Article IV
ASARCO Employees.............................................. 5.5(e)
ASARCO Indemnified Parties.................................... 5.11(a)
ASARCO Maximum Cash Consideration............................. 1.2(b)
ASARCO Maximum Stock Consideration............................ 1.2(c)
ASARCO Merger................................................. 2.1(a)
ASARCO Merger Cash Amount..................................... 3.1(b)(ii)
ASARCO Merger Consideration................................... 3.1(b)
ASARCO Merger Exchange Ratio.................................. 3.1(b)
ASARCO Merger Stock Amount.................................... 3.1(b)(iv)
ASARCO Non Electing Proration Factor.......................... 1.2(d)(iii)
ASARCO Non Electing Shares.................................... 1.2(a)
ASARCO Notice................................................. 5.9(a)
ASARCO Offer.................................................. Introduction
ASARCO Option Plans........................................... 5.5(a)
ASARCO Policy................................................. 5.11(b)
ASARCO SAR.................................................... 5.5(a)
ASARCO Shareholder Approval................................... 4.12(b)
ASARCO Shareholders Meeting................................... 5.3(c)(iii)
ASARCO Stock Consideration.................................... Introduction
ASARCO Stock Election Shares.................................. 1.2(a)
ASARCO Stock Options.......................................... 5.5(a)
v
<PAGE> 7
ASARCO Stock Proration Factor.......................... 1.2(c)(i)
ASARCO Surviving Corporation........................... 2.1(a)
ASARCO Takeover Proposal............................... 5.9(a)
CERCLA................................................. 4.6(d)
Certificates........................................... 2.2(c)
Closing................................................ 2.2
Closing Date........................................... 2.2
Code................................................... Introduction
Combination............................................ Introduction
Common Shares Trust.................................... 3.2(e)(iii)
control................................................ 8.11
Current Representing Party Group....................... 4.10(a)
DGCL................................................... 2.1(a)
Effective Time......................................... 2.3
Employee Benefit Plan.................................. 4.7(g)(i)
Encumbrance............................................ 4.1(c)
Environmental Claim.................................... 4.6(d)(i)
Environmental Law...................................... 4.6(d)(ii)
Environmental Permits.................................. 4.6(a)
ERISA.................................................. 4.7(g)(iii)
ERISA Affiliate........................................ 4.7(g)(iv)
Excess Shares.......................................... 3.2(e)(ii)
Exchange Act........................................... 1.3(b)
Exchange Agent......................................... 3.2(a)
Exchange Fund.......................................... 3.2(a)
Expiration Date........................................ 1.1(a)
Foreign Plan........................................... 4.7(g)(ii)
GAAP................................................... Introduction
Governmental Entity.................................... 4.4(a)
Hazardous Materials.................................... 4.6(d)(iii)
HSR Act................................................ 5.6(b)(i)
IRS.................................................... 4.7(b)
Joint Proxy Statement.................................. 4.8
Law.................................................... 4.4(a)
Material Adverse Effect................................ 4.1(a)
Minimum Condition...................................... 1.1(a)
Multiemployer Plan..................................... 4.7(a)
NJBCA.................................................. 2.1(a)
NYSE................................................... 3.2(e)(ii)
Offer Documents........................................ 1.1(a)
vi
<PAGE> 8
Option Agreements Introduction
Parent.............................................. Introduction
Parent Certificates................................. 3.2(a)
Parent Common Stock................................. 1.1(a)
Parent Disclosure Schedule.......................... Article IV
Parent Shareholder Approval......................... 4.12(a)
Parent Shareholders Meeting......................... 5.3(c)(ii)
Past Representing Party Group....................... 4.10(a)
person.............................................. 8.11
Phelps Dodge Proxy Statement........................ 5.3(c)(ii)
Plan................................................ 4.7(g)(iii)
Registration Statement.............................. 5.3(a)(i)
Representing Party.................................. Article IV
Representing Party Affiliated Group................. 4.10(a)
Representing Party Agreements....................... 4.4(a)
Representing Party's Disclosure Schedule............ Article IV
Required Statutory Approvals........................ 4.4(b)
Required Third Party Consents....................... 4.4(b)
Schedule 14d-1...................................... 4.8
Schedule 14d-9...................................... 1.3(b)
SEC................................................. 4.5(a)
SEC Reports......................................... 4.5
Securities Act...................................... 4.5
Share Issuance...................................... 4.3(a)
Significant Subsidiaries............................ 8.11
SubA................................................ Introduction
Subsidiaries........................................ 8.11
Tax Certificates.................................... 5.3(a)(v)
Tax Return.......................................... 4.10
Taxes............................................... 4.10
Termination Date.................................... 5.1
vii
<PAGE> 9
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 5,
1999 (the "Agreement"), among PHELPS DODGE CORPORATION, a New York corporation
("Parent"), AAV CORPORATION, a Delaware corporation ("SubA") and ASARCO
INCORPORATED, a New Jersey corporation ("ASARCO");
WHEREAS, Parent and ASARCO desire to combine their respective
businesses upon the terms and subject to the conditions in this Agreement (the
"Combination");
WHEREAS, (i) Parent is a corporation organized and existing
under the laws of the State of New York; and (ii) ASARCO is a corporation
organized and existing under the laws of the State of New Jersey;
WHEREAS, Parent has formed SubA, a wholly owned subsidiary of
Parent, and all the outstanding capital stock of SubA is owned by Parent;
WHEREAS, the Board of Directors of each of Parent and ASARCO
deems it advisable and in the best interests of their shareholders to effect the
Combination by causing ASARCO to become a subsidiary of Parent pursuant to the
ASARCO Merger as provided for in this Agreement;
WHEREAS, in furtherance of the Combination, Parent has caused
SubA to commence an exchange offer, which Parent shall cause SubA to amend in
accordance with the terms of this Agreement (as so amended, the "ASARCO Offer")
to acquire all of the issued and outstanding shares of ASARCO Common Stock, for
either $29.50 per share, net to the seller in cash, without interest (the
"ASARCO Cash Consideration") or 0.50266 of a share of Parent Common Stock (the
"ASARCO Stock Consideration"), subject to the election and proration provisions
of this Agreement and to the terms and conditions of this Agreement and the
ASARCO Offer;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Combination and also
to prescribe various conditions to the Combination;
WHEREAS, for U.S. federal income tax purposes, it is intended
that the ASARCO Merger will qualify as a transaction described in Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
<PAGE> 10
WHEREAS, for financial accounting purposes, it is intended
that the transactions contemplated by this Agreement will be accounted for as a
purchase transaction in accordance with United States generally accepted
accounting principles ("GAAP"); and
WHEREAS, the Agreement and Plan of Merger, dated as of July
15, 1999, as amended as of September 27, 1999, among Asarco Cyprus Incorporated,
a Delaware corporation, ACO Acquisition Corp., a New Jersey corporation, CAM
Acquisition Corp., a Delaware corporation, ASARCO and Cyprus Amax Minerals
Company, a Delaware corporation, has been terminated.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and fully
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE ASARCO OFFER
Section 1.1 The ASARCO Offer. (a) As promptly as practicable
(but in no event later than five business days after the public announcement of
the transactions contemplated by this Agreement), Parent shall amend the ASARCO
Offer to reflect the existence of this Agreement and amend the conditions to the
ASARCO Offer in accordance herewith. The expiration date of the ASARCO Offer
shall be either (i) the initial expiration date of the ASARCO Offer as set forth
in the Schedule 14D-1 or (ii) the tenth business day from and after the date the
ASARCO Offer is amended to provide for the purchase of all of the outstanding
shares of ASARCO Common Stock in accordance with the terms hereof (the
"Expiration Date"), as soon as it is legally permitted under applicable Law. The
ASARCO Offer shall be made pursuant to a supplement to Parent's Offer to
Purchase dated September 22, 1999 and related letter of transmittal (together
with any supplements or amendments thereto, collectively the "Offer Documents")
containing the terms and conditions set forth in this Agreement and in form
reasonably satisfactory to ASARCO. The obligation of Parent to accept for
payment and pay for the shares of common stock, no par value, of ASARCO (the
"ASARCO Common Stock") tendered pursuant to the ASARCO Offer shall be subject to
the condition (the "Minimum Condition") that at least the number of shares of
ASARCO Common Stock that when added to the ASARCO Common Stock already owned by
Parent shall constitute 80% of then outstanding ASARCO Common Stock on a fully
diluted basis shall have been validly tendered and not withdrawn prior to the
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<PAGE> 11
expiration of the ASARCO Offer and also shall be subject to the satisfaction of
the other conditions set forth in Annex A hereto. Parent expressly reserves the
right to waive any such condition (other than the Minimum Condition, the Phelps
Dodge Stockholder Approval Condition and the condition relating to the
effectiveness of the Registration Statement), to increase the consideration per
share of ASARCO Common Stock payable in the ASARCO Offer, and to make any other
changes in the terms and conditions of the ASARCO Offer, provided however, that
no change may be made which decreases the consideration per share of ASARCO
Common Stock payable in the ASARCO Offer or which reduces the maximum number of
shares of ASARCO Common Stock to be acquired in the ASARCO Offer or which
imposes conditions to the ASARCO Offer in addition to those set forth in Annex A
hereto. Notwithstanding the foregoing, Parent shall extend the ASARCO Offer at
any time up to March 31, 2000 for one or more periods of not more than 10
business days, if at the Expiration Date of the ASARCO Offer, or any extension
thereof, any of the conditions on Annex A is not satisfied or waived; provided,
however, if all of the conditions to the ASARCO Offer are satisfied or waived
but the number of shares of ASARCO Common Stock tendered is 85% or more, but
less than 90%, of the then outstanding number of shares of ASARCO Common Stock
then Parent may extend the ASARCO Offer for an aggregate period of not more than
three business days beyond the Expiration Date. The ASARCO Cash Consideration
shall, subject to applicable withholding of taxes, be net to the seller in cash,
upon the terms and subject to the conditions of the ASARCO Offer. Subject to the
terms and conditions of the ASARCO Offer, Parent shall accept for payment and
pay the ASARCO Cash Consideration and issue shares of common stock, par value
$6.25 per share, of Parent (the "Parent Common Stock") in payment of the ASARCO
Stock Consideration, as promptly as practicable after expiration of the ASARCO
Offer, for all shares of ASARCO Common Stock validly tendered and not withdrawn.
Section 1.2 ASARCO Elections.
(a) Subject to Sections 1.2(b), (c) and (d) below, each
holder of ASARCO Common Stock shall be entitled, with respect to each share of
ASARCO Common Stock held by such holder, to elect to receive either the ASARCO
Cash Consideration or the ASARCO Stock Consideration. Shares of ASARCO Common
Stock that are validly tendered and not withdrawn and (i) covered by elections
to receive the ASARCO Cash Consideration are referred to herein as "ASARCO Cash
Election Shares", (ii) covered by elections to receive the ASARCO Stock
Consideration are referred to herein as "ASARCO Stock Election Shares", and
(iii) not covered by a valid election to receive either the ASARCO Cash
Consideration or the ASARCO Stock Consideration are referred to herein as
"ASARCO Non Electing Shares".
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<PAGE> 12
(b) Excess of Cash Elections. If the aggregate ASARCO Cash
Consideration elected in respect of all ASARCO Cash Election Shares exceeds
$14.75 multiplied by the total number of shares of ASARCO Common Stock
outstanding immediately prior to closing of the ASARCO Offer (the "ASARCO
Maximum Cash Consideration"), the following will occur:
(i) Each ASARCO Cash Election Share will be exchanged in the ASARCO
Offer for (A) $29.50 multiplied by a fraction (the "ASARCO Cash
Proration Factor"), the numerator of which is the ASARCO Maximum Cash
Consideration and the denominator of which is the number of ASARCO
Cash Election Shares multiplied by $29.50, and (B) a number of shares
of Parent Common Stock equal to 0.50266 multiplied by l minus the
ASARCO Cash Proration Factor.
(ii) Each ASARCO Stock Election Share and each ASARCO Non Electing
Share will be exchanged for 0.50266 of a share of Parent Common Stock.
(c) Excess of Stock Elections. If the aggregate ASARCO Stock
Consideration elected in respect of all ASARCO Stock Election Shares exceeds
0.25133120 multiplied by the total number of shares of ASARCO Common Stock
outstanding immediately prior to closing of the ASARCO Offer (the "ASARCO
Maximum Stock Consideration"), the following will occur:
(i) Each ASARCO Stock Election Share will be exchanged in the ASARCO
Offer for (A) a number of shares of Parent Common Stock equal to
0.50266 multiplied by a fraction (the "ASARCO Stock Proration
Factor"), the numerator of which is the ASARCO Maximum Stock
Consideration and the denominator of which is the number of ASARCO
Stock Election Shares multiplied by 0.50266, and (B) cash in an amount
equal to $29.50 multiplied by 1 minus the ASARCO Stock Proration
Factor.
(ii) Each ASARCO Cash Election Share and each ASARCO Non Electing
Share will be exchanged for $29.50, without interest.
(d) No Excess of Cash or Stock Elections. In the event that
neither Section 1.2(b) or 1.2(c) above is applicable, the following will occur:
(i) Each ASARCO Cash Election Share will be exchanged for $29.50 in
cash without interest.
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<PAGE> 13
(ii) Each ASARCO Stock Election Share will be exchanged for 0.50266 of
a share of Parent Common Stock.
(iii) Each ASARCO Non Electing Share will be exchanged for (A) an
amount in cash without interest equal to $29.50 multiplied by a
fraction (the "ASARCO Non Electing Proration Factor"), the numerator
of which is the difference between the ASARCO Cash Number less the
number of ASARCO Cash Election Shares and the denominator of which is
the number of ASARCO Non Electing Shares; and (B) a number of shares
of Parent Common Stock equal to 0.50266 multiplied by 1 minus the
ASARCO Non Electing Proration Factor. For purposes of this Section
1.2(d), the ASARCO Cash Number is determined by dividing the ASARCO
Maximum Cash Consideration by $29.50.
Section 1.3 ASARCO Action.
(a) ASARCO hereby approves of and consents to the ASARCO
Offer and represents that (i) the Board of Directors of ASARCO (the "ASARCO
Board"), at a meeting duly called and held on October 5, 1999, has unanimously
(A) determined that this Agreement and the transactions contemplated hereby,
including each of the ASARCO Offer and the ASARCO Merger, are fair to and in the
best interests of the holders of ASARCO Common Stock, (B) approved and adopted
this Agreement and the transactions contemplated hereby and (C) recommended
that the shareholders of ASARCO accept the ASARCO Offer and approve and adopt
this Agreement and the transactions contemplated hereby, and (ii) Credit Suisse
First Boston Corporation has delivered to the Board an opinion that the
consideration to be received by the holders of ASARCO Common Stock pursuant to
each of the ASARCO Offer and the ASARCO Merger is fair to the holders of ASARCO
Common Stock from a financial point of view. ASARCO hereby consents to the
inclusion in the Offer Documents of the recommendation of the ASARCO Board
described in the immediately preceding sentence, subject to Section 5.9(b).
ASARCO has been advised by each of its directors and executive officers that
they intend either to tender all shares of ASARCO Common Stock beneficially
owned by them to Parent pursuant to the ASARCO Offer or to vote such shares of
ASARCO Common Stock in favor of the approval and adoption by the stockholders of
ASARCO of this Agreement and the transactions contemplated hereby.
(b) As soon as reasonably practicable after the date hereof,
ASARCO shall file with the SEC an amendment to its Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule
5
<PAGE> 14
14D-9") containing, subject to Section 5.9, the recommendation of the ASARCO
Board described in Section 1.3(a) and shall disseminate the Schedule 14D-9 to
the extent required by Rule 14D-9 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and any other applicable federal
securities laws. ASARCO and Parent agree to correct promptly any information
provided by either of them for use in the Schedule 14D-9 which shall have become
false or misleading, and ASARCO further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of ASARCO Common Stock, in each case as and to the
extent required by applicable federal securities laws.
Section 1.4 Directors. (a) Promptly upon the purchase of and
payment for shares of ASARCO by Parent or any of its Subsidiaries which
represent at least a majority of the outstanding shares of ASARCO Common Stock
(on a fully diluted basis) pursuant to the ASARCO Offer, Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the ASARCO Board as is equal to the product of the total number of
directors on such Board (giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage that the aggregate
number of shares of ASARCO Common Stock beneficially owned by SubA, Parent and
any other wholly-owned subsidiary of Parent bears to the total number of shares
of ASARCO Common Stock then outstanding. ASARCO shall, upon request of SubA, use
all reasonable efforts promptly either to increase the size of its Board of
Directors or, at ASARCO's election, secure the resignations of such number of
its incumbent directors as is necessary to enable Parent's designees to be so
elected to the ASARCO Board, and shall cause Parent's designees to be so
elected. Notwithstanding the foregoing, until the Effective Time, ASARCO shall
retain as members of its Board of Directors at least two directors who are
directors of ASARCO on the date hereof (the "ASARCO Designees"); provided, that
subsequent to the purchase of and payment for shares of ASARCO Common Stock
pursuant to the ASARCO Offer, Parent shall always have its designees represent
at least a majority of the entire Board of Directors. ASARCO's obligations under
this Section 1.4(a) shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. ASARCO shall promptly take all actions
required pursuant to such Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 1.4(a), including mailing to shareholders the
information required by such Section 14(f) and Rule 14f-1 as is necessary to
enable Parent's designees to be elected to the ASARCO Board of Directors. Parent
or SubA will supply ASARCO any information with respect to either of them and
their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1.
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<PAGE> 15
(b) From and after the time, if any, that Parent's designees
constitute a majority of the ASARCO Board, any amendment of this Agreement, any
termination of this Agreement by ASARCO, any extension of time for performance
of any of the obligations of Parent or SubA hereunder, any waiver of any
condition or any of ASARCO's rights hereunder or other action by ASARCO
hereunder may be effected only by the action of a majority of the directors of
ASARCO then in office who were directors of ASARCO on the date hereof, which
action shall be deemed to constitute the action of the full Board of Directors;
provided, that if there shall be no such directors, such actions may be effected
by majority vote of the entire ASARCO Board.
ARTICLE II
THE ASARCO MERGER; CLOSING
Section 2.1 The ASARCO Merger.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the New Jersey Business Corporation Act
(the "NJBCA") and the Delaware General Corporation Law ("DGCL"), SubA shall
merge with ASARCO (the "ASARCO Merger") at the Effective Time. SubA shall be the
surviving corporation in the ASARCO Merger (the "ASARCO Surviving Corporation").
From and after the Effective Time, the identity and separate existence of ASARCO
shall cease.
(b) In connection with the ASARCO Merger, Parent shall
reserve a sufficient number of shares of Parent Common Stock prior to the ASARCO
Merger, to permit the issuance of shares of Parent Common Stock (i) to the
holders of ASARCO Common Stock, as of the Effective Time in accordance with the
terms of this Agreement, and (ii) upon the exercise of ASARCO Stock Options
being assumed by Parent in accordance with Section 5.5 hereof.
Section 2.2 Closing. The closing of the ASARCO Merger (the
"Closing") will take place at 10:00 a.m. local time on the day following the
later of the Parent Shareholders Meeting and the ASARCO Shareholders Meeting
(the "Closing Date"), but shall in no event be later than the second business
day after satisfaction or waiver of the conditions set forth in Article VI
unless another time or date is agreed to by the parties hereto. The Closing will
be held at the offices of Shearman & Sterling,
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<PAGE> 16
599 Lexington Avenue, New York, NY, unless another place is agreed to by the
parties hereto.
Section 2.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, (i) SubA and
ASARCO shall file with the Secretary of State of the State of New Jersey a
certificate of merger duly completed and executed in accordance with the
relevant provisions of the NJBCA and shall make all other filings or recordings
required under the NJBCA in order to effect the ASARCO Merger and (ii) SubA
shall file with the Secretary of State of the State of Delaware a certificate of
merger duly completed and executed in accordance with the relevant provisions of
the DGCL in order to effect the ASARCO Merger. The ASARCO Merger shall become
effective at the actual time of the filing of both such certificates of merger,
or of the later to be filed of such certificates of merger, or at such other
later time as is reasonably specified in the certificates of merger (the time at
which ASARCO Merger has become fully effective being hereinafter referred to as
the "Effective Time").
Section 2.4 Effects of the ASARCO Merger.
(a) NJBCA and DGCL. The ASARCO Merger shall have the effects
set forth in Section 14A:10-6 of the NJBCA and Section 259 of the DGCL.
(b) Name of Surviving Corporation. The name of the ASARCO
Surviving Corporation from and after the Effective Time shall be "ASARCO
Incorporated" until changed or amended in accordance with applicable Law.
(c) Charter Documents. At the Effective Time the Certificate
of Incorporation and the Bylaws of SubA, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and Bylaws,
respectively, of the ASARCO Surviving Corporation.
Section 2.5 Directors and Officers. The directors of SubA at
the Effective Time shall be the directors of the ASARCO Surviving Corporation
until the next annual meeting of shareholders of ASARCO (or their earlier
resignation or removal) and until their respective successors are duly elected
and qualified, as the case may be. The officers of SubA at the Effective Time
shall be the officers of the ASARCO Surviving Corporation, until their
respective successors are duly appointed.
8
<PAGE> 17
ARTICLE III
EFFECT OF THE ASARCO MERGER ON THE STOCK OF
ASARCO; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on ASARCO Stock and SubA Stock. As of the
Effective Time, by virtue of the ASARCO Merger and without any action on the
part of SubA, ASARCO or the holders of any securities of SubA or ASARCO:
(a) Cancellation of Treasury Stock and Parent Owned Stock.
Each share of ASARCO Common Stock that is owned directly by ASARCO or any of its
Subsidiaries or by Parent or any of its Subsidiaries (but not including any such
shares owned by employees or employee benefit or pension plans) shall
automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of ASARCO Common Stock. Each issued and
outstanding share of ASARCO Common Stock (other than shares to be cancelled in
accordance with Section 3.1(a)) shall be converted into the ASARCO Stock
Consideration, the ASARCO Cash Consideration or a combination thereof, in each
case determined pursuant to this Section 3.1(b) (such consideration being
referred to herein as the "ASARCO Merger Consideration"). If Section 1.2(b) is
applicable to the ASARCO Offer, each outstanding share of ASARCO Common Stock
will be converted in the ASARCO Merger into the right to receive the ASARCO
Stock Consideration. If Section 1.2(c) is applicable to the ASARCO Offer, each
outstanding share of ASARCO Common Stock will be converted in the ASARCO Merger
into the right to receive the ASARCO Cash Consideration. If neither Section
1.2(b) nor Section 1.2(c) is applicable, each outstanding share of ASARCO Common
Stock will be converted in the ASARCO Merger into (A) an amount of cash equal to
the ASARCO Merger Cash Amount, without interest, and (B) a number of shares of
Parent Common Stock equal to the ASARCO Merger Stock Amount. The ASARCO Merger
Cash Amount and the ASARCO Merger Stock Amount will be determined as follows:
(i) The aggregate amount of ASARCO Cash Consideration actually paid in
the ASARCO Offer will be subtracted from the Total ASARCO Available
Cash to determine the amount of cash available to be paid in the
ASARCO Merger (the "Aggregate ASARCO Merger Cash Consideration"). For
purposes of this Section, Total ASARCO Available Cash equals (A) the
number of shares exchanged in the ASARCO Offer plus the number of
shares of ASARCO
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<PAGE> 18
Common Stock to be converted in the ASARCO Merger, multiplied by (B)
$14.75.
(ii) The Aggregate ASARCO Merger Cash Consideration will be divided by
the number of shares of ASARCO Common Stock to be converted in the
ASARCO Merger, to determine the amount of cash consideration to be
paid in respect of each such share of ASARCO Common Stock in the
ASARCO Merger (the "ASARCO Merger Cash Amount").
(iii) The aggregate number of shares of Parent Common Stock actually
issued as ASARCO Stock Consideration in the ASARCO Offer will be
subtracted from the Total ASARCO Available Stock to determine the
number of shares of Parent Common Stock available to be paid in the
ASARCO Merger (the "Aggregate ASARCO Merger Stock Consideration"). For
purposes of this Section, Total ASARCO Available Stock equals (A) the
number of shares of ASARCO Common Stock exchanged in the ASARCO Offer
plus the number of shares of ASARCO Common Stock to be converted in
the ASARCO Merger, multiplied by (B) 0.25133120.
(iv) The Aggregate ASARCO Merger Stock Consideration will be divided
by the number of shares of ASARCO Common Stock to be converted in the
ASARCO Merger, to determine the number of shares of Parent Common
Stock to be issued in respect of each such share of ASARCO Common
Stock in the ASARCO Merger (the "ASARCO Merger Stock Amount").
As of the Effective Time, all such shares of ASARCO Common Stock shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of ASARCO
Common Stock (the "ASARCO Certificates") shall cease to have any rights with
respect thereto, except the right to receive (x) the ASARCO Merger
Consideration, (y) certain dividends and other distributions in accordance with
Section 3.2(c), and (z) cash in lieu of fractional shares of Parent Common Stock
in accordance with Section 3.2(e), without interest.
(c) Conversion of Common Stock of SubA. Each issued and
outstanding share of common stock, par value $.01 per share, of SubA shall be
converted into one fully paid and nonassessable share of common stock of the
ASARCO Surviving Corporation.
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<PAGE> 19
Section 3.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall
enter into an agreement with a bank or trust company designated by it and
reasonably satisfactory to ASARCO (the "Exchange Agent"), which shall provide
that Parent shall deposit with the Exchange Agent as of the Effective Time, for
the benefit of the holders of shares of ASARCO Common Stock for exchange in
accordance with this Article III, through the Exchange Agent, (i) cash in the
amount required to be exchanged for ASARCO Common Stock pursuant to Section
3.1(b) and (ii) certificates ("Parent Certificates") representing the number of
whole shares of Parent Common Stock issuable pursuant to Section 3.1(b) in
exchange for outstanding shares of ASARCO Common Stock (such cash and shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time, any Excess Shares and any
cash (including cash proceeds from the sale of the Excess Shares) payable in
lieu of any fractional shares of Parent Common Stock being hereinafter referred
to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of an ASARCO Certificate whose shares were converted into the ASARCO Merger
Consideration pursuant to Section 3.1(b), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
ASARCO Certificates shall pass, only upon delivery of the ASARCO Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
ASARCO and Parent may reasonably specify), and (ii) instructions for use in
effecting the surrender of the ASARCO Certificates in exchange for the ASARCO
Merger Consideration. Upon surrender of an ASARCO Certificate for cancellation
to the Exchange Agent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such ASARCO Certificate shall be entitled to receive in exchange
therefor (i) a check in the amount equal to the cash, if any, which such holder
has the right to receive pursuant to the provisions of this Article III and (ii)
a Parent Certificate representing that number of whole shares of Parent Common
Stock, if any, which such holder has the right to receive pursuant to the
provisions of this Article III, certain dividends or other distributions in
accordance with Section 3.2(c) and cash in lieu of any fractional share in
accordance with Section 3.2(e). The ASARCO Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of ASARCO Common
Stock not registered in the transfer records of ASARCO, the applicable ASARCO
Merger Consideration may be issued or paid to a person other than the person in
whose name the ASARCO Certificate so surrendered is
11
<PAGE> 20
registered if such ASARCO Certificate shall be properly endorsed or otherwise be
in proper form for transfer, and the person requesting such issuance shall pay
all transfer or other non-income Taxes required by reason of the issuance of
ASARCO Merger Consideration to a person other than the registered holder of such
ASARCO 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 3.2, each ASARCO Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
applicable ASARCO Merger Consideration into which the shares of ASARCO Common
Stock formerly represented by such ASARCO Certificate have been converted,
certain dividends or other distributions in accordance with Section 3.2(c) and
cash in lieu of any fractional share in accordance with Section 3.2(e). No
interest will be paid or will accrue on any cash payable to holders of ASARCO
Certificates pursuant to the provisions of this Article III.
(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 shall be paid to the holder of any
unsurrendered ASARCO 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 3.2(e), and all such
dividends, other distributions and cash in lieu of fractional shares of Parent
Common Stock shall be paid by Parent to the Exchange Agent and shall be included
in the Exchange Fund, in each case until the surrender of such ASARCO
Certificate in accordance with this Article III. Subject to the effect of
applicable escheat or similar Laws, following surrender of any such ASARCO
Certificate there shall be paid to the holder of the Parent Certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 3.2(e), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock. Parent shall make available to the Exchange Agent cash for these
purposes.
(d) No Further Ownership Rights in ASARCO Common Stock. All
ASARCO Merger Consideration issued or paid upon the surrender for exchange of
ASARCO Certificates in accordance with the terms of this Article III shall be
deemed to have been issued and paid in full satisfaction of all rights
pertaining to the shares of
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ASARCO Common Stock theretofore represented by such ASARCO Certificates,
subject, however, to the ASARCO Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been authorized or made by ASARCO on such shares
of ASARCO Common Stock which remain unpaid at the Effective Time, and there
shall be no further registration of transfers on the stock transfer books of the
ASARCO Surviving Corporation of the shares of ASARCO Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, ASARCO Certificates are presented to the ASARCO Surviving Corporation or
the Exchange Agent for any reason, they shall be cancelled and exchanged as
provided in this Article III, except as otherwise provided by Law.
(e) No Fractional Shares. (i) No Parent Certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of ASARCO Certificates, no dividend or distribution of
Parent shall relate to such fractional share interests, and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Parent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent will determine the excess of (A) the number of whole
shares of Parent Common Stock delivered to the Exchange Agent by
Parent pursuant to Section 3.2(a) for exchange pursuant to Section 3.1
for outstanding shares of ASARCO Common Stock over (B) the aggregate
number of whole shares of Parent Common Stock to be distributed to
holders of ASARCO Common Stock pursuant to Section 3.2(b) (such excess
being herein called the "Excess Shares"). Following the Effective
Time, the Exchange Agent will, on behalf of former shareholders of
ASARCO, sell the Excess Shares at then-prevailing prices on the New
York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in
Section 3.2(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and
will be executed in round lots to the extent practicable. The Exchange
Agent will use reasonable efforts to complete the sale of the Excess
Shares as promptly following the Effective Time as, in the Exchange
Agent's sole judgment, is practicable consistent with obtaining the
best execution of such sales in light of prevailing market conditions.
Until the net proceeds of such sale or sales have been distributed to
the holders of ASARCO Common
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Stock, the Exchange Agent will hold such proceeds in trust for the
holders of ASARCO Common Stock (the "Common Shares Trust"). The Parent
will pay all commissions, transfer Taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent incurred in connection with such sale of the Excess
Shares. The Exchange Agent will determine the portion of the Common
Shares Trust to which each holder of ASARCO Common Stock is entitled,
if any, by multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such
holder of ASARCO Common Stock is entitled (after taking into account
all shares of ASARCO Common Stock held at the Effective Time by such
holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of ASARCO Common Stock
are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of ASARCO Common Stock with
respect to any fractional share interests, the Exchange Agent will
make available such amounts to such holders of ASARCO Common Stock
subject to and in accordance with the terms of Section 3.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the ASARCO Certificates six
months after the Effective Time shall be delivered to Parent upon demand, and
any holders of the ASARCO Certificates who have not theretofore complied with
this Article III shall thereafter look only to Parent for payment of their claim
for ASARCO Merger Consideration, 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, ASARCO 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 in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law. If any ASARCO Certificate
shall not have been surrendered prior to seven years after the Effective Time
(or immediately prior to such earlier date on which any ASARCO Merger
Consideration, any cash payable to the holder of such ASARCO Certificate
pursuant to this Article III or any dividends or distributions payable to the
holder of such ASARCO Certificate would otherwise escheat to or become the
property of any governmental body or authority) any such ASARCO Merger
Consideration or cash, dividends or distributions in respect of such ASARCO
Certificate shall, to the extent permitted by applicable Law, become the
property of the ASARCO
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Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) Lost Certificates. If any ASARCO Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such ASARCO Certificate to be lost, stolen or destroyed and,
if required by the ASARCO Surviving Corporation, the posting by such person of a
bond in such reasonable amount as the ASARCO Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
ASARCO Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed ASARCO Certificate the ASARCO Merger Consideration and, if
applicable, any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Parent Common Stock as may be deliverable in respect
thereof pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Except as set forth in the disclosure schedule delivered by
Parent to ASARCO prior to the execution of this Agreement (the "Parent
Disclosure Schedule"), Parent hereby represents and warrants to ASARCO, and,
except as set forth in the disclosure schedule delivered by ASARCO to Parent
prior to the execution of this Agreement (the "ASARCO Disclosure Schedule"),
ASARCO hereby represents and warrants to Parent, in each case as set forth in
this Article IV, with the party making such representations and warranties being
referred to as the "Representing Party" and such Representing Party's Disclosure
Schedule as the "Representing Party's Disclosure Schedule." Notwithstanding the
foregoing, any representation or warranty which expressly refers to ASARCO or
Parent is being made solely by ASARCO or Parent, as the case may be.
Section 4.1 Organization, Qualification, Etc.
(a) The Representing Party is a corporation duly organized,
validly existing and in good standing (or other equivalent status) under the
laws of the jurisdiction of its incorporation and has the corporate power and
authority to own, operate and lease all of its properties and assets and to
carry on its business as it is now being conducted or presently proposed to be
conducted and is duly qualified to do business and is in good standing (or other
equivalent status) in each jurisdiction in which
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the ownership, operation or leasing of its properties or assets or the conduct
of its business requires such qualification, except for jurisdictions in which
the failure to be so qualified or in good standing (or other equivalent status)
would not, individually or in the aggregate, have a Material Adverse Effect on
the Representing Party and its Subsidiaries, taken as a whole. As used in this
Agreement, any reference to any state of facts, event, change or effect having a
"Material Adverse Effect" on or with respect to a Representing Party, means such
state of facts, event, change or effect that has had or would reasonably be
expected to have a material adverse effect on the business, results of
operations or financial condition of the Representing Party and its
Subsidiaries, taken as a whole; provided, however, that any adverse effect that
copper prices have had or may have on the business, results of operations or
financial condition of the Representing Party and its Subsidiaries, taken as a
whole, shall not be deemed a Material Adverse Effect for purposes of this
Agreement. The copies of each Representing Party's Certificate of Incorporation
and Bylaws which have been delivered to the other Representing Party are
complete and correct and in full force and effect.
(b) Each of the Representing Party's Significant Subsidiaries
is a corporation duly organized, validly existing and in good standing (or other
equivalent status) under the laws of its jurisdiction of incorporation or
organization, has the power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted or
presently proposed to be conducted, and is duly qualified to do business and is
in good standing (or equivalent status) in each jurisdiction in which the
ownership, operation or leasing of its properties or assets or the conduct of
its business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing (or other equivalent status)
would not, individually or in the aggregate, have a Material Adverse Effect on
the Representing Party. Each Representing Party has made available to the other
Representing Party complete and correct copies of the certificate of
incorporation, bylaws or other similar governing documents which are in full
force and effect for each of such Representing Party's Significant Subsidiaries
that are not directly or indirectly wholly owned.
(c) All the outstanding shares of capital stock of, or other
ownership interests in, the Representing Party's Subsidiaries are validly
issued, fully paid and non-assessable and are owned of record and beneficially
by such Representing Party, directly or indirectly, free and clear of all
Encumbrances. As used in this Agreement, the term "Encumbrance" means any
mortgage, pledge, lien, charge, encumbrance, defect, security interest, claim,
option or restriction of any kind. There are no (i) securities of the
Representing Party or any of its Subsidiaries convertible into or exchangeable
or exercisable for shares of capital stock or other voting securities or
ownership interests
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in any of the Representing Party's Subsidiaries, (ii) warrants, calls, options
or other rights to acquire from the Representing Party or any of its
Subsidiaries, or any obligations of the Representing Party or any of its
Subsidiaries to issue, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable or exercisable
for, any capital stock, voting securities or ownership interests in any of the
Representing Party's Subsidiaries, or (iii) obligations of the Representing
Party or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
outstanding securities of the Representing Party's Subsidiaries or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such securities.
(d) Except for the Representing Party's Subsidiaries, as set
forth in Section 4.1(d) of the Representing Party's Disclosure Schedule or the
Representing Party's (or any of its Subsidiaries') SEC Reports, and in respect
of minerals exploration or development agreements in the ordinary course of
business, the Representing Party (excluding employee pension or benefit plans)
does not own any securities of, or have any debt or equity investment in, or
loans outstanding to, any corporation, partnership, joint venture, limited
liability company or other entity. The Representing Party is not subject to any
contractual obligation under which it may be required to advance or contribute
capital to any entity, except in respect of minerals exploration or development
agreements in the ordinary course of business.
Section 4.2 Capital Stock.
(a) Section 4.2(a) of the Representing Party's Disclosure
Schedule sets forth as of September 30, 1999:
(i) the number of authorized shares of each class or series of capital
stock of the Representing Party;
(ii) the number of shares of each class or series of capital stock of
the Representing Party which are issued and outstanding;
(iii) the number of shares of each class or series of capital stock
which are held in the treasury of such Representing Party;
(iv) the number of shares of each class or series of capital stock of
the Representing Party which are reserved for issuance, indicating
each specific reservation; and
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(v) the number of shares of each class or series of capital stock of
such Representing Party which are subject to employee stock options or
other rights to purchase or receive capital stock granted under such
Representing Party's stock option or other stock based employee or
non-employee director benefit plans, indicating the name of the plan,
the date of grant, the number of shares and the exercise price
thereof.
(b) All of the issued and outstanding shares of capital stock
of the Representing Party have been validly issued and are fully paid and
nonassessable. Except as set forth in Section 4.2(a) of the Representing Party's
Disclosure Schedule, there are no authorized, issued, reserved for issuance or
outstanding (i) shares of capital stock or voting securities of the Representing
Party, (ii) securities convertible into or exchangeable for shares of capital
stock or voting securities of the Representing Party, (iii) warrants, calls,
options or other rights to acquire from the Representing Party or any of its
Subsidiaries, or any obligation of the Representing Party or any of its
Subsidiaries to issue, any shares of capital stock or voting securities or
securities convertible into or exchangeable or exercisable for capital stock or
voting securities of the Representing Party, and (iv) there are no outstanding
obligations of the Representing Party to repurchase, redeem or otherwise acquire
any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities.
Section 4.3 Corporate Authority Relative to this Agreement.
(a) Parent has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Parent, and, except for the approval of the issuance of
the Parent Common Stock in the ASARCO Merger (the"Share Issuance") by its
shareholders, no other corporate proceedings on the part of Parent are necessary
to authorize the consummation of the transactions contemplated hereby. The Board
of Directors of Parent has determined that the transactions contemplated by this
Agreement are in the best interests of Parent and its shareholders and to
recommend to such shareholders that they approve the Share Issuance. This
Agreement has been duly and validly executed and delivered by Parent and,
assuming this Agreement constitutes a valid and binding agreement of the other
parties hereto, this Agreement constitutes a valid and binding agreement of
Parent, enforceable against Parent in accordance with its terms (except insofar
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or
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similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
(b) ASARCO has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of ASARCO, and, except for the approval of this Agreement by
its shareholders, no other corporate proceedings on the part of ASARCO are
necessary to authorize the consummation of the transactions contemplated hereby.
The Board of Directors of ASARCO has taken all appropriate action so that none
of Parent or SubA will be (i) an "interested stockholder" within the meaning of
Section 14A:10A-3 of the NJBCA or (ii) an "interested shareholder" within the
meaning of the Certificate of Incorporation of ASARCO by virtue of Parent and
SubA entering into this Agreement and consummating the transactions contemplated
hereby. The Board of Directors of ASARCO has determined that the transactions
contemplated by this Agreement are in the best interests of ASARCO and its
shareholders and to recommend to such shareholders that they approve this
Agreement. This Agreement has been duly and validly executed and delivered by
ASARCO and, assuming this Agreement constitutes a valid and binding agreement of
the other parties hereto, this Agreement constitutes a valid and binding
agreement of ASARCO, enforceable against ASARCO in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
Section 4.4 Non-Contravention; Consents and Approvals.
(a) None of the execution, delivery or performance of this
Agreement by the Representing Party or the consummation by such Representing
Party of the transactions contemplated hereby will (i) violate the certificate
of incorporation or the bylaws or other similar governing documents of the
Representing Party or any of its Subsidiaries, (ii) except for the Required
Third Party Consents, result in the violation or breach of or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, vesting, payment, exercise, acceleration,
suspension or revocation) under any of the provisions of any note, bond,
mortgage, deed of trust, security interest, indenture, license, contract,
agreement, plan or other instrument or obligation to which the Representing
Party or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound (the "Representing Party Agreements"),
(iii) except for the Required Statutory
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Approvals, violate any order, writ, injunction, decree, judgment, permit,
license, statute, law, ordinance, policy, rule or regulation ("Law") of any
court, tribunal or administrative, governmental or regulatory body, agency,
commission, division, department, public body or other authority, whether
federal, state, local or foreign (individually, a "Governmental Entity")
applicable to the Representing Party or any of its Subsidiaries or any of their
respective property or assets, or (iv) result in the creation or imposition of
any Encumbrance on any asset of the Representing Party or any of its
Subsidiaries, except in the case of clauses (ii), (iii) and (iv) for violations,
breaches, defaults, terminations, cancellations, accelerations or creations
which would not in the aggregate have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole, or prevent or delay
the consummation of the transactions contemplated hereby.
(b) Section 4.4(b)(i) of the Representing Party's Disclosure
Schedule sets forth a list of all third party consents and approvals required to
be obtained under the Representing Party Agreements prior to the consummation of
the transactions contemplated by this Agreement the failure of which to obtain
would have, individually or in the aggregate, a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole (the "Required Third
Party Consents"). Section 4.4(b)(ii) of the Representing Party's Disclosure
Schedule sets forth a list of all notices to, filings and registrations with,
and permits, authorizations, consents and approvals of, Governmental Entities
required to be made or obtained from Governmental Entities prior to the
consummation of the transactions contemplated by this Agreement the failure of
which to obtain would have, individually or in the aggregate, a Material Adverse
Effect on the Representing Party and its Subsidiaries, taken as a whole (the
"Required Statutory Approvals").
Section 4.5 Reports and Financial Statements. The
Representing Party has previously furnished or made available to the other
Representing Party complete and correct copies of:
(a) such Representing Party's (and any of its Subsidiaries')
Annual Reports on Form 10-K filed with the Securities and Exchange Commission
(the "SEC") for each of the years ended December 31, 1996 through 1998;
(b) such Representing Party's (and any of its Subsidiaries')
Quarterly Reports on Form 10-Q filed with the SEC for each of the fiscal
quarters ended following such Representing Party's last fiscal year end;
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(c) each definitive proxy statement filed by such
Representing Party or any of its Subsidiaries with the SEC since March 1, 1996;
(d) each final prospectus filed by such Representing Party
with the SEC since December 31, 1995; and
(e) all Current Reports on Form 8-K filed by such
Representing Party with the SEC since January 1, 1998.
As of their respective dates, such reports, proxy statements and prospectuses
(collectively, with any amendments, supplements and exhibits thereto, the "SEC
Reports") (i) complied as to form in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Exchange Act, and the rules and regulations promulgated thereunder, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any SEC Report of
the Representing Party has been revised or superseded by an SEC Report
subsequently filed by the Representing Party, none of the Representing Party's
SEC Reports contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included in the Representing
Party's SEC Reports (including any related notes and schedules) fairly present
the financial position of the Representing Party and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end adjustments), in each case in accordance with past practice
and GAAP consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto). Since January 1, 1998, the Representing Party
has timely filed all reports, registration statements and other filings required
to be filed by it with the SEC under the rules and regulations of the SEC.
Section 4.6 Environmental Matters.
(a) Except for Environmental Claims disclosed in or referred
to in Section 4.6(b) of the Disclosure Schedule, as of the date of this
Agreement, each of the Representing Party and its Subsidiaries has obtained all
licenses, permits, authorizations, approvals and consents from Governmental
Entities which are required under any
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applicable Environmental Law in respect of its business, properties, assets and
operations ("Environmental Permits"), except (i) for such permits as to which
due and proper application is pending, and (ii) for such failures to have
Environmental Permits which, individually or in the aggregate, are not
reasonably expected to have a Material Adverse Effect on the Representing Party
and its Subsidiaries, taken as a whole. Each of such Environmental Permits is in
full force and effect, and each of the Representing Party and its Subsidiaries
is in compliance with the terms and conditions of all such Environmental Permits
and with all applicable Environmental Laws, except for such exceptions as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole.
(b) Except for Environmental Claims disclosed in or referred
to in Section 4.6(b) of the Disclosure Schedule, as of the date of this
Agreement, there is no Environmental Claim filed, pending, or to the best
knowledge of the Representing Party threatened or in process, against the
Representing Party or any of its Subsidiaries or any person whose liability for
such Environmental Claim the Representing Party or any of its Subsidiaries has
or may have retained or assumed either contractually or by operation of Law,
that would, individually or in the aggregate, have a Material Adverse Effect on
the Representing Party and its Subsidiaries, taken as a whole.
(c) Except as disclosed or referred to in Section 4.6(c) of
the Disclosure Schedule, no Encumbrances have arisen under or pursuant to any
Environmental Law on any property, site or facility owned, operated or leased by
the Representing Party or any of its Subsidiaries, except for such Encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Representing Party and its Subsidiaries, taken as a whole, and no
action of any Governmental Entity has been taken or, to the best knowledge of
the Representing Party, is threatened or in process which could subject any of
such properties to such Encumbrances, except for such action which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole.
(d) As used in this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
order, investigation or notice (written or oral) by any person
alleging potential or actual liability (including, without limitation,
potential or actual liability for investigation, evaluation, cleanup,
removal actions, remedial actions, response actions, natural resources
damages, property damages, personal injuries or penalties)
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arising out of, based on or resulting from any Environmental Law,
including any claim under CERCLA, and shall include any request for
information under CERCLA or any comparable state or local Law.
(ii) "Environmental Law" means any Law relating to (a) the environment
or pollution, environmental matters, the protection of the environment,
or the protection of human health and safety from environmental
concerns, (b) actual or threatened emissions, discharges, or releases
of pollutants, contaminants, chemicals or solid, industrial, toxic or
hazardous substances, wastes or constituents into the environment, and
(c) the presence, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials.
(iii) "Hazardous Materials" mean (a) any petroleum or petroleum
products and radioactive materials, (b) any chemicals, constituents,
materials, or substances defined or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous substances," "toxic substances " and related
materials, as such materials are defined in any Environmental Law, and
(c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Governmental Entity.
Section 4.7 Employee Benefit Plans; ERISA.
(a) Except as set forth in the Representing Party's SEC
Reports or as would not have a Material Adverse Effect on the Representing Party
and its Subsidiaries, taken as a whole, (i) all Employee Benefit Plans (other
than any Employee Benefit Plan that is a "multiemployer plan" within the meaning
of Section 3(37) of ERISA (a "Multiemployer Plan")) of the Representing Party
are in material compliance with all applicable requirements of Law, including
ERISA and the Code, and (ii) neither the Representing Party nor any of its
Subsidiaries nor any ERISA Affiliate has any liabilities or obligations with
respect to any such Employee Benefit Plans, whether accrued, contingent or
otherwise, that are not otherwise reflected on the Representing Party's
financial statements, nor to the best knowledge of the Representing Party, are
any such liabilities or obligations expected to be incurred. Except as described
in the Representing Party's (or any of its Subsidiaries') SEC Reports or as set
forth in Section 4.7(a) of the Representing Party's Disclosure Schedule, the
execution and delivery of, and performance of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Employee Benefit Plan of the
Representing Party that will or may result in
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acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee. The only
severance agreements or severance policies applicable to the Representing Party
or any of its Subsidiaries are the agreements and policies specifically
described in Section 4.7(a) of the Representing Party's Disclosure Schedule.
(b) With respect to each of its Plans, the Representing Party
has heretofore made available to the other Representing Party complete and
correct copies of each of the following documents, as applicable: (i) a copy of
the Plan and any amendments thereto; (ii) a copy of the most recent annual
report; (iii) a copy of the most recent actuarial report; (iv) a copy of the
most recent Summary Plan Description and all material modifications; (v) a copy
of the trust or other funding agreement and any amendments thereto; and (vi) the
most recent determination letter received from the Internal Revenue Service (the
"IRS") with respect to each Plan that is intended to be qualified under Section
401 of the Code and all notices of reportable events received following receipt
of such letter. Each Representing Party will deliver to the other Representing
Party a copy of each Foreign Plan within thirty days following the date hereof.
(c) Section 4.7(c) of the Representing Party's Disclosure
Schedule sets forth a list of each employee of the Representing Party (or any
Subsidiary) who is a party to any agreement (whether written or oral) with
respect to such person's employment by the Representing Party or a Subsidiary,
other than offer letters which do not have guaranteed periods of employment and
statutory employment agreements under foreign Laws, and which provide for annual
compensation in excess of $100,000. The Representing Party has made available to
the other Representing Party a complete and correct copy of each such written
employment agreement and a complete and correct summary of each such oral
agreement.
(d) No liability under Title IV of ERISA has been incurred by
the Representing Party or any ERISA Affiliate within the past six years that has
not been satisfied in full. To the best knowledge of the Representing Party, no
condition exists that presents a material risk to the Representing Party, any of
its Subsidiaries or any ERISA Affiliate of incurring a liability under such
Title that is reasonably likely to have a Material Adverse Effect on the
Representing Party. The Pension Benefit Guaranty Corporation has not instituted
proceedings to terminate any of the Employee Benefit Plans, and, to the
knowledge of the Representing Party, no condition exists that presents a
material risk that such proceedings will be instituted. Except as would not have
a Material Adverse Effect on the Representing Party, with respect to each of the
Employee
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Benefit Plans that is subject to Title IV of ERISA, the present value of accrued
benefits under such Employee Benefit Plan, based upon the actuarial assumptions
used for funding purposes in the most recent actuarial report prepared by such
Employee Benefit Plan's actuary with respect to such Employee Benefit Plan, did
not, as of its latest valuation date, exceed the then current value of the
assets of such Employee Benefit Plan allocable to such accrued benefits, and
there have been no changes since such latest valuation date which would cause
the present value of such accrued benefits to exceed the current value of such
assets. None of the Employee Benefit Plans or any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each of the Employee Benefit Plans ended prior to
the date of this Agreement. None of the Employee Benefit Plans is a
Multiemployer Plan. To the knowledge of the Representing Party each of the
Employee Benefit Plans that is intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code. Except as set forth
in Section 4.7(d) of the ASARCO Disclosure Schedule, no Employee Benefit Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees after
retirement or other termination of service (other than coverage mandated by
applicable Law or benefits, the full cost of which is borne by the current or
former employee). There are no material pending or threatened claims by or on
behalf of any Employee Benefit Plan, by any employee or beneficiary covered
under any such Employee Benefit Plan, or otherwise involving any such Employee
Benefit Plan (other than routine claims for benefits). No prohibited transaction
has occurred with respect to any Employee Benefit Plan that would result,
directly or indirectly, in the imposition of an excise Tax or other liability
under the Code or ERISA, except for such a Tax or other liability that would not
have a Material Adverse Effect. Except as would not have a Material Adverse
Effect on the Representing Party, with respect to each Foreign Plan: (i) all
amounts required to be reserved on account of each Foreign Plan have been so
reserved in accordance with reasonable accounting practices prevailing in the
country where such Foreign Plan is established, and (ii) each Foreign Plan
required to be registered with a Governmental Entity has been registered, has
been maintained in good standing with the appropriate Governmental Entities, and
has been maintained and operated in accordance with its terms and applicable
Law.
(e) Except as set forth in Section 4.7(a) and (d) of the
ASARCO Disclosure Schedule no director or officer or other employee of such
Representing Party will become entitled to any termination, retirement,
severance or similar payment, benefit or enhanced or accelerated benefit
(including any acceleration of vesting or lapse
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of restrictions, repurchase rights or obligations with respect to any employee
stock option or other benefit under any stock option plan or incentive or
compensation plan or arrangement) as a result of the transactions contemplated
by this Agreement (either standing alone or in conjunction with any additional
or subsequent events).
(f) Except as set forth in Section 4.7(f) of the ASARCO
Disclosure Schedule, any amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement by any employee, officer or
director of the Representing Party or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employee benefit plan or other
compensation arrangement currently in effect would not be characterized as an
"excess parachute payment" or a "parachute payment" (as such terms are defined
in Section 280G(b)(1) of the Code).
(g) As used in this Agreement
(i) "Employee Benefit Plan" means any material Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by the Representing Party, any of its Subsidiaries or
ERISA Affiliates for the benefit of the current or former employees or
directors of the Representing Party or any of its Subsidiaries and
existing on the date of this Agreement or at any time subsequent
thereto and on or prior to the Effective Time;
(ii) "Foreign Plan" shall refer to each material plan, program or
contract that is subject to or governed by the Laws of any
jurisdiction other than the United States, and which would have been
treated as an Employee Benefit Plan had it been a United States plan,
program or contract;
(iii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent
care, legal services, cafeteria, life, health, medical, accident,
disability, worker's compensation or other insurance, severance,
separation, termination, change of control or other benefit plan,
agreement, practice policy, program or arrangement of any kind,
whether written or oral, other than a Foreign Plan, including, but not
limited to any "employee benefit plan" within the meaning of Section
3(3) of the Employee Retirement
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Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"); and
(iv) "ERISA Affiliate" means, with respect to any Representing Party,
any entity, trade or business that is a member of the same controlled
group as such Representing Party (within the meaning of Sections
414(b), (c), (m) or (o) of the Code).
Section 4.8 Information Statement; Registration Statement;
Other Information. None of the information with respect to the Representing
Party or its Subsidiaries to be included in the Schedule 14D-9, the Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1"), the Information Statement or the Registration
Statement will, in the case of the Information Statement, the Schedule 14D-9,
Schedule 14D-1, or any amendments or supplements thereto at the time that such
document is mailed, and at the time of the Parent Shareholders Meeting and the
ASARCO Shareholders Meeting, or, in the case of the Registration Statement, at
the time it becomes effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Representing Party with respect to information supplied in writing by the other
Representing Party or any of its affiliates specifically for inclusion in the
Information Statement. The Information Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. The letters to shareholders, notices of
meeting, information statement and forms of proxies to be distributed to
shareholders in connection with the ASARCO Merger and any schedules required to
be filed with the SEC in connection therewith are collectively referred to
herein as the "Information Statement."
Section 4.9 ASARCO Rights Plan. ASARCO represents and
warrants that the Board of Directors of ASARCO has taken all necessary action to
render the Rights Agreement dated as of July 26, 1989, as amended, between
ASARCO and First Chicago Trust Company of New York and the Rights Agreement
between ASARCO and The Bank of New York, dated as of January 28, 1998,
inapplicable to the transactions contemplated by this Agreement.
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Section 4.10 Tax Matters.
(a) All federal, state, local and foreign Tax Returns
required to be filed by or on behalf of the Representing Party, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which the Representing Party or any of its Subsidiaries (i) is a member (a
"Current Representing Party Group") or (ii) was a member during six years prior
to the date hereof but is not currently a member, but only insofar as any such
Tax Return relates to a taxable period ending on a date within the last six
years (a "Past Representing Party Group," together with Current Representing
Party Groups, a "Representing Party Affiliated Group") have been timely filed,
and all such Tax Returns filed are complete and accurate except to the extent
any failure to file or any inaccuracies in filed Tax Returns would not,
individually or in the aggregate, have a Material Adverse Effect on such
Representing Party (it being understood that the representations made in this
Section, to the extent that they relate to Past Representing Party Groups, are
made to the knowledge of the Representing Party). All Taxes due and owing by the
Representing Party, any Subsidiary of the Representing Party or any Representing
Party Affiliated Group have been paid, or adequately reserved for, except to the
extent any failure to pay or reserve would not, individually or in the
aggregate, have a Material Adverse Effect on the Representing Party. There is no
audit examination, deficiency, refund litigation, proposed adjustment or matter
in controversy with respect to any Taxes due and owing by the Representing
Party, any Subsidiary of the Representing Party or any Representing Party
Affiliated Group which would, individually or in the aggregate, have a Material
Adverse Effect on the Representing Party. All assessments for Taxes due and
owing by the Representing Party, any Subsidiary of the Representing Party or any
Representing Party Affiliated Group with respect to completed and settled
examinations or concluded litigation have been paid. As soon as practicable
after the public announcement of the execution of the Merger Agreement, the
Representing Party will provide the other party with written schedules of (i)
the taxable years of the Representing Party for which the statutes of
limitations with respect to federal income Taxes have not expired, and (ii) with
respect to federal income Taxes, those years for which examinations have been
completed, those years for which examinations are presently being conducted, and
those years for which examinations have not yet been initiated. The Representing
Party and each of its Subsidiaries have complied in all material respects with
all rules and regulations relating to the withholding of Taxes, except to the
extent any such failure to comply would not, individually or in the aggregate,
have a Material Adverse Effect on the Representing Party.
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(b) Neither the Representing Party nor any of its
Subsidiaries has (i) entered into a closing agreement or similar agreement with
a taxing authority relating to Taxes of the Representing Party or any of its
Subsidiaries with respect to a taxable period for which the statute of
limitations is still open, or (ii) with respect to U.S. federal income Taxes,
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any such income Tax, in either
case, that is still outstanding. There are no Encumbrances relating to Taxes
upon the assets of the Representing Party other than Encumbrances relating to
Taxes not yet due, except as would not have a Material Adverse Effect on the
Representing Party. Neither the Representing Party nor any of its Subsidiaries
is a party to any agreement relating to the allocating or sharing of Taxes,
other than an agreement with each other.
(c) Neither the Representing Party nor any of its
Subsidiaries knows of any fact or has taken any action that could reasonably be
expected to prevent the ASARCO Merger from constituting a transaction described
in Section 368(a) of the Code.
For purposes of this Agreement: (i) "Taxes" means any and all federal, state,
local, foreign or other taxes of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any taxing authority, including, without limitation, taxes or other
charges on or with respect to income, franchise, windfall or other profits,
gross receipts, property, sales, use, severance, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth, and taxes or other charges in the nature of excise, withholding,
ad valorem or value added, and (ii) "Tax Return" means any return, report or
similar statement (including the attached schedules) required to be filed with
respect to any Tax, including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
Section 4.11 Opinion of Financial Advisors.
(a) The Board of Directors of ASARCO has received the opinion
of Credit Suisse First Boston Corporation, dated the date of this Agreement,
substantially to the effect that, as of such date, the consideration to be
received by holders of ASARCO Common Stock in the ASARCO Offer and the ASARCO
Merger, is fair to the holders of ASARCO Common Stock from a financial point of
view.
(b) The Board of Directors of Parent has received the opinion
of Morgan Stanley & Co. Incorporated., dated the date of this Agreement,
substantially to
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the effect that, as of such date, the consideration to be paid by Parent
pursuant to this Agreement is fair to Parent from a financial point of view.
Section 4.12 Required Vote.
(a) The affirmative vote of the holders of shares of Parent
Common Stock representing a majority of the shares voting at the Parent
Shareholders Meeting, provided that at least 50% of the outstanding Parent
Common Stock that is entitled to vote, votes at the Parent Shareholders Meeting
(the "Parent Shareholder Approval"), is required to approve the Share Issuance.
No other vote of the shareholders of Parent is required by Law, the Certificate
of Incorporation or the Bylaws of Parent or otherwise in order for Parent to
consummate the ASARCO Merger and the transactions contemplated hereby.
(b) The affirmative vote of the holders of 80% of the
outstanding shares of ASARCO Common Stock entitled to vote at the ASARCO
Shareholders Meeting (the "ASARCO Shareholder Approval") is required to approve
this Agreement. No other vote of the shareholders of ASARCO is required by Law,
the Certificate of Incorporation or the Bylaws of ASARCO or otherwise in order
for ASARCO to consummate the ASARCO Merger and the transactions contemplated
hereby.
Section 4.13 Absence of Certain Changes. Except as set forth
in Section 4.13 of the ASARCO Disclosure Schedule, since December 31, 1998, and,
other than with respect to clause (a) below, prior to the date hereof, except as
set forth in the Representing Party's (or any of its Subsidiaries') SEC Reports
filed prior to the date hereof, the Representing Party and its Subsidiaries have
conducted their respective businesses in the ordinary course, consistent with
past practice and there has not been:
(a) any event, occurrence or development (including the
discovery of new or additional information concerning an existing environmental
condition) which, individually or in the aggregate, would have a Material
Adverse Effect on the Representing Party;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Representing Party (other than regular quarterly cash dividends payable by the
Representing Party in respect of shares of its capital stock consistent with
past practice) or any repurchase, redemption or other acquisition by the
Representing Party or any of its Subsidiaries of any outstanding shares of its
capital stock (except (x) as required by the terms of any
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employee or stock option plan or compensation plan or arrangement, (y) in
accordance with any dividend reinvestment plan as in effect as of the date of
this Agreement in the ordinary course of operation of such plan consistent with
past practice, and/or (z) as otherwise permitted by Section 5.1);
(c) any amendment of any material term of any outstanding
security of the Representing Party or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract,
agreement or settlement entered into, by (or judgment, order or decree
affecting) the Representing Party or any of its Subsidiaries relating to its
assets or business (including the acquisition or disposition of any material
amount of assets) or any relinquishment by the Representing Party or any of its
Subsidiaries of any contract or other right, in either case, material to the
Representing Party and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements (including
without limitation settlements of litigation and tax proceedings) in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement;
(e) any change prior to the date hereof in any method of
accounting or accounting practice by the Representing Party or any of its
Subsidiaries, except for any such change which is not material or which is
required by reason of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or
amendment to any such existing arrangement with) any director, officer or
employee of the Representing Party or any of its Subsidiaries, (ii) entering
into of any employment, deferred compensation, supplemental retirement or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Representing Party or any of its
Subsidiaries, (iii) increase in, or accelerated vesting and/or payment of,
benefits under any existing severance or termination pay policies or employment
agreements or (iv) increase in or enhancement of any rights or features related
to compensation, bonus or other benefits payable to directors, officers or
employees of the Representing Party or any of its Subsidiaries, in each case,
other than in the ordinary course of business consistent with past practice or
as permitted by this Agreement; or
(g) any material Tax election made or changed, any material
audit settled or any material amended Tax Returns filed.
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Section 4.14 No Undisclosed Material Liabilities. There are
no liabilities of the Representing Party or any Subsidiary of the Representing
Party of any kind whatsoever, whether accrued, contingent, absolute, determined
or determinable, other than:
(a) liabilities which, individually or in the aggregate,
would not have a Material Adverse Effect on the Representing Party;
(b) liabilities disclosed in the SEC Reports of the
Representing Party or except as disclosed pursuant to Section 4.6 hereof; and
(c) liabilities under or arising as a result of this
Agreement.
Section 4.15 Labor Relations. As of the date of this
Agreement: (i) Section 4.15 of the Representing Party's Disclosure Schedule sets
forth a complete list of each collective bargaining agreement to which the
Representing Party or any of its Subsidiaries is a party, (ii) no labor
organization or group of employees of the Representing Party (or any of its
Subsidiaries) has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the
Representing Party, threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or authority, and (iii)
there are no organizing activities, strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances, or other material labor
disputes pending or, to the knowledge of the Representing Party, threatened
against or involving the Representing Party or any of its Subsidiaries.
Section 4.16 No Prior Activities. SubA was formed for the
purpose of effecting a business combination with ASARCO, and does not have any
Subsidiaries and has not undertaken any business or other activities other than
in connection with pursuing such business combination and entering into this
Agreement and engaging in the transactions contemplated hereby.
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ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of Business Pending the Effective Time.
From and after the date hereof and prior to the Effective Time or the date, if
any, on which this Agreement is earlier terminated pursuant to Section 7.1 (the
"Termination Date"), and except as may be agreed in writing by the other parties
hereto or as may be provided for or permitted pursuant to this Agreement:
(a) each of the parties shall, and shall cause each of its
Subsidiaries to, conduct its operations according to their ordinary and usual
course of business in substantially the same manner as heretofore conducted;
(b) each of the parties shall use its reasonable best
efforts, and cause each of its Subsidiaries to use its reasonable best efforts,
to preserve intact its business organizations and goodwill, keep available the
services of its current officers and other key employees and preserve its
relationships with those persons having business dealings with it (including its
relationships with customers, suppliers, employees and business partners);
(c) each of the parties shall confer at such times as any of
the other parties may reasonably request with one or more representatives of
such requesting party to report material operational matters and the general
status of ongoing operations (to the extent such requesting party reasonably
requires such information);
(d) each of the parties shall notify the other parties of any
emergency or other change in the normal course of its or its Subsidiaries'
respective businesses or in the operation of its or its Subsidiaries, respective
properties and of any complaints or hearings (or communications indicating that
the same may be contemplated) of any Governmental Entity if such emergency,
change, complaint, investigation or hearing would have a Material Adverse Effect
on such party;
(e) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, (i) declare, set aside, authorize or pay any
dividends on or make any distribution with respect to its outstanding shares of
stock, except in the case of Parent for regular quarterly cash dividends on the
outstanding shares of Parent Common Stock and in the case of ASARCO and its
majority owned subsidiary Southern Peru Copper Corporation for regular quarterly
cash dividends on the outstanding shares of
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their common stock and except for cash dividends by a wholly owned Subsidiary to
a parent, or (ii) split, combine or reclassify any of its shares of capital
stock;
(f) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, except (i) in the ordinary course of business
consistent with past practice, (ii) as otherwise provided in this Agreement or
(iii) as required by applicable Law, adopt or amend any Employee Benefit Plan;
(g) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, authorize, propose or announce an intention
to authorize or propose, or enter into an agreement with respect to, any merger,
consolidation or business combination (other than the ASARCO Offer and the
ASARCO Merger and for Parent's Offer to purchase all of the outstanding shares
of common stock of Cyprus Amax Minerals Company and the related merger of Cyprus
Amax Minerals Company with a Subsidiary of Parent), any acquisition of a
material amount of assets or securities, any disposition of a material amount of
assets or securities or any release or relinquishment of any material contract
rights, in each case not in the ordinary course of business;
(h) none of the parties shall, and none of the parties shall
permit its Subsidiaries to, propose or adopt any amendments to its certificate
of incorporation or by-laws or other similar governing documents;
(i) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, issue or authorize the issuance of, or agree
to issue or sell any shares of their capital stock of any class (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise), except for the issuance of shares of Parent
Common Stock by Parent and ASARCO Common Stock by ASARCO upon the exercise of
stock options or other rights to acquire such party's capital stock, in each
case which securities, options and rights are outstanding as of the date of this
Agreement and such issuance is made in accordance with the terms of such
securities, options and rights in effect on the date of this Agreement;
(j) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, except in the ordinary course of business in
connection with employee incentive and benefit plans, programs or arrangements
in existence on the date hereof, purchase or redeem any shares of its stock or
any rights, warrants or options to acquire any such shares;
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(k) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, incur, assume or prepay any indebtedness or
any other material liabilities, other than indebtedness between such party and a
wholly owned Subsidiary or between wholly owned Subsidiaries, provided, in
either such case, such wholly owned Subsidiaries remain wholly owned
Subsidiaries, and other than in the ordinary course of business consistent with
past practice;
(l) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, sell, lease, license, mortgage or otherwise
encumber or subject to any Encumbrance or otherwise dispose of any of its
properties or assets (including securitizations), other than in the ordinary
course of business consistent with past practice and other than the consummation
of contracts of sale executed and delivered prior to the date hereof;
(m) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, take any action that would reasonably be
expected to cause the ASARCO Merger not to constitute a transaction described in
Section 368(a) of the Code;
(n) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to make any material Tax election or settle or
compromise any material Tax liability, other than in the ordinary course of
business consistent with past practice; and
(o) none of the parties shall, and none of the parties shall
permit any of its Subsidiaries to, agree, in writing or otherwise, to take any
of the foregoing actions or take any action which would (i) make any
representation or warranty made by such party in Article IV hereof untrue or
incorrect or (ii) result in any of the conditions to the ASARCO Merger set forth
in Article VI not being satisfied.
Section 5.2 Investigation.
(a) Each of Parent and ASARCO shall (and shall cause its
respective Subsidiaries to) afford to one another and to one another's officers,
employees, accountants, counsel and other authorized representatives full and
complete access on reasonable prior notice during normal business hours,
throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' properties, contracts,
commitments, books, and records (including but not limited to Tax Returns) and
any report, schedule or other document filed or received by it or any of its
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Subsidiaries pursuant to the requirements of federal or state securities laws or
filed with or sent to the SEC, the Department of Justice, the Federal Trade
Commission or any other Governmental Entity and shall use their reasonable best
efforts to cause their respective representatives and Subsidiaries to furnish
promptly to one another such additional financial and operating data and other
information as to its and its Subsidiaries' respective businesses and properties
as the other or its duly authorized representatives may from time to time
reasonably request; provided, that nothing herein shall require either Parent or
ASARCO or any of their respective Subsidiaries to disclose any information to
the other that would cause significant competitive harm to such disclosing party
or its affiliates if the transactions contemplated by this Agreement are not
consummated. Notwithstanding any provision of this Agreement to the contrary, no
party shall be obligated to make any disclosure in violation of applicable Laws.
(b) Parent and ASARCO will not, and will cause their
respective officers, employees, accountants, counsel and representatives not to,
use any information obtained pursuant to this Section 5.2 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Pending consummation of the transactions herein contemplated, each of
Parent and ASARCO will keep confidential, and will cause their respective
officers, employees, accountants, counsel and representatives to keep
confidential, all information and documents obtained pursuant to this Section
5.2 unless such information (i) was already known to it, (ii) becomes available
to it from other sources not known by it to be bound by a confidentiality
obligation, (iii) is independently acquired by it as a result of work carried
out by any of its employees or representatives to whom no disclosure of such
information has been made, (iv) is disclosed with the prior written approval of
the other party or (v) is or becomes readily ascertainable from published
information or trade sources. Upon any termination of this Agreement, each party
will, upon request, collect and deliver to the other party all documents
obtained by it or any of its officers, employees, accountants, counsel and
representatives then in their possession and any copies thereof.
Section 5.3 Shareholder Approvals and Other Cooperation.
(a) If required by applicable Law, as soon as practicable
following consummation of the ASARCO Offer, Parent and ASARCO shall together, or
pursuant to any reasonable allocation of responsibility between them:
(i) prepare and file confidentially with the SEC as soon as is
reasonably practicable the Information Statement in preliminary form
and promptly prepare and cause Parent to file with the SEC a
registration statement on Form S-4 under
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the Securities Act with respect to the Parent Common Stock issuable in
the ASARCO Merger (or, to the extent practicable, to amend as
necessary the Registration Statement of Parent on Form S-4 (Reg. No.
333-86063), which was declared effective by the SEC on September 2,
1999 with respect to the Parent Common Stock) (the "Registration
Statement"), and shall use their reasonable best efforts to have the
Information Statement cleared by the SEC under the Exchange Act and
the Registration Statement declared effective by the SEC under the
Securities Act;
(ii) as soon as is reasonably practicable cause Parent to take all
such action as may be required under state blue sky or securities laws
in connection with the issuance of shares of Parent Common Stock in
the ASARCO Merger and as contemplated by this Agreement;
(iii) promptly prepare and file with the NYSE and such other stock
exchanges as shall be agreed upon listing applications covering the
shares of Parent Common Stock issuable in the ASARCO Merger, upon
exercise of ASARCO stock options, warrants, conversion rights or other
rights or vesting or payment of other ASARCO equity-based awards and
use its reasonable best efforts to obtain, prior to the Effective
Time, approval for the listing of such Parent Common Stock, subject
only to official notice of issuance;
(iv) cooperate with one another in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated herein; and
(v) cooperate with one another in obtaining (i) an opinion of Shearman
& Sterling, special counsel to Parent, dated as of the date of the
Effective Time, to the effect that the ASARCO Merger will qualify as a
transaction described in Section 368(a) of the Code, and (ii) an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel
to ASARCO, dated as of the date of the Effective Time, to the effect
that the ASARCO Merger will qualify as a transaction described in
Section 368(a) of the Code. In connection therewith, each of ASARCO
and Parent shall deliver to Shearman & Sterling and Skadden, Arps,
Slate, Meagher & Flom LLP customary representation letters in form and
substance reasonably satisfactory to such special counsel and Parent
and ASARCO shall use their reasonable best efforts to obtain any
representation letters drafted by their special counsel from their
respective appropriate shareholders and shall deliver any such letters
obtained to Shearman & Sterling
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and Skadden, Arps, Slate, Meagher & Flom LLP (the representation
letters referred to in this sentence are collectively, the "Tax
Certificates").
(b) Subject to the limitations contained in Section 5.2,
Parent and ASARCO shall each furnish to one another and to one another's counsel
all such information as may be required in order to effect the foregoing actions
and each represents and warrants to the other that no information furnished by
it in connection with such actions or otherwise in connection with the
consummation of the transactions contemplated by this Agreement will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in order to make any information so furnished, in light of the
circumstances under which it is so furnished, not misleading.
(c) (i) Parent shall cause an appropriate supplement to the
Phelps Dodge Proxy Statement to be mailed to Parent's shareholders, and ASARCO
shall cause the Information Statement to be mailed to ASARCO's shareholders, in
each case as promptly as practicable after the Registration Statement is
declared effective under the Securities Act.
(ii) Parent shall hold a meeting of its stockholders (the "Parent
Shareholder Meeting") as provided in the Phelps Dodge Proxy Statement
dated September 13, 1999 as supplemented by the Proxy Statement
Supplement dated September 22, 1999 (as the same may be further
amended or supplemented, the "Phelps Dodge Proxy Statement") for the
purpose of obtaining the Parent Shareholder Approval. Parent shall,
through its Board of Directors, recommend to its shareholders the
approval of the Share Issuance and the other transactions contemplated
hereby unless the Board of Directors of Parent determines in good
faith, after consultation with outside counsel, that to do so would be
inconsistent with its fiduciary duties under applicable Law.
Notwithstanding anything herein to the contrary, in the event that
Parent, SubA or any other subsidiary of Parent shall acquire at least
90% of the outstanding shares of each class of capital stock of
ASARCO, pursuant to the ASARCO Offer or otherwise, the parties hereto
agree to take all necessary and appropriate action to cause the ASARCO
Merger to become effective as soon as practicable after such
acquisition, without a meeting of ASARCO shareholders, in accordance
with Section 14A:10-5.1 of the NJBCA and Section 253 of the DGCL.
(iii) ASARCO shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of
its shareholders (the "ASARCO Shareholders Meeting") for the purpose
of
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obtaining the ASARCO Shareholder Approval. ASARCO shall, through its
Board of Directors, subject to the last sentence of Section 5.9(b),
recommend to its shareholders the adoption of this Agreement, the
ASARCO Merger and the other transactions contemplated hereby.
(iv) Each of Parent and ASARCO will use their best efforts to hold the
Parent Shareholders Meeting and the ASARCO Shareholders Meeting as
soon as practicable after the date hereof.
(d) Parent shall vote, or cause to be voted, all of the
shares of ASARCO Common Stock then owned by it or any of its Subsidiaries in
favor of the approval and adoption of this Agreement.
Section 5.4 Affiliate Agreements.
ASARCO shall, as soon as practicable, deliver to Parent a
list (reasonably satisfactory to counsel for Parent) setting forth the names and
addresses of all persons who will be, at the time of the ASARCO Shareholders
Meeting, in ASARCO's reasonable judgment, "affiliates" of ASARCO for purposes of
Rule 145 under the Securities Act. ASARCO shall furnish such information and
documents as Parent may reasonably request for the purpose of reviewing such
list. ASARCO shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished pursuant to this Section 5.4
to execute a written agreement on or prior to the mailing of the Joint Proxy
Statement, in substantially the form of Exhibit A hereto.
Section 5.5 ASARCO Employee Stock Options, Incentive and
Benefit Plans.
(a) Simultaneously with the ASARCO Merger, (i) each
outstanding option ("ASARCO Stock Options") and related stock appreciation right
("ASARCO SAR"), if any, to purchase or acquire a share of ASARCO Common Stock
under employee incentive or benefit plans, programs or arrangements and
non-employee director plans presently maintained by ASARCO ("ASARCO Option
Plans") shall be converted into an option (together with a related stock
appreciation right of ASARCO, if applicable) to purchase the number of shares of
Parent Common Stock equal to 0.50266, times the number of shares of ASARCO
Common Stock which could have been obtained prior to the Effective Time upon the
exercise of each such option, at an exercise price per share equal to the
exercise price for each such share of ASARCO
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Common Stock subject to an option (and related ASARCO SAR, if any) under the
ASARCO Option Plans divided by 0.50266, and all references in each such option
(and related ASARCO SAR, if any) to ASARCO shall be deemed to refer to Parent,
where appropriate, and (ii) Parent shall assume the obligations of ASARCO under
the ASARCO Option Plans. The other terms of each such ASARCO Stock Option and
ASARCO SAR, and the plans under which they were issued, shall continue to apply
in accordance with their terms, including any provisions providing for
acceleration of vesting or payment.
(b) Simultaneously with the ASARCO Merger, each outstanding
award including restricted stock and phantom stock or common stock equivalents
("ASARCO Award") under any employee incentive or benefit plans, programs or
arrangements and non-employee director plans presently maintained by ASARCO
which provide for grants of equity-based awards shall be amended or converted
into a similar instrument of Parent, in each case with such adjustments to the
terms of such ASARCO Awards as are appropriate to preserve the value inherent in
such ASARCO Awards with no detrimental effects on the holders thereof. The other
terms of each ASARCO Award, and the plans or agreements under which they were
issued, shall continue to apply in accordance with their terms, including any
provisions providing for acceleration of vesting or payment. With respect to any
restricted stock awards as to which the restrictions shall have lapsed on or
prior to the Effective Time in accordance with the terms of the applicable plans
or award agreements, shares of such previously restricted stock shall be
converted in accordance with the provisions of Section 3.1(b).
(c) Prior to the Effective Time, ASARCO shall amend each of
its employee incentive or benefit plans, programs and arrangements and
non-employee director plans, to the extent necessary and appropriate, to reflect
the transactions contemplated by this Agreement, including, but not limited to
the conversion of shares of ASARCO Common Stock held or to be awarded or paid
pursuant to such benefit plans, programs or arrangements into shares of Parent
Common Stock on a basis consistent with the transactions contemplated by this
Agreement. At or prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the ASARCO Stock Options. As soon as
practicable after the Effective Time, Parent shall file a registration statement
on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the Parent Common Stock subject to such
ASARCO Stock Options, and shall maintain the effectiveness of such registration
statement and the current status of the prospectus or prospectuses contained
therein, for so long as such ASARCO Stock Options remain outstanding.
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(d) Parent and its Subsidiaries and affiliates agree to honor
in accordance with their terms the ASARCO Employee Benefit Plans, including,
without limitation, any rights or benefits arising thereunder as a result of the
transactions contemplated by this Agreement (either alone or in combination with
any other event). It is the intention of the parties hereto that, for a period
of one year from the Effective Time, Parent and its Subsidiaries continue to
maintain the ASARCO Employee Benefit Plans, in each case in accordance with
their terms as in effect at the Effective Time, with only such amendments as are
required by applicable Law or permitted by the terms thereof as in effect at the
Effective Time, and which do not adversely affect the rights of participants (or
their beneficiaries) thereunder.
(e) Parent shall take, and shall cause the ASARCO Surviving
Corporation and its Subsidiaries and all other affiliates of Parent to take, the
following actions: (i) waive any limitations regarding pre-existing conditions
and eligibility waiting periods under any welfare or other employee benefit plan
maintained by any of them for the benefit of employees of ASARCO or any of its
Subsidiaries immediately prior to the Effective Time (the "ASARCO Employees") or
in which ASARCO Employees participate after the Effective Time, (ii) provide
each ASARCO Employee with credit for any co-payments and deductibles paid prior
to the Effective Time for the calendar year in which the Effective Time occurs,
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time, and (iii) for all purposes under all compensation and benefit
plans and policies applicable to ASARCO Employees, treat all service by ASARCO
Employees with ASARCO or any of its Subsidiaries or affiliates before the
Effective Time as service with Parent and its Subsidiaries and affiliates.
(f) As of the Effective Time, Parent shall guarantee the
performance of the employment contracts and ASARCO Employee Benefit Plans in
accordance with their respective terms and the terms of this Agreement.
(g) The parties hereto agree that the transactions
contemplated by this Agreement shall constitute a "change of control" for
purposes of the ASARCO Employee Benefit Plans.
Section 5.6 Filings; Other Action.
(a) Subject to the terms and conditions herein provided,
Parent and ASARCO shall (i) promptly make all filings necessary in connection
with their
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respective Required Statutory Approvals and (ii) use reasonable best efforts to
cooperate with one another in (y) determining whether any filings are required
to be made with, or consents, permits, authorizations or approvals are required
to be obtained from, any third party or other governmental or regulatory bodies
or authorities of federal, state, local and foreign jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby and (z) timely making all such
filings and timely seeking all such consents, permits, authorizations or
approvals, including such party's Required Third Party Consents. The parties
shall cooperate with one another in connection with the making of all such
filings, including providing copies of all such documents to the non-filing or
non-submitting party and its advisors prior to filing or otherwise submitting.
(b) (i) Without limiting the generality of the undertakings
of Parent and ASARCO pursuant to Section 5.6(a), Parent agrees to obtain the
expiration or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(which approval has already been obtained), and applicable foreign Laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization, restraint of trade or limitation of
competition (collectively, "Antitrust Laws"), which obligation shall be
unconditional and shall be not be qualified by best efforts (regardless of
whether fulfillment of such obligation would have a Material Adverse Effect on
Parent or ASARCO). The existence of the conditions set forth in Sections 6.1(a)
shall not limit or diminish Parent's obligations pursuant to the foregoing
sentence or relieve Parent of any liability or damages that may result from its
breach of its obligations under this Section 5.6(b)(i) (nor limit the
obligations of ASARCO pursuant to the following sentence or relieve ASARCO of
any liability or damages that may result from its breach of obligations under
this Section 5.6(b)(i)). In connection with the foregoing, ASARCO will cooperate
with and assist Parent, and, with respect to matters that are within its power
or control will use its reasonable best efforts to promptly (i) take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable Antitrust Laws to consummate the
transactions contemplated by this Agreement as soon as practicable, including,
without limitation, preparing and filing as promptly as practicable all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtain and maintain all approvals, consents, registrations, permits,
authorizations and other confirmations required to be obtained from any third
party that are necessary, proper or advisable to consummate the ASARCO Merger
and the other transactions contemplated by this Agreement. At Parent's request,
ASARCO will commit to and implement any divestiture, hold separate or similar
transaction or action
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with respect to any asset or business of ASARCO, which commitment and
implementation may, at ASARCO's option, be conditioned upon and effective as of
the Effective Time. Subject to applicable Laws relating to the exchange of
information, the Parent and ASARCO shall have the right to review in advance,
and to the extent practicable each will consult with the other on, all the
information relating to their respective Subsidiaries, that appears in any
filing made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the ASARCO Merger and the other
transactions contemplated by this Agreement.
(ii) In furtherance and not in limitation of the foregoing, and to the
extent that any such action has not heretofore been taken or completed, each of
Parent and ASARCO agrees to (i) make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby as promptly as practicable and in any event within ten
business days of the date hereof, (ii) supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act and (iii) complete the review process under the HSR Act to permit
the consummation of the ASARCO Merger including, but not limited to, causing the
expiration of termination of the applicable waiting periods under the HSR Act as
soon as practicable.
Section 5.7 Further Assurances. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each of the
parties to this Agreement shall take all such necessary action.
Section 5.8 Takeover Statute. If any "fair price,"
"moratorium," "control share acquisition" or other form of antitakeover statute
or regulation shall become applicable to the transactions contemplated hereby,
ASARCO and the members of its Board of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
Section 5.9 No Solicitation by ASARCO.
(a) ASARCO shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any of its directors, officers
or employees or any investment banker, financial advisor, attorney, accountant
or other representative
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retained by it or any of its Subsidiaries to, directly or indirectly through
another person, (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes any ASARCO Takeover
Proposal (or reasonably could be expected to lead to a ASARCO Takeover Proposal)
or (ii) participate in any discussions or negotiations regarding any ASARCO
Takeover Proposal; provided, however, that if the Board of Directors of ASARCO
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to ASARCO's
shareholders under applicable Law, ASARCO may, in response to an ASARCO Takeover
Proposal which was not solicited by it or which did not otherwise result from a
breach of this Section 5.9(a), and subject to providing prior written notice of
its decision to take such action to Parent (the "ASARCO Notice") (x) furnish
information with respect to ASARCO and its Subsidiaries to any person making an
ASARCO Takeover Proposal pursuant to a customary confidentiality agreement (as
determined by ASARCO after consultation with its outside counsel) and (y)
participate in discussions or negotiations regarding such ASARCO Takeover
Proposal. For purposes of this Agreement, "ASARCO Takeover Proposal" means any
inquiry, proposal or offer (or any improvement, restatement, amendment, renewal
or reiteration thereof) from any person relating to any direct or indirect
acquisition or purchase of a business or shares of any class of equity
securities of ASARCO or any of its Subsidiaries, any tender offer or exchange
offer that if consummated would result in any person beneficially owning any
class of equity securities of ASARCO or any of its Subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving ASARCO or any of its subsidiaries, other than
the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 5.9,
neither the Board of Directors of ASARCO nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent, the recommendation by such Board of Directors or such
committee of the ASARCO Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any ASARCO Takeover Proposal, or (iii)
cause ASARCO to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, a "ASARCO Acquisition
Agreement") related to any ASARCO Takeover Proposal. Notwithstanding the
foregoing, in the event that the Board of Directors of ASARCO receives an ASARCO
Takeover Proposal and the Board of Directors of ASARCO determines in good faith,
after consultation with outside counsel, that it is necessary to do so in order
to comply with its fiduciary duties to ASARCO's shareholders under applicable
Law, the Board of Directors of ASARCO may (x) take any of the
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actions described in clauses (i), (ii) or (iii) above or (y) terminate this
Agreement (and concurrently with or after such termination, if it so chooses,
cause ASARCO to enter into any ASARCO Acquisition Agreement with respect to any
ASARCO Takeover Proposal) but only after the fifth business day following
Parent's receipt of written notice advising Parent that the Board of Directors
of ASARCO is prepared to accept an ASARCO Takeover Proposal, specifying the
material terms and conditions of such ASARCO Takeover Proposal and identifying
the person making such ASARCO Takeover Proposal.
(c) In addition to the obligations of ASARCO set forth in
paragraphs (a) and (b) of this Section 5.9, ASARCO shall immediately advise
Parent orally and in writing of any request for information or of any ASARCO
Takeover Proposal, the material terms and conditions of such request or ASARCO
Takeover Proposal and the identity of the person making such request or ASARCO
Takeover Proposal. ASARCO will keep Parent reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
ASARCO Takeover Proposal.
(d) Nothing contained in this Section 5.9 shall prohibit
ASARCO from taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to ASARCO's shareholders if, in the good faith judgement of the Board of
Directors of ASARCO, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable Law. At the
meeting of the ASARCO Board at which this Agreement was considered, authorized
and approved, held October 5, 1999, the ASARCO Board unanimously declared it
advisable that ASARCO's shareholders adopt and approve this Agreement.
Notwithstanding any subsequent determination by the ASARCO Board to change such
recommendation, this Agreement shall be submitted to the shareholders of ASARCO
at the ASARCO Shareholder Meeting for the purpose of obtaining the ASARCO
Shareholder Approval and nothing contained herein shall be deemed to relieve
ASARCO of such obligation.
Section 5.10 Public Announcements. Parent and ASARCO will
consult with and provide each other the reasonable opportunity to review and
comment upon any press release prior to the issuance of any press release
relating to this Agreement or the transactions contemplated herein and shall not
issue any such press release prior to such consultation except as may be
required by Law or by obligations pursuant to any listing agreement with any
national securities exchange.
Section 5.11 Indemnification and Insurance.
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(a) Parent agrees that all rights to exculpation and
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers (the "ASARCO
Indemnified Parties") of ASARCO as provided in its charter or by-laws or in any
agreement shall survive the ASARCO Merger and shall continue in full force and
effect in accordance with their terms. For six years from the Effective Time,
Parent shall indemnify the ASARCO Indemnified Parties to the same extent as such
ASARCO Indemnified Parties are entitled to indemnification pursuant to the
preceding sentence.
(b) For three years from the Effective Time, Parent shall
maintain in effect ASARCO's current directors' and officers' liability insurance
policy (the "ASARCO Policy"), covering those persons who are covered by the
ASARCO Policy (a copy of which has been heretofore delivered to Parent);
provided, however, that in no event shall Parent be required to expend in any
one year an amount in excess of 150% of the annual premiums to be paid by ASARCO
for such insurance, and, provided, further, that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount; and provided, further, that Parent may meet its obligations under this
paragraph by covering the above people under Parent's insurance policy or
policies on the terms described above.
Section 5.12 Accountants' "Comfort" Letters. Parent and
ASARCO will each use reasonable best efforts to cause to be delivered to each
other two letters from their respective independent accountants, one dated a
date within two business days before the date of the Registration Statement and
one dated a date within two business days before the Effective Time, in form and
substance reasonably satisfactory to the recipient and customary in scope for
comfort letters delivered by independent accountants in connection with
registration statements similar to the Registration Statement.
Section 5.13 Additional Reports. Parent and ASARCO shall each
furnish to the other copies of any reports of the type referred to in Section
4.5 which it files with the SEC on or after the date hereof, and each of Parent
and ASARCO, as the case may be, represents and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading. Any unaudited consolidated interim
financial statements included in such reports (including any related notes
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and schedules) will fairly present the financial position of Parent and its
consolidated Subsidiaries or ASARCO and its consolidated Subsidiaries, as the
case may be, as of the dates thereof and the results of operations and changes
in financial position or other information included therein for the periods or
as of the date then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto).
Section 5.14 Disclosure Schedule Supplements. From time to
time after the date of this Agreement and prior to the Effective Time, Parent
will promptly supplement or amend the Parent Disclosure Schedule with respect to
any matter hereafter arising which, if existing or occurring at or prior to the
date of this Agreement, would have been required to be set forth or described in
the Parent Disclosure Schedule or which is necessary to correct any information
in a schedule or in any representation and warranty of Parent which has been
rendered inaccurate thereby. From time to time after the date of this Agreement
and prior to the Effective Time, ASARCO will promptly supplement or amend the
ASARCO Disclosure Schedule with respect to any matter hereafter arising which,
if existing or occurring at or prior to the date of this Agreement, would have
been required to be set forth or described in the ASARCO Disclosure Schedule or
which is necessary to correct any information in a schedule or in any
representation and warranty of ASARCO which has been rendered inaccurate
thereby.
Section 5.15 Certain Litigation. Each of the parties shall
prior to or at the Effective Time cease, terminate and dismiss, with prejudice,
any and all actions, proceedings or lawsuits initiated, commenced or filed by
such party in connection with (i) the Combination and (ii) Parent's exchange
offer dated as of September 3, 1999, as amended, for ASARCO and each of the
parties shall use their reasonable best efforts to cause any and all actions,
proceedings or lawsuits initiated, commenced or filed by third parties in
connection with the transactions in the above (i) and (ii) to cease, terminate
or be dismissed, with prejudice.
Section 5.16 Shareholder Litigation. Each of Parent and
ASARCO shall give the other the reasonable opportunity to participate in the
defense of any shareholder litigation against ASARCO or Parent, as applicable,
and its directors relating to the transactions contemplated by this Agreement.
Section 5.17 Section 16(b). Parent and ASARCO shall take all
steps reasonably necessary to cause the transactions contemplated hereby and any
other
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dispositions of equity securities of ASARCO (including derivative securities) or
acquisitions of Parent equity securities (including derivative securities) in
connection with this Agreement by each individual who is a director or officer
of ASARCO to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 5.18 Change of Control Agreements.
ASARCO has change of control employment agreements with the
12 people listed in Section 5.18(a) of the ASARCO Disclosure Schedule which
provide certain benefits upon a termination of employment other than for "cause"
or for "good reason" following the Effective Time. Parent shall take all
appropriate steps necessary to, and will, give reasonable advance notice of its
intention to offer employment (including the proposed terms thereof), or not to
offer employment, to each of the aforementioned 12 people and will make such
offers in the former case, all sufficiently in advance of the Effective Time to
afford such offerees reasonable time prior to the Effective Time to decide
whether or not to accept the employment offered prior to the Effective Time.
ASARCO has previously made written disclosure to Parent for each of such 12
people and for all such people in the aggregate of the total estimated amount
payable to such people for all obligations owed to them by ASARCO under all
contractual and plan arrangements with such people, assuming that the employment
of each such person was terminated effective as of December 31, 1999 (except
that specific benefits are calculated as of specified dates set forth in the
written disclosure). The parties hereto agree that the transactions contemplated
by the Agreement shall constitute a "change of control" for purposes of the
change of control employment agreements referred to in this Section 5.18.
ARTICLE VI
CONDITIONS TO THE ASARCO MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
ASARCO Merger. The respective obligations of each party to effect the ASARCO
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) The Parent Shareholder Approval and the ASARCO
Shareholder Approval shall have been obtained, all in accordance with applicable
Law.
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(b) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or enforced
by any court or other tribunal or governmental body or authority which prohibits
or makes illegal the consummation of the ASARCO Merger substantially on the
terms contemplated hereby. In the event any order, decree or injunction shall
have been issued, each party shall use its reasonable efforts to remove any such
order, decree or injunction.
(c) SubA shall have accepted for exchange all shares of
ASARCO Common Stock validly tendered and not withdrawn pursuant to the ASARCO
Offer; provided, however, that this condition shall not be applicable to the
obligations of SubA if, in breach of this Agreement, SubA fails to accept for
exchange and exchange any such shares validly tendered and not withdrawn
pursuant to the ASARCO Offer.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.1 Termination or Abandonment. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after any
approval of the matters presented in connection with the ASARCO Merger by the
respective shareholders of Parent and ASARCO:
(a) by the mutual consent of the Board of Directors of Parent
and ASARCO;
(b) by either Parent or ASARCO if, without fault of such
terminating party, the purchase of ASARCO Common Stock pursuant to the ASARCO
Offer shall not have occurred on or before March 31, 2000, which date may be
extended by mutual written consent of the parties hereto; or
(c) by either Parent or ASARCO if any court of competent
jurisdiction or other governmental body shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the purchase of ASARCO Common
Stock pursuant to the ASARCO Offer or the ASARCO Merger, and such order, decree,
ruling or other action shall have become final and nonappealable; provided that
the party seeking to terminate this Agreement shall have used its reasonable
best efforts, subject to Section 5.6, to remove or lift such order, decree or
ruling; or any statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any
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court, administrative agency or commission or other governmental authority or
instrumentality which prohibits or makes illegal the consummation of the ASARCO
Offer or the ASARCO Merger and which, in the case of any such order, injunction
or decree, shall have become final and nonappealable; or there shall have been a
failure to obtain any required consent or approval under foreign laws or
regulations which would prohibit or make the consummation of the ASARCO Offer or
the ASARCO Merger illegal or would have a Material Adverse Effect on Parent or
on ASARCO.
Section 7.2 Termination by Parent. This Agreement may be
terminated and the ASARCO Offer and the ASARCO Merger may be abandoned by action
of the Board of Directors of Parent, at any time prior to the purchase of ASARCO
Common Stock pursuant to the ASARCO Offer, if (a) the ASARCO Board shall
withdraw, modify or change its recommendation or approval in respect of this
Agreement or the ASARCO Offer in a manner adverse to Parent, (b) the ASARCO
Board shall have recommended any proposal other than by Parent in respect of an
ASARCO Takeover Proposal, (c) an ASARCO Takeover Proposal other than by Parent
shall be publicly disclosed and at the scheduled expiration of the ASARCO Offer
the Minimum Tender Condition shall not have been satisfied; provided, that all
other conditions to the ASARCO Offer are satisfied, or (d) the condition to the
ASARCO Offer described in clause (e) of Annex A hereto shall not have been
satisfied within 30 days of notice that such condition has not been satisfied.
Section 7.3 Termination by ASARCO. This Agreement may be
terminated and the ASARCO Merger may be abandoned by action of the ASARCO Board,
at any time prior to the acceptance for payment of shares under the ASARCO
Offer, (a) if there shall be a material breach of any of Parent's
representations, warranties or covenants hereunder, which breach shall not be
cured within ten days of notice thereof, or (b) provided ASARCO is not in breach
of any obligation under this Agreement, to allow ASARCO to enter into an
agreement in respect of an ASARCO Takeover Proposal (provided that such
termination pursuant to this clause (b) shall not be effective unless and until
ASARCO shall have paid to Parent the fee described in Section 7.5 hereof and
shall have complied with Section 5.9(c) and the notice provisions of Section
5.9(b)).
Section 7.4 Effect of Termination. In the event of
termination of this Agreement pursuant to Section 7.1, all rights and
obligations under this Agreement shall terminate (except for the provisions of
Sections 5.2(b) and 8.2), and there shall be no other liability on the part of
Parent or ASARCO to the other except liability arising out of a willful and
material breach of this Agreement.
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Section 7.5 Termination Fee. In the event that (i) after the
date hereof and prior to the ASARCO Shareholder Meeting an ASARCO Takeover
Proposal shall have been made known to ASARCO or any of its Subsidiaries or
shall have been made directly to its shareholders generally or any person shall
have publicly announced an intention (whether or not conditional) to make an
ASARCO Takeover Proposal and thereafter this Agreement is terminated by either
Parent or ASARCO pursuant to Section 7.1(b) or (ii) this Agreement is terminated
by ASARCO pursuant to Section 7.3(b), then ASARCO shall promptly pay Parent a
fee equal to $30 million (the "ASARCO Termination Fee"), payable by wire
transfer of same day funds; provided, however, that no ASARCO Termination Fee
shall be payable to Parent pursuant to this paragraph unless and until within 18
months of such termination ASARCO or any of its Subsidiaries enters into any
ASARCO Acquisition Agreement or consummates any ASARCO Takeover Proposal (for
the purposes of the foregoing proviso the terms "ASARCO Acquisition Agreement"
and "ASARCO Takeover Proposal" shall have the meanings assigned to such terms in
Section 5.9 (except that the reference to the "acquisition or purchase of a
business or shares of any class of equity securities of ASARCO or any of its
Subsidiaries" in the definition of "ASARCO Takeover Proposal" in Section 5.9
shall be deemed to be a reference to the "acquisition or purchase of a business
that constitutes 20% or more of the net revenues, net income or the assets of
ASARCO and its Subsidiaries, taken as a whole, or 20% of any class of equity
securities of ASARCO or any of its Subsidiaries," in which event the Termination
Fee shall be payable upon the first to occur of such events. ASARCO acknowledges
that the agreements contained in this Section 7.5(a) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if ASARCO fails
promptly to pay the ASARCO Termination Fee, and, in order to obtain such
payment, Parent commences a suit which results in a judgement against ASARCO for
the ASARCO Termination Fee, ASARCO shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the ASARCO Termination Fee and the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
Section 7.6 Amendment or Supplement. At any time before or
after approval of the matters presented in connection with the Combination by
the respective shareholders of Parent and ASARCO and prior to the Effective
Time, this Agreement may be amended or supplemented in writing by Parent and
ASARCO with respect to any of the terms contained in this Agreement; provided,
however, that following approval by the shareholders of ASARCO there shall be no
amendment or change to the
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provisions hereof with respect to the ASARCO Merger Consideration as provided
herein nor any amendment or change not permitted under applicable Law, without
further approval by the shareholders of ASARCO.
Section 7.7 Extension of Time, Waiver, Etc. At any time prior
to the Effective Time, any party may:
(a) extend the time for the performance of any of the
obligations or acts of the other party;
(b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto; or
(c) subject to the proviso of Section 7.3 waive compliance
with any of the agreements or conditions of the other party contained herein.
Notwithstanding the foregoing no failure or delay by any
party in exercising any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the ASARCO Merger.
Section 8.2 Expenses. Whether or not the ASARCO Merger is
consummated, all costs and expenses incurred in connection with the ASARCO
Merger, this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses, except that (a)(i) the filing fee in
connection with any HSR Act filing or any other Required Statutory Approval,
(ii) the commissions and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent, incurred in connection with the
sale of Excess Shares, (iii) the expenses incurred
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in connection with the printing and mailing of the Joint Proxy Statement
(including SEC filing fees), and (iv) all transfer Taxes, shall be shared
equally by Parent and ASARCO.
Section 8.3 Counterparts; Effectiveness. This Agreement may
be executed in two or more consecutive counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered (by telecopy or otherwise)
to the other parties.
Section 8.4 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of laws thereof, except to the extent the
provisions of this Agreement are expressly governed by or derive their authority
from the NJBCA.
Section 8.5 Notices. All notices and other communications
hereunder shall be in writing (including telecopy or similar writing) and shall
be effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 8.5 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 8.5:
To Parent or SubA:
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, Arizona 85004-3014
copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: David W. Heleniak
Telecopy: (212) 848-7179
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Michael W. Blair
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Telecopy: (212) 909-6836
To ASARCO:
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Attention: Augustus B. Kinsolving, Esq.
Telecopy: (212) 510-1910
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Margaret L. Wolff
Telecopy: (212) 735-2000
Section 8.6 Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
Section 8.7 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
Section 8.8 Enforcement of Agreement. The parties hereto
agree that money damages or other remedy at law would not be sufficient or
adequate remedy for any breach or violation of, or a default under, this
Agreement by them and that in addition to all other remedies available to them,
each of them shall be entitled to the fullest extent permitted by Law to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief,
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including, without limitation, specific performance, without bond or other
security being required.
Section 8.9 Entire Agreement; Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof
and thereof and, except for the provisions of Section 5.11 hereof, is not
intended to and shall not confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 8.10 Headings. Headings of the Articles and Sections
of this Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11 Definitions. References in this Agreement to
"Subsidiaries" of any person shall mean any corporation or other form of legal
entity of which more than 50% of the outstanding voting securities are on the
date hereof directly or indirectly owned by such person. References in this
Agreement to "Significant Subsidiaries" shall mean Subsidiaries which constitute
"significant subsidiaries" under Rule 405 promulgated by the SEC under the
Securities Act. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
Notwithstanding the foregoing, Parent shall not be deemed to be an "affiliate"
or a "Subsidiary" of ASARCO.
Section 8.12 Finders or Brokers. Except for Morgan Stanley &
Co. Incorporated with respect to Parent, a copy of whose engagement agreement
has been or will be provided to ASARCO, and Credit Suisse First Boston
Corporation with respect to ASARCO, a copy of whose engagement agreement has
been or will be provided to Parent, neither Parent nor ASARCO nor any of their
respective Subsidiaries has employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to any fee or any commission in connection with or upon consummation
of the ASARCO Merger.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
PHELPS DODGE CORPORATION
By: /s/ D. C. Yearley
-------------------------------
Name: Douglas C. Yearley
Title: Chairman & CEO
AAV ACQUISITION CORP.
By: /s/ D. C. Yearley
-------------------------------
Name: Douglas C. Yearley
Title: Chairman
ASARCO INCORPORATED
By: /s/ Francis R. McAllister
-------------------------------
Name: Francis R. McAllister
Title: Chairman of the Board
<PAGE> 65
ANNEX A
Conditions to the ASARCO Offer
Notwithstanding any other provision of the ASARCO Offer,
Parent and the Purchaser shall not be required to accept for exchange or
exchange any ASARCO Common Stock, may postpone the acceptance for exchange of or
exchange for tendered ASARCO Common Stock, and, subject to the terms of the
Merger Agreement, may, terminate or amend the Offer as to any ASARCO Common
Stock not then exchanged (a) if at the Expiration Date, any of the Minimum
Condition or the Phelps Dodge Stockholder Approval Condition (as defined in the
Prospectus dated September 22, 1999 relating to the Offer by Phelps Dodge for
shares of ASARCO Common Stock) has not been satisfied or (b) if on or after
October 5, 1999 and at or prior to the Expiration Date, any of our other
conditions are not satisfied. The conditions are as follows:
(a) The shares of our common stock which shall be issued to
ASARCO stockholders in the ASARCO Offer and the ASARCO Merger have been
authorized for listing on the NYSE, subject to official notice of issuance;
(b) Registration Statement No. 333-86063 and any
post-effective amendments thereto shall be effective under the Securities Act,
and no stop order suspending the effectiveness of the Registration Statement
shall have been issued nor shall there have been proceedings for that purpose
initiated or threatened by the SEC and we shall have received all necessary
state securities law or "blue sky" authorizations;
(c) No temporary restraining order, preliminary or permanent
injunction or other order or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Offer or any of the other transactions contemplated by the Prospectus
dated September 22, 1999 (the "Prospectus") shall be in effect; no statute,
rule, regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any court, administrative agency or commission or
other governmental authority or instrumentality which prohibits, or makes
illegal the consummation of our Offer; nor shall there have been a failure to
obtain any required consent or approval under foreign laws or regulations which
prohibit or would make the consummation of the ASARCO Offer illegal or would
have a Material Adverse Effect on Parent or on ASARCO;
(d) There shall not have been after the date of this
Agreement any (i) amendment of the Code, (ii) amendment or adoption of final or
temporary Treasury Regulations under the Code, (iii) Internal Revenue Service
revenue ruling, revenue procedures, technical advice memorandum or notices, or
(iv) final decision of a court
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of competent jurisdiction, in each case that would be inconsistent with the
ASARCO Merger qualifying as a reorganization under Section 368(a) of the Code;
and
(e) The representations and warranties of ASARCO in this
Agreement shall be true and correct (without giving effect to any qualification
as to "materiality" or "Material Adverse Effect" set forth therein) as of the
date of the Agreement and as of the expiration date as though made on and as of
the date of the Agreement and the Expiration Date except where the failure of
such representations and warranties to be so true and correct would not
reasonably be expected to have, individually or in the aggregate a Material
Adverse Effect on ASARCO; and ASARCO shall have performed or complied in all
material respects with all the material agreements and covenants required by
this Agreement.
The foregoing conditions are solely for benefit of Parent and
the Purchaser and Parent and the Purchaser may assert them regardless of the
circumstances giving rise to any such conditions (including any action or
inaction by Parent and the Purchaser). The determination as to whether any
condition has been satisfied shall be deemed a continuing right which may be
asserted at any time and from time to time. Notwithstanding the fact that Parent
and the Purchaser reserve the right to assert the failure of a condition
following acceptance for exchange but prior to exchange in order to delay
exchange or cancel its obligation to exchange properly tendered ASARCO Common
Stock, Parent and the Purchaser will either promptly exchange such ASARCO Common
Stock or promptly return such ASARCO Common Stock.
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EXHIBIT (D)(3)
October 7, 1999
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3014
Offer to Exchange Common Stock of Phelps Dodge Corporation
for Common Stock of ASARCO Incorporated
Ladies and Gentlemen:
You have requested our opinion as to certain United States federal income
tax consequences of your offer to exchange shares of your common stock for
shares of common stock of ASARCO Incorporated, a New Jersey corporation and of
the merger of AAV Corporation, a Delaware subsidiary wholly owned by you, with
ASARCO Incorporated. We hereby confirm our opinion as set forth under the
heading "Material U.S. Federal Income Tax Considerations" in the Prospectus
dated October 7, 1999.
We hereby consent to the reference to us under the heading "Material U.S.
Federal Income Tax Considerations" in the Prospectus and to the filing of this
opinion as an exhibit to the related Registration Statement on Form S-4 filed
with the Securities and Exchange Commission. In giving this consent, we do not
hereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
SHEARMAN & STERLING
PHB/PMM
