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[LOGO OF CYPRUS AMAX MINERALS
COMPANY APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT FOR CYPRUS AMAX
MINERALS COMPANY
To be held on Wednesday, May 7, 1997 at 10 a.m. in the Summit Room of the
Inverness Hotel and Golf Club 200 Inverness Drive West Englewood, Colorado
80112
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NOTICE OF MEETING
The Annual Meeting of Shareholders of Cyprus Amax Minerals Company, a
Delaware corporation ("Cyprus Amax"), will be held in the Summit Room of the
Inverness Hotel and Golf Club, 200 Inverness Drive West, Englewood, Colorado
80112, on May 7, 1997 at 10:00 in the morning for the following purposes:
(1) electing three directors;
(2) approving the Management Incentive Program, as amended and
restated;
(3) approving Price Waterhouse LLP to serve as independent accountants
for Cyprus Amax for the 1997 fiscal year;
(4) considering and acting upon a shareholder proposal regarding an
independent nominating committee of the Board of Directors of
Cyprus Amax; and
(5) transacting such other business as properly may come before the
meeting or any adjournment thereof.
The close of business on March 10, 1997 has been fixed as the record date
for the annual meeting. All holders of common stock of record at that time are
entitled to vote at the meeting.
It is important that your stock be represented at the meeting. Whether or
not you plan to attend, please sign, date, and return the enclosed proxy
promptly in order to be sure that your shares will be voted. You may revoke
your proxy at any time before it is voted at the meeting by submitting a
written revocation or a new proxy or by attending the meeting and voting in
person.
Philip C. Wolf
Senior Vice President, General Counsel
and Secretary
March 21, 1997
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PROXY STATEMENT
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
Cyprus Amax Minerals Company ("Cyprus Amax" or "the Company") for the Annual
Meeting of Shareholders to be held on May 7, 1997. Only holders of Cyprus Amax
common stock ("Common Stock") of record at the close of business on March 10,
1997, will be entitled to vote at the meeting, each share of such Common Stock
being entitled to one vote. On March 21, 1997, there were outstanding
93,323,929 shares of Common Stock. Assuming a quorum is present, the
affirmative vote of at least a majority of the shares of Common Stock
represented at the meeting, either in person or by proxy, and entitled to vote
is required to approve each of the matters presented to the shareholders.
Abstentions are counted in tabulations of votes cast at the meeting and thus
have the same effect as a negative vote, whereas shares not voted due to the
failure of a broker to exercise his discretionary authority are not tabulated
for purposes of determining whether a proposal has been approved. The proxy
statement and enclosed form of proxy are being mailed on or about March 27,
1997 to each shareholder entitled to vote at the meeting. The Annual Report to
Shareholders for the year ended December 31, 1996, which is not a part of this
proxy statement, was mailed to shareholders commencing March 13, 1997.
Properly executed proxies returned at or prior to the meeting, unless
subsequently revoked, will be voted in accordance with the directions thereon.
If no directions are specified, the shares represented by the proxy will be
voted FOR proposals 1, 2, and 3 and AGAINST proposal 4. You may revoke your
proxy at any time before it is voted at the meeting by submitting a written
revocation or a new proxy to the Secretary of the Company or by attending the
meeting and voting in person. The persons named in the proxy will have
discretionary authority to vote with respect to additional matters that may
properly come before the meeting.
The entire cost of the solicitation of proxies will be borne by Cyprus Amax.
In addition to solicitation by mail, officers and regular employees of Cyprus
Amax may solicit proxies by telephone, telegraph, or personal contact.
Additional solicitation of proxies of brokers, banks, nominees, and
institutional investors will be made by Georgeson & Company Inc. at a cost to
Cyprus Amax of approximately $8,000 plus out-of-pocket expenses.
ELECTION OF DIRECTORS
Cyprus Amax's Certificate of Incorporation establishes a classified Board of
Directors with three classes of directors. At each Annual Meeting of
Shareholders, the successors to the class of directors whose terms expire at
that meeting are elected to serve as directors for a three-year term. At this
annual meeting, three directors are nominated for election to hold office
until the Annual Meeting of Shareholders in 2000 or until their successors are
elected and duly qualified.
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The Board of Directors has nominated John Hoyt Stookey, Billie B. Turner,
and Milton H. Ward for election to the Board. Each nominee currently is a
director of Cyprus Amax and was recommended to the Board by the Nominating
Committee of the Board (the "Nominating Committee").
Brief statements setting forth the principal occupations of and other
information concerning the nominees appear below.
John Hoyt Stookey: Chairman, Suburban Propane Partners
[PHOTO OF since March 1996; age 67. Mr. Stookey has been a
JOHN HOYT STOOKEY director of Cyprus Amax since November 15, 1993, and
APPEARS HERE] his term will expire at the annual meeting in 1997.
Mr. Stookey served as Chairman of Quantum Chemical
Company, a subsidiary of Hanson PLC from 1984 through
1995, and as President from 1975 through 1993. He
served from 1989 to 1993 as an executive officer of
Petrolane Incorporated, Petrolane Finance Corporation
and QJV Corp., affiliates of Quantum Chemical Company,
which companies were reorganized on July 15, 1993
under the U.S. Bankruptcy Code. Mr. Stookey is a
director of ACX Technologies, Inc., Chesapeake
Corporation, and the United States Trust Company of
New York.
Billie B. Turner: Retired Chairman, President and
[PHOTO OF Chief Executive Officer of IMC Fertilizer Group, Inc.;
BILLIE B. TURNER age 66. Mr. Turner has been a director of Cyprus Amax
APPEARS HERE] since October 22, 1992, and his term will expire at
the annual meeting in 1997. He served as Chairman,
President and Chief Executive Officer of IMC
Fertilizer Group, Inc. from July 1987 until 1994. Mr.
Turner has held a variety of executive offices within
the IMC organization since 1954. Mr. Turner is a
director of IMC Global, Inc. and International
Minerals and Chemical Corporation (Canada).
Milton H. Ward: Chairman, President and Chief
[PHOTO OF Executive Officer of Cyprus Amax since May 14, 1992;
MILTON H. WARD age 64. His term as a director will expire at the
APPEARS HERE] annual meeting in 1997. Mr. Ward served as Director,
President, and Chief Operating Officer of Freeport-
McMoRan Inc. from 1983 until 1992 and as Chairman and
Chief Executive Officer of Freeport McMoRan Copper &
Gold Inc. from 1984 until 1992. Mr. Ward is Chairman
of the Board and Chief Executive Officer of Amax Gold
Inc. He is a director of the National Mining
Association.
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THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION
OF JOHN HOYT STOOKEY, BILLIE B. TURNER, AND MILTON H. WARD AS DIRECTORS OF
CYPRUS AMAX. Shares represented by an executed proxy in the form enclosed
will, unless otherwise directed, be voted for the election of Messrs. Stookey,
Turner, and Ward. Should any of these nominees become unavailable for election
for any reason now unknown, the shares so represented will be voted for the
election of such other person or persons as the Board of Directors may
recommend. The affirmative vote of a majority of the shares represented at the
meeting, either in person or by proxy, is required to elect each director.
Shares represented at the meeting that abstain from voting as to a nominee
will have the same effect in the tabulation of votes as shares as to which
authority to vote has been withheld. Shares represented by a proxy that is
executed in such a manner as not to withhold authority are deemed to grant
authority to vote for the nominees.
OTHER DIRECTORS
Brief descriptions of the remaining members of the Board appear below.
Linda G. Alvarado: President and Chief Executive
[PHOTO OF Officer of Alvarado Construction Inc. since 1981; age
LINDA A. ALVARADO 45. Ms. Alvarado has been a director of Cyprus Amax
APPEARS HERE] since December 14, 1989, and her term will expire at
the annual meeting in 1999. Ms. Alvarado is a director
of Engelhard Corporation and Pitney Bowes, Inc.
George S. Ansell: President of the Colorado School of
[PHOTO OF Mines since 1984; age 62. Dr. Ansell has been a
GEORGE S. ANSELL director of Cyprus Amax since December 3, 1987, and
APPEARS HERE] his term will expire at the annual meeting in 1999.
From 1974 to 1984, Dr. Ansell served as Dean of the
School of Engineering of Rensselaer Polytechnic
Institute. Dr. Ansell is a director of OEA, Inc.
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Allen Born: Chairman and Chief Executive Officer of
[PHOTO OF ALLEN Alumax Inc. since November 15, 1993; age 63. Mr. Born
BORN APPEARS HERE] has been a director of Cyprus Amax since November 15,
1993, served as Co-Chairman from November 1993 through
November 1995 and served as Vice Chairman from
November 1995 through May 1996. His term will expire
at the annual meeting in 1999. Mr. Born was Chairman
of AMAX Inc. from June 1988 until November 1993 and
Chief Executive Officer of AMAX Inc. from January 1986
until November 1993. He served as President and Chief
Operating Officer of AMAX Inc. from June 1985 through
July 1991. Mr. Born is a director of AK Steel, Alumax
Inc., and Amax Gold Inc. Mr. Born also is Chairman of
the Aluminum Association and a director of the
International Primary Aluminum Institute.
William C. Bousquette: Independent Financial
[PHOTO OF WILLIAM Consultant since December 1996; age 60. Mr. Bousquette
C. BOUSQUETTE has been a director of Cyprus Amax since December 5,
APPEARS HERE] 1991, and his term will expire at the annual meeting
in 1998. Mr. Bousquette served as Senior Vice
President and Chief Financial Officer of Texaco Inc.
from January 1995 until December 1996. He was
Executive Vice President and Chief Financial Officer
of Tandy Corporation from January 1994 until January
1995 and from November 1990 until January 1993. Mr.
Bousquette was Chief Executive Officer of TE
Electronics, a subsidiary of Tandy Corporation, from
January 1993 until January 1994. He was Executive Vice
President and Chief Financial Officer of Emerson
Electric Company from 1984 until 1990. Mr. Bousquette
is a director of O'Sullivan Industries Holdings, Inc.
Thomas V. Falkie: President and Chief Executive
[PHOTO OF THOMAS V. Officer of Berwind Natural Resources Corporation since
FALKIE APPEARS HERE] 1977; age 62. Dr. Falkie has been a director of Cyprus
Amax since July 1, 1988, and his term will expire at
the annual meeting in 1998. He was Director of the
United States Bureau of Mines from 1974 to 1977 and
head of the Mineral Engineering Department of
Pennsylvania State University from 1969 to 1974. Dr.
Falkie is a director of the National Coal Association
and the National Mining Association, and a member of
the Governing Council of the National Academy of
Engineering.
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Ann Maynard Gray: President of Diversified Publishing
[PHOTO OF ANN MAYNARD Group, ABC, Inc. since April 1991; age 51. Ms. Gray
GRAY APPEARS HERE] has been a director of Cyprus Amax since November 15,
1993, and her term will expire at the annual meeting
in 1998. For more than five years prior to 1991, Ms.
Gray held various senior financial and managerial
positions within the ABC, Inc. organization. Ms. Gray
is a director of PanEnergy Corporation.
James C. Huntington, Jr.: Independent Businessman
[PHOTO OF JAMES C. since 1988; age 69. Mr. Huntington has been a director
HUNTINGTON, JR. of Cyprus Amax since November 15, 1993. His term will
APPEARS HERE] expire at the annual meeting in 1997 and he is not
seeking reelection. Mr. Huntington was Senior Vice
President, Finance and Administration of American
Standard Inc. from 1987 through August 1988. He is a
director of Alumax Inc., Dravo Corporation, and
Westinghouse Air Brake Company.
Michael A. Morphy: Independent Businessman since 1985;
[PHOTO OF MICHAEL A. age 64. Mr. Morphy has been a director of Cyprus Amax
MORPHY APPEARS HERE] since July 1, 1985, and his term will expire at the
annual meeting in 1999. He was President and Chief
Executive Officer of California Portland Cement
Company from 1972 until 1981, and served as its
Chairman from 1981 through 1985. Mr. Morphy was Vice
Chairman of CalMat Co. in 1984 and 1985. Mr. Morphy is
a director of Monterey Resources, Inc. and Santa Fe
Pacific Pipelines, L.P.
Rockwell A. Schnabel: Chairman Trident Capital, L.P.
[PHOTO OF ROCKWELL and former Deputy Secretary of the United States
A. SCHNABEL APPEARS Department of Commerce from 1989 to 1992; age 60. Mr.
HERE] Schnabel has been a director of Cyprus Amax since
February 11, 1993, and his term will expire at the
annual meeting in 1999. Mr. Schnabel served as Acting
Secretary of Commerce from December 1991 to March
1992. Prior to that, he served as the United States
Ambassador to the Republic of Finland from 1986 to
1989. Mr. Schnabel was with Bateman Eichler Hill
Richards, Inc. (investment bankers-member NYSE) from
1965 to 1983, serving as its President from 1980 to
1982. Mr. Schnabel is a director of CSG Systems Inc.,
International Game Technology, and Pegasus Systems
Inc.
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Theodore M. Solso: President and Chief Operating
[PHOTO OF Officer of Cummins Engine Company, Inc. since February
THEODORE M. SOLSO 1995; age 50. Mr. Solso has been a director of Cyprus
APPEARS HERE] Amax since November 15, 1993, and his term will expire
at the annual meeting in 1998. He has held various
positions with Cummins Engine Company, Inc. since
1971. Mr. Solso is a director of Cummins Engine
Company, Inc., Cummins Engine Foundation, Amoco
Corporation, Irwin Financial Corporation, and The
Heritage Fund of Bartholomew County.
James A. Todd, Jr.: Chairman, Strategic Medical
[PHOTO OF Systems since December 1996; age 68. Mr. Todd has been
JAMES A. TODD, JR. a director of Cyprus Amax since October 22, 1992, and
APPEARS HERE] his term will expire at the annual meeting in 1998. He
served as Chairman of Birmingham Steel Corporation
from 1991 until 1996, as Chief Executive Officer from
1984 until 1996, and as President from 1984 to 1991.
Mr. Todd is a director of the National Mining
Association.
APPROVAL OF THE MANAGEMENT INCENTIVE PROGRAM, AS AMENDED AND RESTATED
On February 13, 1997, the Board of Directors unanimously adopted an
amendment and restatement of the Management Incentive Program of Cyprus Amax
Minerals Company (the "Program"), subject to shareholder approval at the
annual meeting. The Program was initially adopted in 1985 and was amended and
restated, and approved by the Company's shareholders in 1992.
The Program, as proposed to be amended, is included as Appendix A to this
proxy statement. A general description of the Program, including the
significant amendments, is described below. This description is qualified in
its entirety by reference to the complete text of the Program set forth in
Appendix A.
Shareholders are encouraged to review carefully the following information as
well as the complete text of the Program included in Appendix A.
Administration
The Program is administered by the Compensation and Benefits Committee of
the Board of Directors (the "Compensation Committee"). Each member of the
Compensation Committee must satisfy the definition of "non-employee director"
under Section 16 of the Securities Exchange Act
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of 1934, as amended, and the rules and regulations promulgated thereunder, and
the definitions of "outside director" under Section 162(m) of the Internal
Revenue Code of 1986, as amended, and regulations promulgated thereunder (the
"Code").
Under the Program, the Compensation Committee has the power to administer
the Program and all grants and awards made under the Program, to prescribe,
amend and rescind rules and regulations relating to the Program, and to make
all determinations necessary or advisable for administering the Program. As
amended, the Program also gives the Compensation Committee authority to extend
the period during which an optionee may exercise a stock option after
terminating employment, accelerate vesting of stock options or restricted
stock, and waive any required employment period for the exercise of stock
options.
The Board of Directors generally may amend the Program, or terminate the
Program, without shareholder approval. However, shareholder approval is
required with respect to amendments that change the aggregate or individual
maximum annual limits on grants or awards, the number of shares available for
incentive stock option grants, and the minimum price per share at which stock
options may be exercised. The Compensation Committee may also amend the
Program to meet any requirements under the Code regarding incentive stock
options.
Types of Awards
Under the Program, Cyprus Amax is able to grant stock options, with or
without stock appreciation rights ("SARs"), and award shares of restricted
stock. The purpose of the Program is to further the interest of Cyprus Amax
and its shareholders by providing incentives to key employees, recognizing and
rewarding key employees in a manner that enhances their proprietary and
personal interest in Cyprus Amax's continued success and progress, and
enabling Cyprus Amax to attract and retain key personnel.
The Compensation Committee determines, among other things, the key employees
to whom grants and awards are to be made and the amount and terms of each
grant or award. Directors are eligible to receive grants and awards under the
Program only if they are also employees of Cyprus Amax.
Stock options. Key employees may be granted options to purchase shares of
Common Stock at an exercise price equal to the fair market value of Common
Stock on the date of the grant. On March 20, 1997, the closing price of Common
Stock on the New York Stock Exchange was $24.75 per share. Stock options
granted may either be incentive stock options, meeting the requirements of
Section 422 of the Code, or nonqualified stock options. Stock options may be
granted with or without SARs. SARs permit holders to surrender exercisable
stock options in exchange for a payment, in either shares or cash, equal to
the amount by which the market price of the shares on the date the rights are
exercised exceeds the stock option exercise price.
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At the time of the grant, the Compensation Committee may provide that a
stock option may become exercisable in installments or only after a specified
period of employment has been completed after the date of the grant.
The Program has been amended to provide that no incentive stock options
shall be granted under the Program after June 30, 2006. Previously, such
grants could not be made after June 30, 2001.
Under the amended Program, both incentive stock options and nonqualified
stock options expire no later than ten years from the date of grant. In
addition, the Program authorizes the Compensation Committee, at the time a
stock option is granted, to specify the length of time during which the option
holder may exercise a stock option after ceasing to be employed by Cyprus
Amax. If the employee retires, the stock option generally remains exercisable
for three years. If the employee dies following retirement, the stock option
remains exercisable for the remaining portion of the three year period plus an
additional three months. The Program has been amended to provide that, in the
event of a change of control, the stock option remains exercisable for 90
days. The Program previously provided that the stock option remained
exercisable for six months and one day.
With respect to employees who transfer between Cyprus Amax and Amax Gold
Inc., the Program has been amended to treat Amax Gold Inc. as a participating
subsidiary under the Program for purposes of determining whether an optionee
has terminated employment with Cyprus Amax.
The Program also has been amended to permit an optionee to elect, subject to
rules and procedures established by the Compensation Committee, to irrevocably
transfer nonqualified stock options to certain family members or a trust
established for the benefit of such family members.
Restricted stock. The Program also permits the award of shares of restricted
stock to key employees. Restricted stock awards are subject to forfeiture to
Cyprus Amax if the holder ceases to be employed by Cyprus Amax during a
restricted period specified by the Compensation Committee. Restrictions
typically lapse in four equal annual installments beginning on the first
anniversary of the date of the award.
As amended, the Program also authorizes the Compensation Committee to
include in the terms of an award conditions requiring a forfeiture of the
restricted stock if performance goals or other factors specified in the award
are not attained. The Program provides that, with respect to the Chief
Executive Officer and the next four highest compensated officers (other than
the Chief Executive Officer) of Cyprus Amax (collectively, the "Named
Executives"), the performance goals may be established in accordance with the
performance-based compensation exemption under Section 162(m) of the Code. For
an award to qualify for this exemption, the Compensation
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Committee must: (1) fix the number of shares subject to the award, establish
specific, objective goals and the period over which the performance goals must
be attained, and set any other conditions upon which the award is contingent;
and (2) certify in writing that the performance goals have been attained. The
Program sets forth the general criteria applicable to the performance goals,
rather than specific performance goals.
The Program authorizes the Compensation Committee to include in any award of
restricted stock the right of the recipient, upon termination of employment
other than by reason of death, disability or retirement, to retain the
restricted shares free of any restrictions that have not yet lapsed, to
receive cash equal to the fair market value of such restricted shares, or to
retain a portion of the restricted shares and receive cash for the remaining
portion. In the event of death, disability, retirement, or a change of
control, the restrictions lapse unless otherwise provided at the time of the
award.
Annual Limit on Shares Subject to Award
The Program imposes an annual limit on the aggregate number of shares for
which stock options may be granted or restricted stock may be awarded during
each fiscal year. The annual limit is the sum of (1) 1.2 percent of the number
of shares of Common Stock outstanding as of the end of the immediately
preceding fiscal year plus (2) the cumulative number of carry forward shares
from all prior fiscal years not previously used to make grants and awards.
These carryforward shares include 324,598 shares as of December 31, 1996. In
addition to that annual limit, the Program limits to 5,000,000 the aggregate
number of shares which may be issued upon exercise of incentive stock options.
In addition to the aggregate annual limit, the Program has been amended to
impose a maximum annual individual limit on the number of shares subject to
grants and awards that may be made to employees who are covered employees
under Section 162(m)(3) of the Code (the "Covered Employees"). As amended, the
Program provides that the maximum number of shares subject to stock option
grants (with or without SARs) or restricted stock awards that may be made to a
Covered Employee (excluding the Chief Executive Officer) in any fiscal year
shall not exceed 10 percent of the total maximum annual limit on grants and
awards available under the Program. The maximum number of shares subject to
stock option grants (with or without SARs) and restricted stock awards that
may be made to the Chief Executive Officer shall not exceed 50 percent of the
maximum annual limit on grants and awards available under the Program.
Federal Tax Consequences Regarding Stock Options
There are no federal income tax consequences for either the employee who
receives a grant or Cyprus Amax when a stock option is granted. The federal
income tax consequences for both the employee and Cyprus Amax when a stock
option is exercised and when the shares
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subsequently are sold vary depending upon whether the stock option is an
incentive stock option or a nonqualified stock option.
Incentive Stock Options. When an incentive stock option is exercised, the
option holder generally will recognize no taxable income and Cyprus Amax is
entitled to no deduction. If the option holder continues to hold the acquired
shares until at least two years beyond the date of grant and one year beyond
the date of exercise, any gain the holder realizes when the shares
subsequently are sold will be taxed as a long-term capital gain. In such
event, Cyprus Amax receives no deduction. If the option holder sells the
acquired shares prior to the expiration of the prescribed holding periods, the
holder will recognize ordinary income at the time of sale up to the amount of
the difference between the exercise price and the fair market value of the
shares at the date of exercise. If there is additional gain on the sale, the
holder will recognize either a short-term or long-term capital gain on the
additional gain. In this event, Cyprus Amax would be entitled to a deduction
equal to the amount of ordinary income recognized by the holder. There may be
additional tax consequences for an employee who exercises an incentive stock
option and is subject to the alternative minimum taxable income provisions in
the Code.
Nonqualified Stock Options. Upon the exercise of a nonqualified stock
option, the option holder will recognize ordinary income equal to the
difference between the exercise price and the fair market value of the
acquired shares on the date of exercise and Cyprus Amax is entitled to a
deduction in an equal amount.
Withholding. The Program has been amended to give Cyprus Amax the right
either to reduce the number of shares of Common Stock deliverable pursuant to
the Program by an amount which has a fair market value equal to the amount of
all federal, state, or local taxes withheld, or to delay the transfer of
shares of Common Stock deliverable pursuant to the Program until the employee
has made a cash payment equal to the amount of all federal, state, or local
taxes to be withheld.
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Benefits of the Program. The individuals who receive stock options and/or
restricted shares and the number of shares of Common Stock included in each
such grant or award are within the discretion of the Compensation Committee.
The grants and awards that were received by or allocated to those
participating in the Program during 1996 are shown below.
<TABLE>
<CAPTION>
RESTRICTED STOCK STOCK OPTIONS
AWARDS GRANTED
------------------ --------------------
DOLLAR
VALUE NUMBER DOLLAR NUMBER
($) OF SHARES VALUE ($) OF SHARES
-------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Milton H. Ward, Chairman,
President and Chief Executive Officer.. $ 0 0 $7,826,295 1,150,000
Gerald J. Malys, Senior Vice President
and Chief Financial Officer............ 0 0 252,071 42,700
Jeffrey G. Clevenger, Senior Vice
President, Copper...................... 0 0 236,132 40,000
Garold R. Spindler, Senior Vice
President, Coal........................ 0 0 164,702 27,900
Philip C. Wolf, Senior Vice President,
General Counsel, and Secretary......... 0 0 148,173 25,100
Executive Officer Group................ 0 0 9,009,317 1,350,400
Non-Executive Officer Employee Group... 848,125 39,500 2,410,894 411,950
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
MANAGEMENT INCENTIVE PROGRAM OF CYPRUS AMAX MINERALS COMPANY, AS AMENDED AND
RESTATED.
APPROVAL OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS
The Board of Directors, pursuant to the recommendation of the Audit
Committee of the Board (the "Audit Committee"), unanimously recommends the
appointment of Price Waterhouse LLP to serve as independent accountants for
Cyprus Amax for the 1997 fiscal year. Price Waterhouse LLP has served as
Cyprus Amax's independent accountants since 1985. Representatives of Price
Waterhouse LLP will attend the annual meeting, will have an opportunity to
make a statement if they desire, and will be available to respond to
appropriate comments.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
PRICE WATERHOUSE LLP TO SERVE AS INDEPENDENT ACCOUNTANTS FOR CYPRUS AMAX FOR
THE 1997 FISCAL YEAR.
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SHAREHOLDER PROPOSAL RELATING TO THE CREATION OF AN INDEPENDENT NOMINATING
COMMITTEE OF THE BOARD OF DIRECTORS
The New York City Employees' Retirement System, which owns 214,566 shares of
Common Stock, has informed Cyprus Amax that it intends to propose the
following resolution at the 1997 annual meeting. The address of the New York
City Employees' Retirement System will be furnished upon request. The proposal
and supporting statement, for which the Board of Directors and Cyprus Amax
accept no responsibility, are set forth below.
The Shareholder Proposal
WHEREAS, the board of directors is meant to be an independent body elected
by shareholders and charged by law and shareholders with the duty, authority
and responsibility to formulate and direct corporate policies, and
WHEREAS, this company has provided that the board may designate from among
its members one or more committees, each of which, to the extent allowed,
shall have certain designated authority, and
WHEREAS, we believe that directors independent of management are best
qualified to act in the interest of shareholders and can take steps necessary
to seek, nominate and present new directors to shareholders, and
WHEREAS, we believe the selection of new directors is an area in which
inside directors may have a conflict of interest with shareholders, and
WHEREAS, we believe that an increased role for the independent directors
would help our company improve its long-term financial condition, stock
performance and ability to compete,
NOW THEREFORE, BE IT RESOLVED THAT: the shareholders request the company
establish a Nominating Committee to recommend candidates to stand for election
to the board of directors. The Committee shall be composed solely of
independent directors. For these purposes, an independent director is one who:
(1) has not been employed by the company or an affiliate in an executive
capacity within the last five years; (2) is not a member of a company that is
one of this company's paid advisors or consultants; (3) is not employed by a
significant customer or supplier; (4) is not remunerated by the company for
personal services (consisting of legal, accounting, investment banking, and
management consulting services (whether or not as an employee) for a
corporation, division, or similar organization that actually provides the
personal services, nor an entity from which the company derives more than 50
percent of its gross revenues); (5) is not employed by a tax-exempt
organization that receives significant contributions from the company; (6) is
not a relative of the management of the company; and (7) is not part of an
interlocking directorate in which the CEO or other executive officers of the
corporation serves on the board of another corporation that employs the
director.
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The Shareholder's Statement of Support
As long-term shareholders we are concerned about our company's prospects for
profitable growth. This proposal is intended to strengthen the process by
which nominees are selected. We believe that this will strengthen the board of
directors in its role of advising, overseeing and evaluating management.
We urge you to vote FOR this proposal.
Board of Directors Comments
The Nominating Committee consists of seven members, five of whom (including
the committee chairman) meet all seven tests for independence proposed by the
shareholder resolution and one of whom meets tests two through seven. The
seventh member is the Chairman and Chief Executive Officer of Cyprus Amax. The
Nominating Committee and the Board have discussed the proposed shareholder
resolution and have concluded that the Nominating Committee is, in every
practical sense, an independent committee. The absence of the Chairman and
Chief Executive Officer as a member would diminish the meaningful contribution
he gives with respect to the requisite experience and qualifications of
candidates for filling vacancies or additions to the Board of Directors. The
independence of the Nominating Committee should be apparent in that the Board
consists of 13 non-employee directors representing diverse backgrounds and
strengths, and the Chairman and Chief Executive Officer. This diversity has
been achieved by the independent actions of the current Nominating Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE FOREGOING
PROPOSAL.
13
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of March 21, 1997, the beneficial ownership of
Common Stock held by each director, the Named Executives, and all directors
and executive officers as a group. Unless otherwise specified, the directors
and executive officers have sole voting and investment power with respect to
these securities. Cyprus Amax currently has $4.00 Series A Convertible
Preferred Stock issued and outstanding, none of which is beneficially owned by
directors or executive officers.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME OF BENEFICIAL OWNER SHARES OF CLASS
------------------------ --------- --------
<S> <C> <C>
Milton H. Ward......................................... 1,291,316 1%
Allen Born............................................. 22,148 *
Linda G. Alvarado...................................... 3,815 *
George S. Ansell....................................... 2,875** *
William C. Bousquette.................................. 5,084 *
Thomas V. Falkie....................................... 6,091 *
Ann Maynard Gray....................................... 3,853 *
James C. Huntington, Jr. .............................. 3,500 *
Michael A. Morphy...................................... 16,429 *
Rockwell A. Schnabel................................... 19,229 *
Theodore M. Solso...................................... 5,921 *
John Hoyt Stookey...................................... 2,915 *
James A. Todd, Jr. .................................... 8,116 *
Billie B. Turner....................................... 3,500 *
Gerald J. Malys........................................ 223,045** *
Jeffrey G. Clevenger................................... 151,660** *
Garold R. Spindler..................................... 69,694 *
Philip C. Wolf......................................... 161,059 *
All directors and executive officers as a group (22
persons).............................................. 2,301,723 2%
</TABLE>
- --------
* Amount of class is less than one percent.
** Dr. Ansell shares voting power with respect to 375 shares; Mr. Clevenger
shares voting power with respect to 15,986 shares; and Mr. Malys shares
voting power with respect to 14,000 shares.
The shares shown include shares which certain persons have the rights to
acquire within 60 days through the exercise of stock options issued under the
Management Incentive Program. These shares include 909,552 for Mr. Ward,
127,982 for Mr. Malys, 67,700 for Mr. Clevenger, 43,950 for Mr. Spindler,
107,392 for Mr. Wolf, and 1,409,548 for all directors and executive officers
as a group. The shares shown also include shares of restricted stock. These
shares include 236,580 for Mr. Ward, 69,296 for Mr. Malys, 56,181 for Mr.
Clevenger, 22,900 for Mr. Spindler, 44,450 for Mr. Wolf, and 542,325 for all
directors and executive officers as a group.
14
<PAGE>
The holders of restricted shares have the power to vote these shares, but do
not have investment power with respect to these shares until they vest. Also
included are shares held in the Deferred Compensation Plan (see page 16) and
the employee savings plan (2,044 for Mr. Ward, 2,322 for Mr. Clevenger, 4,554
for Mr. Malys, 344 for Mr. Spindler, 9,217 for Mr. Wolf, and 22,356 for all
executive officers as a group).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows, as of March 21, 1997, Common Stock held by the
only person(s) known to Cyprus Amax to have beneficial ownership of more than
five percent of its Common Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ --------- --------
<S> <C> <C>
T. Rowe Price Trust Company as Trustee of the
Company employee savings plan
10090 Red Run Boulevard
Owings Mills, MD 21117................................ 5,595,674(1) 5.9%
T. Rowe Price Trust Company and T. Rowe Price
Associates, Inc., for other funds and individual
accounts 10090 Red Run Boulevard Less
Owings Mills, MD 21117................................ 78,408 than 1%
Trimark Investment Management Inc., as Manager and
Trustee of certain mutual funds and individual
accounts One First Canadian Place, Suite 5600
P.O. Box 487
Toronto ON M5X 1E5, Canada............................ 9,310,500(2) 9.9%
</TABLE>
- --------
(1) As to all of these shares, the Trustee has shared voting power and shared
investment power. In light of rights given to the participants under the
employee savings plan, the participants may be beneficial owners of some
or all of the 3,054,077 shares (3.2 percent of the class) held by the
Trustee that have been allocated to the participants' accounts.
(2) Trimark Financial Corporation, owner of 100 percent of the voting equity
securities of Trimark Investment Management Inc., may be deemed to be a
beneficial owner of the shares.
DIRECTOR COMPENSATION AND BUSINESS RELATIONSHIPS
Director compensation. Directors who are not employees of Cyprus Amax
receive an annual retainer of $25,000, a $1,000 fee for attendance at Board
meetings, and a $1,000 fee for attendance at committee meetings and at other
meetings at which their attendance is requested by Cyprus Amax. In addition,
for meetings at which such person chairs, the chairman of the
15
<PAGE>
Nominating Committee receives an additional $250, the chairman of the Employee
Funds Investment Committee of the Board (the "Employee Funds Investment
Committee") receives an additional $500, and the chairmen of the Audit and the
Compensation Committees each receive an additional $5,000 per year or $500 per
meeting, whichever is greater. All directors are reimbursed for expenses
incurred in attending Board and committee meetings.
The Company sponsors the Deferred Compensation Plan under which any director
who is not an employee of the Company may elect to defer all or a portion of
his or her director fees and related compensation. Amounts deferred under the
Deferred Compensation Plan are credited to a participant's account, at the
election of the participant, in the form of a right to receive shares of
Common Stock at the closing market price on the Composite Tape of the New York
Stock Exchange on the date such participant would have received such
compensation had a deferral election not then been in effect, or the right to
receive the cash value of an investment of a participant's deferred
compensation into a specific investment fund.
A distribution will be made to a participant upon termination of his or her
directorship or, if he or she so elects, on any January 1 occurring
thereafter. Such distribution will consist of (1) the number of whole shares
credited to his or her account on the date of such distribution and a cash
payment for any fractional shares or (2) cash. Of the 13 non-employee
directors, Allen Born, William C. Bousquette, Thomas V. Falkie, Ann Maynard
Gray, Rockwell A. Schnabel, Theodore M. Solso, John Hoyt Stookey and James A.
Todd, Jr. have elected to participate in the Deferred Compensation Plan. The
total Cyprus Amax shares owned in each participant's account as of March 21,
1997 is as follows: 0 for Mr. Born, 2,584 for Mr. Bousquette, 91 for Dr.
Falkie, 2,203 for Ms. Gray, 3,729 for Mr. Schnabel, 3,921 for Mr. Solso, 915
for Mr. Stookey, and 4,116 for Mr. Todd. Michael A. Morphy, a former
participant in the plan, owns 429 shares.
On July 1 of each year, each director who is not on that date an employee of
Cyprus Amax is granted 500 shares of Common Stock and is granted options to
purchase 2,000 shares of Common Stock pursuant to the terms of the Amended and
Restated Stock Plan for Non-Employee Directors, which was approved by
shareholders in May 1996 (the "Stock Plan"). All grants are made at not less
than 100 percent of the fair market value of a share of Common Stock on the
date of the grant. Each stock option granted expires no later than ten years
and one day after the date the stock option is granted. Before the stock
option becomes vested and exercisable, a director may be required to complete
a period of service as a member of the Board following the date of the grant.
As of March 21, 1997, a total of 28,500 shares and 26,000 stock options had
been granted to 13 directors under the Stock Plan.
In 1995, the Board of Directors adopted a policy regarding stock ownership
requirements of its directors. The policy requires each director to own Common
Stock with an aggregate value equal to three times his or her annual retainer
fee. The directors have five years to meet their stock ownership requirements.
16
<PAGE>
In February 1991, the Board of Directors adopted a retirement policy for the
directors, establishing a retirement age of 70 for non-employee directors and
65 for employee directors. The policy provides that no individual shall be
nominated, appointed, or elected to serve as a director for any period which
would commence after such individual attains retirement age. Any director who
reaches retirement age while serving a term as director may continue to serve
until the first annual meeting following his or her attainment of retirement
age.
Effective 1990, Cyprus Amax adopted a non-qualified retirement plan for non-
employee directors who have at least five years of service on the Board. The
annual benefit payable upon retirement is an amount equal to the annual
retainer which the eligible director received or would have received during
the calendar year in which that director ceased to serve as a director. The
benefits are payable for the life of the eligible director after the later of
retirement from the Board or attainment of age 65.
Certain business relationships. Under a consulting agreement in effect from
November 1993 through November 1996, Mr. Born received payment at the rate of
$300,000 per year from Cyprus Amax. Under that agreement, Mr. Born served as
Co-Chairman of the Board and Chairman of the Executive Committee of the Board
(the "Executive Committee") for two years from November 15, 1993, and
thereafter served until the 1996 annual meeting as Vice Chairman of the Board.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings in 1996.
The Executive Committee, which met four times in 1996, has as its members
Milton H. Ward (Chairman), Linda G. Alvarado, George S. Ansell, Allen Born,
William C. Bousquette, James A. Todd, Jr., and Billie B. Turner. The committee
has and may exercise all of the powers of the Board when the Board is not in
session but may not take any action that legally may be taken only by the
Board.
The Audit Committee, which met two times in 1996, has as its members William
C. Bousquette (Chairman), Linda G. Alvarado, George S. Ansell, Ann Maynard
Gray, James C. Huntington, Jr., Rockwell A. Schnabel, Theodore M. Solso, and
John Hoyt Stookey, none of whom is an officer or employee of Cyprus Amax. The
committee reviews audit examinations and annual financial reports and
statements, as well as internal controls and results of internal auditing
activities. It reviews in advance the engagement or discharge of independent
accountants, the scope of their work, and the fees for all services provided.
The Compensation Committee, which met five times in 1996, has as its members
Billie B. Turner (Chairman), George S. Ansell, Thomas V. Falkie, Ann Maynard
Gray, Michael A. Morphy, Theodore M. Solso, and James A. Todd, Jr. The
committee oversees benefit plans and annual
17
<PAGE>
performance and merit increase budgets. The committee also administers the
Management Incentive Program, which includes stock option and restricted stock
provisions, and the Key Executive Long-Term Incentive Plan, and approves bonus
pools and officer bonuses granted pursuant to the Annual Incentive Plan.
The Employee Funds Investment Committee, which met two times in 1996, has as
its members Michael A. Morphy (Chairman), Linda G. Alvarado, George S. Ansell,
William C. Bousquette, Thomas V. Falkie, James C. Huntington, Jr., and Billie
B. Turner. The committee reviews the investment and performance of benefit
plan trust funds and the selection and performance of benefit plan trust fund
managers and oversees the funding arrangements and investment performances of
salaried and hourly pension plans.
The Nominating Committee, which met one time in 1996, has as its members
James A. Todd, Jr. (Chairman), Allen Born, Thomas V. Falkie, Michael A.
Morphy, Rockwell A. Schnabel, John Hoyt Stookey, and Milton H. Ward. The
committee reviews and makes recommendations concerning the qualifications of
individuals for election to the Board and recommends appointments to all Board
committees. The committee also reviews the performance of Board members and
reviews and approves the acceptance of directorships and trusteeships offered
to senior officers of Cyprus Amax or its subsidiaries by other corporations,
banks, or educational institutions.
The Nominating Committee does not consider individuals nominated by
shareholders for election to the Board. However, under the By-Laws,
nominations for the election of directors may be made by any shareholder
entitled to vote in the election of directors generally, but only if written
notice of such shareholder's intent to make such nominations has been received
by the Secretary of Cyprus Amax at 9100 East Mineral Circle, Englewood,
Colorado 80112 not later than (1) with respect to an election to be held at an
annual meeting of shareholders, 90 days prior to the anniversary date of the
immediately preceding annual meeting, and (2) with respect to an election to
be held at a special meeting of shareholders for the election of directors,
the close of business on the tenth day following the date on which notice of
such meeting is first given to shareholders. Each such notice shall set forth:
(a) the name and address of the shareholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of Common Stock entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) the number of shares of
Cyprus Amax owned of record and beneficially by the shareholder; (d) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (e) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission;
and (f) the consent of each nominee to serve as a director of
18
<PAGE>
Cyprus Amax. The presiding officer of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
CUMULATIVE SHAREHOLDER RETURN
The graph below shows a five-year comparison of cumulative total shareholder
returns for Common Stock, the S&P 500 Index and the Company's peer index. The
peer index includes Asarco Incorporated; Ashland Coal, Inc.; Cleveland-Cliffs
Inc.; Cominco Ltd.; Echo Bay Mines Ltd.; Freeport-McMoRan Copper & Gold; Inco
Limited; Noranda Inc.; Phelps Dodge Corporation; and Zeigler Coal Holding
Company. The returns of the companies in the peer index are weighted based on
their stock market capitalization as of the beginning of the period.
Cumulative total shareholder return (on an assumed initial investment of $100
as of December 31, 1991), as determined at the end of each year, reflects the
change in stock price, assuming the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG CYPRUS AMAX, PEER INDEX AND S&P 500 INDEX
Measurement period CYPRUS PEER S&P 500
(Fiscal Year Covered) AMAX INDEX INDEX
Measurement PT -
12/31/91 $ 100.0 $ 100.0 $ 100.0
FYE 12/31/92 $ 141.9 $ 109.3 $ 107.5
FYE 12/31/93 $ 120.0 $ 131.4 $ 118.2
FYE 12/31/94 $ 124.8 $ 141.7 $ 119.7
FYE 12/31/95 $ 128.1 $ 156.7 $ 164.6
FYE 12/31/96 $ 118.7 $ 165.6 $ 202.7
19
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of seven directors who are not
employees of the Company. The Compensation Committee is responsible for
determining annually the compensation (including awards under compensation
plans) to be paid to the Chief Executive Officer and other executive officers,
including the Named Executives listed in the Summary Compensation Table on
page 24. The following report reflects the compensation philosophy and pay
determinations made by the Compensation Committee for 1996.
Overview
The Company's executive compensation program was adopted by the Compensation
Committee in 1996. The executive compensation program consists of annual
compensation and long-term incentive compensation plans. The program's overall
objectives are to attract and retain the best executive talent, to focus
executive behavior on achieving the Company's annual and long-term business
objectives, to link executive and shareholder interest through equity-based
plans, and to provide a compensation package that rewards financial and
individual performance.
The Company has retained a compensation consultant to review annually and
advise the Compensation Committee on the Company's executive compensation
program. The consultant's review provides an ongoing evaluation of the link
between the Company's performance and its executive compensation program as
compared to the performance and executive compensation programs of other
companies that compete with the Company for executive talent. These
competitors include some of the same companies represented in the Cumulative
Shareholder Return graph on page 19, as well as other companies similar in
size to the Company.
For 1996, the Company's compensation strategy for the key executive group,
other than the Chief Executive Officer, provided total compensation (including
salary, bonus, stock options, and performance-based restricted stock with
deferred cash incentive awards) that was targeted between the 50th percentile
and the 75th percentile of the compensation packages at comparable companies.
These targets were designed to provide meaningful rewards for superior
performance.
In assessing the performance of the Chief Executive Officer and determining
his 1996 compensation, as well as reviewing and approving the Chief Executive
Officer's recommendations for the 1996 performance of other senior management,
the Compensation Committee considered: (1) the individual performance of the
Chief Executive Officer and other senior management; (2) the level of
responsibility and contribution of those individuals to the Company's
performance; (3) the Company's performance based on both annual and long-term
business goals and strategies; and (4) the need to attract and retain key
personnel by providing total compensation opportunities that are competitive.
The Compensation Committee determines the appropriate compensation package for
each particular senior executive in light of the foregoing considerations and
not based on a rigid formula or specific weightings.
20
<PAGE>
Annual Compensation (Base Salaries and Bonuses)
The base salaries for senior management, excluding the Chief Executive
Officer, are generally targeted to range between the median and 75th
percentile of the Company's competitors. Pursuant to the Company's
compensation program, the total annual cash compensation paid to senior
management, excluding the Chief Executive Officer, is targeted in the upper
quartile of the Company's competitors and thus combines current above average
bonus opportunities with fully competitive base salaries.
Under the Annual Incentive Plan, which was approved by shareholders in May
1996, the bonus awards made to the Named Executives and other senior
management as a group are granted by the Compensation Committee from an
incentive pool that is determined annually. The incentive bonus pool equals
1.5 percent of Consolidated Income from Continuing Operations Before Income
Taxes, as adjusted for certain events. The Compensation Committee reviews the
Company's objectives and the executives' objectives, which are presented by
the Chief Executive Officer, at the beginning of the year. At the end of the
year, the Compensation Committee grants awards to the executives based on
Company, business unit, and individual performance compared to the agreed upon
objectives, as well as recommendations of the Chief Executive Officer. For the
Named Executives, the awards are limited to a fixed share of the pool and may
be reduced but not increased at the discretion of the Compensation Committee.
Long-Term Incentive Compensation
The Company's Long-Term Incentive Program provides incentives to the
Company's executive officers and key employees through a combination of stock
options, restricted stock and performance-based restricted stock. The Long-
Term Incentive Program has two components: (1) stock options and restricted
stock, which are awarded under the Management Incentive Program, and (2)
restricted stock and deferred cash incentive awards, which are awarded under
the Key Executive Long-Term Incentive Plan.
1. Management Incentive Program: Grants of stock options and restricted
stock under the Management Incentive Program are designed to link the
interests of key employees (206 in 1996) with those of the shareholders.
Stock options are granted with an exercise price equal to the fair
market value of the Common Stock on the date of grant and vest at such
time as determined by the Compensation Committee when the grant is made.
Grants of stock options promote the creation of shareholder value since
no benefit is realized unless stock price appreciation occurs.
2. Key Executive Long-Term Incentive Plan: The Key Executive Long-Term
Incentive Plan provides for awards of restricted stock. The restriction
period is ten years from the date following the grant, but restrictions
may lapse on an accelerated basis at the end of the third, fourth,
fifth, or sixth calendar years if total shareholder return exceeds the
median performance of certain peer mining companies. In this event,
executives also will
21
<PAGE>
receive a deferred cash incentive award equal to the value of the shares
for which restrictions have lapsed and such shares are valued at the
stock price on the day the stock was awarded multiplied by the
applicable tax rate in effect when the shares vested.
In 1996, the Compensation Committee awarded stock options and performance-
based restricted stock to individuals based on an assessment of the
competitive market data and the pay strategy adopted in 1996, recommendations
of the Chief Executive Officer, as well as the Compensation Committee's
assessment of individual and, if applicable, business unit performance.
Stock Ownership Requirements
In 1995, Cyprus Amax adopted a policy that requires specific levels of stock
ownership requirements by its Named Executives and other senior management.
The policy requires the Company's Chief Executive Officer to own Common Stock
with a value equal to five times his annual base salary and requires the other
Named Executives to own Common Stock with a value equal to three times their
respective base salaries. The required stock ownership levels must be achieved
within five years.
Compensation of Chairman, President and Chief Executive Officer
Mr. Ward, who has over 40 years of experience in the mining industry, has
been the Chairman, President and Chief Executive Officer of the Company since
1992. Although 1996 proved to be a very challenging year, under Mr. Ward's
innovative, forward-thinking leadership the Company was able to: (1) develop,
ahead of schedule, two large world-class ore bodies at Cerro Verde, Peru, and
El Abra, Chile; (2) develop new coal properties in Utah and Australia and
initiate novel marketing efforts, which increased Cyprus Amax's ability to
react to changes resulting from electric utility deregulation; (3) through the
Company's gold subsidiary, Amax Gold Inc., develop three new gold projects in
Alaska, Chile, and Russia which are expected to nearly triple gold production
while lowering costs; (4) develop new products and processes in the lithium
group, which had record sales and earnings; (5) reduce significantly
production costs through implementation of innovative technologies throughout
the Company while increasing production; and (6) attract and retain top
quality employees.
A substantial portion of Mr. Ward's compensation is determined pursuant to
the terms of the employment contract he entered into with the Company in 1996.
For a description of Mr. Ward's employment contracts, see "Employment
Contracts". The Compensation Committee reviewed the Company's performance for
1996 and Mr. Ward's role in attaining achievements noted above, as well as the
other criteria described in the overview section, and determined that the
compensation awarded to him was appropriate.
22
<PAGE>
Employee Remuneration in Excess of $1 Million
Under Section 162(m) of the Code, federal income tax deductions taken by
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, restricted stock awards, stock option
exercises and non-qualified benefits) for certain executive officers exceeds
$1 million in any one year. Under Section 162(m) of the Code, the deduction
limit does not apply to payments which qualify as "performance based." To
qualify as "performance based," compensation payments must be made from a plan
that is administered by a committee of outside directors and be based on
achieving objective performance goals. In addition, the material terms of the
plan must be disclosed to and approved by shareholders, and the committee must
certify that the performance goals were achieved before payments can be
awarded. In order to qualify future payments under the Company's Annual
Incentive Plan as "performance based," the Company obtained shareholder
approval of the Annual Incentive Plan in May 1996.
The Compensation Committee generally intends to administer the Company's
compensation programs so that the total compensation paid to any employee will
not exceed $1 million in any one year, except for compensation payments in
excess of $1 million which qualify as "performance-based compensation" or
which are exempt for other reasons. In 1996, the Company paid Mr. Ward total
compensation in excess of $1 million in recognition of the Company's
outstanding performance under his leadership. If the objectives of its
executive compensation program so require, the Company may pay compensation in
excess of $1 million to its executives which is not deductible.
Billie B. Turner, Chairman
George S. Ansell
Thomas V. Falkie
Ann Maynard Gray
Michael A. Morphy
Theodore M. Solso
James A. Todd, Jr.
23
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth information for the years indicated
concerning the compensation of the Chairman, President and Chief Executive
Officer and each of the four other executives as of year-end 1996 who were the
most highly compensated during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- ------------------------
RESTRICTED SECURITIES
NAME AND SALARY OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR ($) BONUS ($) COMPENSATION ($) AWARD ($)(1) OPTIONS (#) COMPENSATION ($)(2)
------------------ ---- -------- ---------- ---------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Milton H. Ward 1996 $708,000(3) $1,200,000 $ 2,312(6) $1,356,250 1,150,000 $3,879
Chairman, President, and 1995 619,990(4) 1,700,000 6,438(6) 1,522,500 0 4,127
Chief Executive Officer 1994 601,919(5) 1,000,000 0 1,230,000 0 5,050
Gerald J. Malys 1996 340,000 200,000 29,957(6) 385,175 42,700 3,851
Senior Vice President
and 1995 310,000 355,000 20,876(6) 367,938 0 4,092
Chief Financial Officer 1994 255,366 250,000 0 340,556 0 4,798
Jeffrey G. Clevenger 1996 310,000 185,000 257(6) 325,500 40,000 3,848
Senior Vice President, 1995 280,000 290,000 512(6) 350,175 0 4,023
Copper 1994 237,946 165,000 163,783 289,358 0 4,770
Garold R. Spindler 1996 300,000 120,000 1,055(6) 252,263 27,900 3,842
Senior Vice President, 1995 275,000 230,000 512(6) 126,875 30,000 3,628
Coal 1994 0 0 0 0 0 0
Philip C. Wolf 1996 260,000 150,000 1,854(6) 227,850 25,100 3,871
Senior Vice President, 1995 235,000 235,000 512(6) 241,063 0 4,129
General Counsel and 1994 217,440 125,000 0 240,926 0 4,460
Secretary
</TABLE>
- --------
(1) Restricted stock awards were made in January 1996. Amounts shown in the
table reflect the fair market value of the stock on the date of the award.
The actual value an executive may realize will depend upon the amount of
the stock in respect of which restrictions lapse and the value realized,
which may be greater or less than this amount. As of the end of fiscal
1996, the aggregate restricted stock holdings of the Named Executives was
406,944 shares with a fair market value of $9,563,184 based on the closing
price of Common Stock of $23.50 per share on December 31, 1996. Such
holdings include $5,244,260 (223,160 shares) for Mr. Ward; $1,654,800
(70,417 shares) for Mr. Malys; $1,272,572 (54,152 shares) for Mr.
Clevenger; $306,675 (13,050 shares) for Mr. Spindler; and $1,084,878
(46,165 shares) for Mr. Wolf. Restricted stock awards to Messrs. Ward,
Malys, Clevenger, Spindler, and Wolf vest in three years upon achievement
of certain performance-related criteria. For 5,000 shares of Mr.
Spindler's award, restrictions lapse for 25 percent of the shares on each
anniversary of the grant for each award, subject to his continued
employment with the Company. Regular dividends are paid on all restricted
stock awards.
24
<PAGE>
(2) The amounts shown are the employer contributions to the employee savings
plan. For 1996, the maximum recognizable compensation for purposes of
calculating employer contributions is $150,000 based on IRS regulations.
(3) Does not include $292,000 reimbursed to Cyprus Amax by Amax Gold Inc. for
Mr. Ward's salary and benefits for services he provided to Amax Gold Inc.
during 1996.
(4) Does not include $280,010 reimbursed to Cyprus Amax by Amax Gold Inc. for
Mr. Ward's salary and benefits for services he provided to Amax Gold Inc.
during 1995.
(5) Does not include $199,309 reimbursed to Cyprus Amax by Amax Gold Inc. for
Mr. Ward's salary and benefits for services he provided to Amax Gold Inc.
during 1994.
(6) Gross up tax payment for certain benefits received by officers.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE VALUE ($)(2)
---- -------------- ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Milton H. Ward.......... 1,150,000 65.3% $26.4375 January 2, 2006 $7,826,295
Gerald J. Malys......... 42,700 2.4 26.4375 January 2, 2006 252,071
Jeffrey G. Clevenger.... 40,000 2.3 26.4375 January 2, 2006 236,132
Garold R. Spindler...... 27,900 1.6 26.4375 January 2, 2006 164,702
Philip C. Wolf.......... 25,100 1.4 26.4375 January 2, 2006 148,173
</TABLE>
- --------
(1) The exercise price for each grant is equal to 100 percent of the fair
market value of Common Stock on the grant date. The stock options expire
ten years after the grant date.
(2) In accordance with Securities and Exchange Commission rules, the Company
has chosen the Black-Scholes option pricing model to estimate the grant
date present value of the stock options set forth in this table. The
Company's use of this model should not be construed as an endorsement of
its accuracy at valuing stock options. All stock option models, including
the Black-Scholes model, require a prediction about the future movement of
the market price of Common Stock. The following assumptions were made for
purposes of calculating the Grant Date Present Value: A stock option term
of ten years, volatility at 30 percent, dividend yield at 3.0 percent, and
interest rate at 5.3 percent. The real value of the stock options in this
table depends upon the actual performance of Common Stock during the
applicable period.
25
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)
ACQUIRED ON ---------------------- --------------------
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- ------------ ------------- --------------------
<S> <C> <C> <C> <C>
Milton H. Ward.......... 0 $ 0 723,441 / 1,241,147 $ 0 / 0
Gerald J. Malys......... 0 0 106,632 / 52,244 21,188 / 0
Jeffrey G. Clevenger.... 0 0 47,700 / 45,900 0 / 0
Garold R. Spindler...... 0 0 0 / 57,900 0 / 0
Philip C. Wolf.......... 0 0 94,842 / 31,464 56,672 / 0
</TABLE>
- --------
(1) Amounts shown in this column represent the fair market value (average of
the high and low) of the underlying Common Stock at year end minus the
exercise price. The actual value, if any, an executive may realize upon
exercise will depend upon the amount by which the market price of Common
Stock exceeds the exercise price when the stock options are exercised. The
actual value, therefore, may be greater or less than the value shown in
the table.
Employment Contracts. Cyprus Amax entered into a new employment contract
with Mr. Ward effective as of January 1, 1996. The contract, which will expire
on December 31, 2000, establishes a base salary and provides for a target cash
bonus with actual payment determined by the Board. The bonus payment is
subject to the limitation of the Annual Incentive Plan. The contract also
provides that Mr. Ward is eligible to participate in employee benefit programs
as well as supplemental retirement benefits and stock plans. The new contract
primarily serves to reward Mr. Ward for accomplishments already attained and
to encourage him to continue to implement strategies that enable the ongoing
success of the Company. As such, the contract has been designed to connect Mr.
Ward's future financial rewards with shareholder value creation. Mr. Ward
agreed to fulfill his assigned duties and to avoid activities adverse to
Cyprus Amax's interests both during and after the contract term. Cyprus Amax
retains the right to terminate the employment agreement upon 30 days' notice.
If employment is terminated other than due to breach of covenant (or
retirement or resignation in certain circumstances), Mr. Ward would be
entitled to a lump sum payment equal to his salary and bonus for the remainder
of the contract period plus the actuarial equivalent of supplemental
retirement benefits and welfare benefits for retirees. If permitted by
applicable laws and plan provisions, Mr. Ward could be entitled to receive the
value of any previously awarded restricted shares and a three- year period to
exercise previously granted stock options.
In November 1993, Cyprus Amax entered into agreements (the "Agreements")
with Gerald J. Malys, Jeffrey G. Clevenger, Philip C. Wolf and one other
executive officer. Pursuant to the
26
<PAGE>
Agreements, each executive was granted stock options and restricted stock with
a fair market value equal to the severance and other benefits they would have
received under their prior employment arrangements in the event of a
termination of employment. The restricted stock and stock options vest ratably
over a four-year period with accelerated vesting in the event of an
involuntary termination without Cause, a termination by the executive for Good
Reason or by reason of death, Retirement or Disability, or in the event of a
Change of Control (as such terms are defined in the Agreements). Upon an
involuntary termination without Cause, or a termination by the executive for
Good Reason or by reason of death, or Disability, the executive will be
entitled to a cash payment equal to the actuarial equivalent of the excess of
a full retirement benefit and the retirement benefit to which he is actually
entitled and will be eligible for retiree welfare benefits. The executives
will also receive an additional payment to make them whole for any excise tax
imposed by Section 4999 of the Internal Revenue Code imposed upon the
foregoing payments.
Cyprus Amax also entered into change of control employment agreements with
Milton H. Ward, Gerald J. Malys, Jeffrey G. Clevenger, Garold R. Spindler,
Philip C. Wolf and one other executive officer (the "Employment Agreements").
The Employment Agreements become effective upon a Change of Control (as
defined therein). If the executive is terminated other than for Cause or if
the executive terminates employment under enumerated circumstances which
constitute Good Reason (as such terms are defined in the Employment
Agreements) or for any reason during the 30-day period following the first
anniversary of the Change of Control, the executive will become entitled to a
specific severance payment equal to three times the executive's yearly salary
and bonus. The executives will also receive an additional payment to make them
whole for any excise tax imposed by Section 4999 of the Internal Revenue Code
imposed upon the foregoing payments.
In February of 1994, Cyprus Amax adopted the Executive Officer Separation
Policy (the "Policy"). Gerald J. Malys, Jeffrey G. Clevenger, Garold R.
Spindler, Philip C. Wolf, and four other executives ("Participants") are
covered under this Policy. Separation benefits are payable to the Participants
if employment is terminated in circumstances as described in the Policy. The
separation benefits payable to Participants shall be equal to one year of the
Participant's base salary plus the Participant's target annual bonus. The
Participant also shall be eligible for a pro rata bonus for the year of
termination at the discretion of the Compensation Committee. The Participant
shall be entitled to outplacement services provided by a firm of the
Participant's choice at a cost to Cyprus Amax of up to 15 percent of the
Participant's then current base salary plus annual bonus. Commencing upon
termination, the Participant also shall be entitled to receive medical
benefits (excluding dental) and life insurance for one year following the
termination of his employment. The Policy provides that anyone who is a
participant in another agreement or arrangement which, upon termination, will
provide benefits similar to those under the Policy, shall not be entitled to
those benefits under the Policy.
27
<PAGE>
RETIREMENT PLANS
The Retirement Plan for Salaried Employees of Cyprus Amax (the "Retirement
Plan") covers executives and most other salaried employees. The amount of
annuity an employee will receive upon retirement on a single-life basis is
determined under the formula set forth below. Upon retirement, a married
employee receives a reduced annuity payment that continues after death to
cover the surviving spouse, unless the employee and the spouse elect one of
the alternate options of equivalent actuarial value.
If an employee retires on the normal retirement date (generally, the later
of age 65 or the fifth anniversary of the date participation commenced) the
annual benefit payable from the Retirement Plan will be the sum of: (1) 1.7
percent of average annual earnings (base salary plus bonus) received by the
employee for service during each year after 1996, plus (2) 1.7 percent of the
employee's average annual earnings from 1992 through 1996 multiplied by the
employee's number of pre-1997 years of service recognized by Cyprus Amax for
retirement plan benefit accrual purposes, less (3) 1.1 percent of the Social
Security offset multiplied by the total years of service as of December 31,
1996, and certain other offsets, not to exceed 35 years recognized for Cyprus
Amax plan purposes.
The estimated annual benefits payable to the Named Executives upon
retirement at normal retirement age are $174,393 for Milton H. Ward; $211,782
for Gerald J. Malys; $177,410 for Jeffrey G. Clevenger; $126,764 for Garold R.
Spindler; and $206,270 for Philip C. Wolf. The foregoing estimates are based
on actual covered pay for 1992 through 1996 and 1996 base salary and bonus for
years after 1996. The estimates do not reflect the impact of future salary
increases.
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<PAGE>
The five-year period 1992 through 1996 currently used in the benefit formula
described above may be rolled forward by the Board of Directors. The table
below provides information on retirement benefits (subject to reduction by a
percentage of Social Security benefits), assuming that the formula is applied
to average annual remuneration during the five years prior to retirement:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ASSUMED
FIVE-YEAR YEARS OF BENEFIT SERVICE
AVERAGE -------------------------------------------------------------
ANNUAL 10 15 20
EARNINGS 5 YEARS YEARS YEARS YEARS 25 YEARS 30 YEARS 35 YEARS
---------- ------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 375,000 31,875 63,750 95,625 127,500 159,375 191,250 223,125
475,000 40,375 80,750 121,125 161,500 201,875 242,250 282,625
575,000 48,875 97,750 146,625 195,500 244,375 293,250 342,125
775,000 65,875 131,750 197,625 263,500 329,375 395,250 461,125
975,000 82,875 165,750 248,625 331,500 414,375 497,250 580,125
1,175,000 99,875 199,750 299,625 399,500 499,375 599,250 699,125
1,675,000 142,375 284,750 427,125 569,500 711,875 854,250 996,625
2,175,000 184,875 369,750 554,625 739,500 924,375 1,109,250 1,294,125
2,675,000 227,375 454,750 682,125 909,500 1,136,875 1,364,250 1,591,625
</TABLE>
The amounts above are payable upon retirement between ages 62 and 65. For
retirement prior to age 62, the annual annuity amounts are reduced as provided
in the Retirement Plan. At year-end 1996, the Named Executives had accumulated
the years of benefit service stated (excluding additional years under the
unfunded non-qualified plan described below): Milton H. Ward, 4 years; Gerald
J. Malys, 11 years; Jeffrey G. Clevenger, 4 years; Garold R. Spindler,
2 years; Philip C. Wolf, 16 years. The Employee Retirement Income Security Act
of 1974, as amended, limits the benefits payable from any funded retirement
plan that qualifies for federal income tax exemption. The estimated annual
benefits payable upon retirement, including amounts set forth in the table
above, which exceed such limits are payable from Cyprus Amax's unfunded
nonqualified retirement plans which were adopted in 1986.
In 1988, Cyprus Amax adopted another unfunded non-qualified retirement plan
to provide additional retirement benefits for certain executives designated by
the Compensation Committee. If an eligible executive continues to work until
normal retirement age, he will receive additional retirement benefits that
will, when combined with the retirement benefits actually available under the
Retirement Plan, equal the benefits he would receive under the Retirement Plan
for the lesser of 30 years of service credit or twice the service actually
credited under the Retirement Plan. Under the terms of this plan, Milton H.
Ward and Gerald J. Malys would be credited with an additional five years of
service at normal retirement and Jeffrey G. Clevenger would be credited with
an additional eight years of service at normal retirement. Garold R. Spindler
and Philip C. Wolf are not eligible for additional years credited at normal
retirement. This plan provides for
29
<PAGE>
immediate vesting and distribution of accrued benefits in the event of Change
of Control, as defined in the plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee was comprised of Billie B. Turner,
George S. Ansell, Thomas V. Falkie, Ann Maynard Gray, Michael A. Morphy,
Theodore M. Solso and James A. Todd, Jr.; James C. Huntington, Jr. served on
the Compensation Committee until May 1996. None of these committee members is
currently or has been an officer or employee of the Company or any of its
subsidiaries or engaged in any reportable related party transaction with the
Company.
Gerald J. Malys, Cyprus Amax's Senior Vice President and Chief Financial
Officer, has been a director of Amax Gold Inc. since November 15, 1993, and
has served on the Compensation Committee of the Board of Directors of Amax
Gold Inc. between December 1993 and December 1996. Milton H. Ward is the
Chairman of the Board of Directors, President and Chief Executive Officer of
Cyprus Amax and Chairman of the Board of Directors and Chief Executive Officer
of Amax Gold Inc.
SHAREHOLDER PROPOSAL DATE
Shareholders may submit proposals on matters appropriate for shareholder
action consistent with applicable law and the Company's By-Laws. Proposals
which shareholders intend to present at the 1998 Annual Meeting of
Shareholders must be received by the Secretary of Cyprus Amax by November 24,
1997 to be considered for inclusion in Cyprus Amax's proxy statement and form
of proxy relating to the 1998 Annual Meeting of Shareholders.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
meeting. However, if any other matters properly do come before the meeting,
the persons named in the accompanying proxy will vote thereon in accordance
with their best judgment.
By order of the Board of Directors,
Philip C. Wolf
Senior Vice President, General Counsel
and Secretary
March 21, 1997
CYPRUS AMAX'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (WITHOUT EXHIBITS) MAY BE OBTAINED AT NO CHARGE BY ANY
SHAREHOLDER ENTITLED TO VOTE AT THE MEETING WHO WRITES TO: SECRETARY, CYPRUS
AMAX MINERALS COMPANY, 9100 EAST MINERAL CIRCLE, ENGLEWOOD, COLORADO 80112.
EXHIBITS TO THE FORM 10-K ARE ALSO AVAILABLE AT A COST OF TWENTY-FIVE CENTS
PER PAGE.
30
<PAGE>
APPENDIX A
MANAGEMENT INCENTIVE PROGRAM OF
CYPRUS AMAX MINERALS COMPANY
1. PURPOSE
The purpose of this Program is to further the interests of Cyprus Amax
Minerals Company (the "Company"), its Participating Subsidiaries, and its
shareholders by providing incentives in the form of stock option grants, stock
appreciation rights, and restricted stock awards to Employees who contribute
materially to the success and profitability of the Company and such
subsidiaries. Such grants and awards will recognize and reward those Employees
and create for them an interest in the Company parallel to that of the
shareholders, thus enhancing the proprietary and personal interest of such
persons in the Company's continued success and progress. This Program will
also enable the Company and its Participating Subsidiaries to attract and
retain key personnel.
2. DEFINITIONS
For purposes of this Program the following terms shall have the following
meanings:
2.1 "Beneficiary" means a person or persons designated by an Employee to
receive, subject to the terms of the Program, in the event of the
Employee's death, any unexercised option, Stock Appreciation Right, or
Restricted Shares held by the Employee. An Employee may, subject to such
limitations as may be prescribed by the Committee, designate one or more
persons primarily or contingently as beneficiaries in writing upon forms
supplied by and delivered to the Company, and may revoke such designations
in writing. If an Employee fails effectively to designate a beneficiary,
then either the Employee's estate or the person to whom the option, Stock
Appreciation Right, or Restricted Shares is transferred by will or by the
laws of descent and distribution shall be deemed to be the Employee's
beneficiary.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Change of Control" means the happening of any of the following
events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (i) the
then outstanding shares of Common Stock (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained
by the Company or any
A-1
<PAGE>
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction described in Clauses (i), (ii)
and (iii) of Paragraph (c) of this Section 2.3; or
(b) Individuals who, as of January 1, 1990, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to January 1, 1990, whose election, or nomination
for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 80% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale
or other disposition, (A) more than 80% of, respectively, the then
A-2
<PAGE>
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition, in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) less than 20% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by any Person
(excluding any employee benefit plan (or related trust) of the Company
or such corporation), except to the extent that such Person owned 20%
or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities prior to the sale or disposition and (C) at least a
majority of the members of the board of directors of such corporation
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
sale or other disposition of assets of the Company or were elected,
appointed or nominated by the Board.
2.4 "Change of Control Price" means the highest price per share paid in
any transaction reported on the New York Stock Exchange Composite Index or
paid or offered in any bona fide transaction related to a potential or
actual change in control of the Company at any time during the preceding
60-day period as determined by the Committee, except that, in the case of
incentive stock options and Stock Appreciation Rights relating to incentive
stock options, such price shall be based only on transactions reported for
the date on which the Committee decides to cash out such options.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any rules and regulations issued thereunder.
2.6 "Committee" means the Compensation and Benefits Committee of the
Board, consisting of two or more Directors, each of whom shall be (a) a
"non-employee director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act and (b) an
"outside director" within the meaning of Section 162(m) of the Code.
2.7 "Common Stock" means the common stock of the Company.
2.8 "Covered Employee" means an Employee who is a "covered employee" as
such term is defined under Section 162(m)(3) of the Code.
2.9 "Employee" means an individual who is a key employee of the Company
or a Participating Subsidiary, including officers and members of the Board
who are full-time
A-3
<PAGE>
employees, who satisfy criteria established from time to time by the
Committee in its sole discretion.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any rules or regulations issued thereunder.
2.11 "Fair Market Value Per Share" means, in reference to the Common
Stock, with respect to the date of determination the average of the
reported highest and lowest sale prices per share on the New York Stock
Exchange (or if the Common Stock is not then listed on the New York Stock
Exchange, on the principal national securities exchange on which the Common
Stock is then listed) with respect to the date of determination or in the
absence of reported sales on such date, the average of such reported
highest and lowest sale prices per share on the next preceding date on
which reported sales occurred. If the Common Stock is not listed upon any
established exchange, the fair market value per share will be the average
of the highest and lowest sale prices in the over-the-counter markets
(reported from the NASDAQ System) or, if the Common Stock is not traded on
that day, on the next preceding date on which reported sales occurred,
provided, that if the Committee, in its sole discretion, determines that
such price is not representative of the true fair market value due to the
level of trading volume or otherwise, the Committee, in its sole
discretion, may determine the "fair market value per share" in a reasonable
manner consistent with the Code and taking into account information about
sale, bid and asked prices for the Common Stock in the markets where such
stock is then traded or eligible for trading. If the Common Stock is not
traded publicly on the date of determination, its "fair market value per
share" shall be determined by the Board in such manner as the Board, in its
sole discretion, may deem appropriate.
2.12 "Individual Maximum Limit" shall have the meaning set forth in
Section 4(e).
2.13 "Participating Subsidiary" means a subsidiary of the Company more
than 50% of the outstanding voting shares of each class and series of which
are beneficially owned, directly or indirectly, by the Company.
2.14 "Program" means the Management Incentive Program of Cyprus Amax
Minerals Company as set forth herein, and as it may be subsequently amended
from time to time.
2.15 "Restricted Share" shall have the meaning set forth in Section 6.
2.16 "Restriction Period" means, for any Restricted Share, the entire
period when any restrictions apply to such Restricted Share pursuant to
Section 6.2(a)(i), (ii), or (iii).
2.17 "Retirement" means termination of an Employee's employment by
retirement under the normal, mandatory, disability, age plus service, or
consent provisions of the defined benefit pension plan sponsored by the
Company or by a Participating Subsidiary in which the Employee
participates.
2.18 "Securities Act" means the Securities Act of 1933, as amended from
time to time, and any rules or regulations issued thereunder.
A-4
<PAGE>
2.19 "Section 16" means Section 16 of the Exchange Act, as amended from
time to time and any rules or regulations issued thereunder, including but
not limited to Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Exchange Act.
2.20 "Stock Appreciation Right" shall have the meaning set forth in
Section 5.12.
2.21 "Total Disability" means a disability with respect to which an
Employee is eligible for and is receiving disability benefits under a long-
term disability program sponsored by the Company or a Participating
Subsidiary.
3. EFFECTIVE DATE
3.1 Effective Date.
The Program was originally adopted by the sole shareholder of the
Company on May 28, 1985, and became effective as of July 1, 1985. The
Program was most recently amended and restated in its entirety and
approved by shareholders effective as of May 7, 1992. The Program, as
amended and restated herein, will be presented to the shareholders of
the Company on May 7, 1997 (the "Approval Date" ) for approval and if
approved, it will apply to all grants and awards made on or after the
Approval Date.
3.2 Grants and Awards Made Before Approval Date.
Subject to Sections 10.1(c) and (d), all grants and awards made prior
to the Approval Date shall continue to be governed by the terms of the
Program, and amendments thereto, which were in effect prior to the
Approval Date.
3.3 Discontinuance.
This Program shall remain in effect until discontinued by the Board
as provided in Section 11.3.
4. ELIGIBILITY
(a) Participation in this Program is limited to Employees.
(b) Subject to Subsection (d), the Committee from time to time shall
establish the total number of grants and awards to be made to all
Employees.
(c) The Committee shall determine the specific grants and awards made to
any Employee who is a person subject to Section 16 or who is a Covered
Employee. The Committee may delegate to one or more officers of the Company
the authority to determine, under criteria established by the Committee,
the other Employees to whom grants and awards may be made and the number of
options that may be granted or the number of Restricted Shares that may be
awarded to each such Employee, or the Committee itself may make all such
determinations. No Employee shall have any right to participate in any
portion of the Program unless and until so selected. Any Employee selected
to participate during any
A-5
<PAGE>
one period shall not by virtue of such participation participate for any
other period unless and until selected to participate for such other
period.
(d) The total of the number of shares for which options may be granted
during each fiscal year and the number of Restricted Shares which may be
awarded during the same fiscal year (together, the "maximum annual grants
and awards" ) shall be the sum of:
(i) 1.2% of the number of outstanding shares of Common Stock
(excluding treasury shares) as of the end of the immediately preceding
fiscal year, plus
(ii) the cumulative number of carry forward shares (as defined below)
from all prior-fiscal years (including the immediately preceding fiscal
year) which shall not yet have been used to make grants and awards in
any intervening period.
The number of "carry forward shares" from all fiscal years ending on
or before December 31, 1996, collectively, shall be 324,598. The number
of "carry forward shares" from each fiscal year (the "Accumulation
Year" ) ending on or after December 31, 1997, shall be the amount, if
any, by which (i) 1.2% of the number of outstanding shares of Common
Stock (excluding treasury shares) as of the end of the fiscal year
immediately preceding the Accumulation Year exceeds (ii) the total of
the number of shares for which options were granted during the
Accumulation Year and the number of Restricted Shares awarded during
the Accumulation Year. Any determination of the maximum annual grants
and awards for any fiscal year, including any determination of the
number of carry forward shares from any prior fiscal year, shall take
into account and be appropriately adjusted for any intervening changes
in capitalization as provided in Section 7.2.
(e) Notwithstanding any provision of this Program to the contrary, no
Covered Employee shall be granted options (with or without Stock
Appreciation Rights) and awarded Restricted Shares in any fiscal year of
more than 10% of the maximum annual grants and awards as calculated in
accordance with Section 4(d) (the "Individual Maximum Limit" ); provided
however, that the Covered Employee who is the chief executive officer of
the Company or who is acting in such capacity may be granted options (with
or without Stock Appreciation Rights) and awarded Restricted Shares in
excess of the Individual Maximum Limit, but in no event in excess of 50% of
the maximum annual grants and awards as calculated in accordance with
Section 4(d).
5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 Shares Subject to Option.
(a) The aggregate number of shares which may be issued under
incentive stock options (as defined in Section 5.3(a)) shall not exceed
5,000,000.
(b) The shares of Common Stock to be offered under this Program will
be reacquired, purchased or unissued shares, as the Board may
determine. Options shall be granted only in respect of shares of the
Common Stock.
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<PAGE>
5.2 Grants of Options.
(a) Options shall be granted by the Company in accordance with the
decisions of the Committee and the officers to whom the Committee may
delegate authority pursuant to Section 4(c).
(b) No incentive stock option shall be granted after June 30, 2006.
5.3 Types of Options.
(a) New options granted to Employees may be either of a type that
meets the requirements of Section 422(b) of the Code ("incentive stock
options" ), or of a type that does not meet such requirements ("non-
statutory options" ) if otherwise consistent with the provisions of
this Program.
(b) To the extent incentive stock options are granted and the
aggregate Fair Market Value Per Share (determined as of the date the
option is granted) of the Common Stock with respect to which incentive
stock options are exercisable for the first time by such individual
during any calendar year under this Program and any other stock option
plan of the Company or any parent or subsidiary exceeds $100,000, the
portion of the option that exceeds $100,000 shall be treated as a non-
statutory option. Should any of this Section 5.3(b) not be necessary in
order for the options to qualify as incentive stock options, or should
any additional provisions be required, the Committee may amend the
Program accordingly, without the necessity of obtaining the approval of
the shareholders of the Company.
5.4 Option Price.
The price per share at which options may be exercised shall be determined
by the Committee, in its sole discretion, but shall not be less than 100%
of the Fair Market Value Per Share on the date the option is granted.
5.5 Period of Option.
The expiration date of each option shall be that determined by the
Committee, in its sole discretion, but in no event shall the expiration
date be later than ten (10) years from the date an option is granted.
5.6 Restrictions on Transfer.
(a) Except as provided in Subsection (b) below, options and any
rights or privileges pertaining thereto shall not be transferable other
than by will or the laws of descent and distribution or, in the case of
options granted after August 31, 1992, if the terms of a grant so
permit, pursuant to a qualified domestic relations order (as defined
for purposes of Rule 16b-3 of the Exchange Act) and shall be
exercisable during the Employee's lifetime only by such Employee or the
Employee's guardian or legal representative.
(b) Notwithstanding Subsection 5.6(a), an Employee may elect to
irrevocably transfer some or all of the non-statutory options (and
related Stock Appreciation Rights,
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if any), which have been or will be granted to him, to one or more of
his spouse, children and grandchildren, or to one or more trusts
established solely for the benefit of the Employee's spouse, children
and grandchildren; provided, however, that:
(i) the option agreement expressly provides for such transfer
and, with respect to options currently outstanding, the Committee,
in its sole discretion, agrees to amend or has amended the
Employee's option agreement to provide for such transfer;
(ii) the Employee shall receive no consideration for such
transfer;
(iii) the option, once transferred, may not again be transferred
except by will or by the laws of descent and distribution; and
(iv) such option, once transferred, remains subject to the same
terms and conditions of the option as in effect before the transfer
and the transferee has complied with Subsection (c).
The Committee shall establish such rules and procedures as it, in
its sole discretion, deems necessary or desirable to effect such
transfers.
Neither the Company, a Participating Subsidiary, the Board, or
the Committee has any obligation to provide notice to any
transferee of any option expiration date.
(c) No transferred option shall be exercisable unless and until the
Company receives written notice, which must be in a form and manner
satisfactory to the Committee, in its sole discretion, from a
transferee to the effect that a transfer has occurred, identifying the
options transferred, identifying the transferee and relation to the
Employee, and any other information the Committee, in its sole
discretion, determines necessary or desirable, the transferee
acknowledges that the option is subject to the Program and the option
agreement between the Company and the Employee, and that the transferee
will comply with all applicable provisions of the Program and such
option agreement.
(d) Any Employee to whom an option is granted may designate a
Beneficiary who shall have the right to exercise the option after the
Employee's death.
5.7 Required Period of Employment.
(a) In respect of options granted before July 30, 1987, a portion not
in excess of 50% of the shares represented by the option shall be
exercisable by the Employee to whom the option has been granted after
such Employee shall have completed a period of not less than one year
of continuous employment with the Company or a Participating Subsidiary
immediately following the date on which the option is granted.
(b) Options granted on or after July 30, 1987, but before May 7,
1992, shall be exercisable by the Employee to whom the option has been
granted after such Employee shall have completed a period of not less
than two years of continuous employment with
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the Company or a Participating Subsidiary immediately following the
date on which the option is granted.
(c) Options granted on or after May 7, 1992, shall be exercisable by
the Employee to whom the option has been granted after such Employee
shall have completed such period of continuous employment, if any, with
the Company or a Participating Subsidiary immediately following the
date on which the option is granted as shall be specified in the option
agreement.
(d) Notwithstanding the foregoing, upon a Change of Control, all
options granted hereunder shall become exercisable to the full extent
of the original grant.
5.8 Exercise of Option.
After completion of the required period of employment, if any, an
option may be exercised according to its terms during the balance of
the option period, except as otherwise provided in Section 5.9. The
option may be exercised only by the Employee to whom it is granted,
except as otherwise provided in Sections 5.6 and 5.9.
5.9 Termination of Employment.
(a) Termination. If an Employee to whom an option is granted ceases
to be employed either by the Company or by a Participating Subsidiary
for a reason other than Retirement or Total Disability before the
option has been exercised in full, then the option (or the unexercised
portion thereof) shall expire at the time specified in the option
agreement (which shall be, in any event, no later than the expiration
date of the option).
(b) Retirement. If upon Retirement, the Employee has completed the
required period of employment as provided in Section 5.7, the option
shall be exercisable by the Employee, but only within the period
specified in the option agreement (which period shall end not later
than three (3) years after the date of Retirement and, in any event not
later than the expiration date of the option). If an Employee to whom
this Section 5.9(b) is applicable dies before the expiration of the
period specified in the option agreement during which the option may be
exercised in part or in full, then the option (or the unexercised
portion thereof) shall be exercisable by the Beneficiary of the
Employee during the remainder of such three year period following
Retirement plus three months but, in any event, not later than the
expiration date of the option.
(c) Change of Control. Notwithstanding the foregoing, except with
respect to incentive stock options granted prior to January 22, 1990,
unless the option provides for a greater period of exercise when
granted, if an Employee ceases to be employed by the Company or a
Participating Subsidiary at or after a Change of Control, other than by
reason of death or Retirement, any option held by such Employee shall
be exercisable for ninety (90) days but in no event later than the
expiration date of the option.
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(d) Total Disability. If an Employee to whom an option is granted
ceases to be employed by the Company or by a Participating Subsidiary
on account of Total Disability before the option has been exercised in
full, then the option (or the unexercised portion thereof) shall expire
at the time specified in the option agreement (which shall be, in any
event, no later than the expiration date of the option).
(e) Death. If an Employee to whom an option is granted ceases to be
employed by the Company or by a Participating Subsidiary on account of
such Employee's death and such death occurs before the option has been
exercised in full, then the option (or the unexercised portion thereof)
shall expire at the time specified in the option agreement (which shall
be, in any event, no later than the expiration date of the option).
(f) Transferred Employees. Effective August 25, 1994, Amax Gold Inc.
shall be treated as a Participating Subsidiary for purposes of applying
the provisions of this Section 5.9. With respect to options granted
prior to August 25, 1994, an Employee who transfers from the Company to
Amax Gold Inc. will have the ability to elect either:
(i) to retain all vested and unvested options under the terms of
the Program as in effect on such date of transfer, without treating
Amax Gold Inc. as a Participating Subsidiary, in which case any
incentive stock options granted shall expire on the ninetieth
(90th) day following such Employee's transfer to Amax Gold Inc., or
(ii) to have non-statutory options substituted for the original
incentive stock options to remain outstanding for the original
terms of the grant provided the Employee remains employed by Amax
Gold Inc.
5.10 Payment for Shares.
Shares purchased upon exercise of an option shall be paid for in full
at the time the option is exercised. The payment may be in cash or,
subject to such rules as the Committee may establish from time to time,
in shares of Common Stock, or other property, or any combination
thereof. The shares of Common Stock received will be valued at Fair
Market Value Per Share on the date of exercise.
5.11 Option Agreement.
Each grant of options shall be evidenced by a written agreement which
contains such terms and conditions consistent with the Program as the
Committee, in its sole discretion, may determine. In addition, the
option agreement may contain such other terms, provisions and
conditions as may be determined by the Committee, in its sole
discretion, so long as those terms, provisions and conditions are not
inconsistent with the provisions of this Program.
5.12 Stock Appreciation Rights.
(a) Stock Appreciation Rights may be granted in connection with all
or part of any option granted under this Program, either at the time of
the grant of such option or at
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any time thereafter during the term of the option, and shall entitle
the holder of the related option to the extent unexercised, upon
exercise of the Stock Appreciation Rights and surrender of the related
option (or applicable portion thereof), to receive a number of the
shares of the Common Stock or cash, as determined pursuant to Section
5.12(b). Such option shall, to the extent so surrendered, thereupon
cease to be exercisable.
(b) Stock Appreciation Rights shall be subject to such terms and
conditions not inconsistent with the Program as shall from time to time
be determined by the Committee, in its sole discretion, and to the
following terms and conditions:
(i) Stock Appreciation Rights shall be exercisable at such time
or times and to the extent, but only to the extent, that the option
to which they relate shall be exercisable.
(ii) Stock Appreciation Rights shall in no event be exercisable
unless and until the holder of the Stock Appreciation Rights shall
have completed a period of continuous service with the Company or a
Participating Subsidiary, or both, immediately following the date
upon which the Stock Appreciation Rights shall have been granted,
which period shall be determined by the Committee in its sole
discretion.
(iii) Upon an exercise of Stock Appreciation Rights, the holder
thereof shall be entitled to receive a number of the shares of
Common Stock equal in aggregate value to the amount by which the
Fair Market Value Per Share of such stock on the date of such
exercise shall exceed the option price per share of the related
option, multiplied by the number of shares in respect of which the
Stock Appreciation Rights have been exercised. All or any part of
the obligation arising out of an exercise of Stock Appreciation
Rights may, in the sole discretion of the Committee, be settled by
the payment of cash equal to the aggregate value of the shares (or
a fraction of a share) that would otherwise be delivered under the
preceding sentence of this Section 5.12(b)(iii).
(iv) Stock Appreciation Rights shall not be transferable other
than with the option to which they relate whenever such option may
be transferred in accordance with Section 5.6. Stock Appreciation
Rights shall be exercisable during the Employee's lifetime only by
the Employee or the Employee's guardian or legal representative.
Any Beneficiary who is entitled to exercise an option shall be
entitled to exercise any related Stock Appreciation Rights.
(c) To the extent that Stock Appreciation Rights which relate to an
incentive stock option shall be exercised, that incentive stock option
shall be deemed to have been exercised for the purpose of the maximum
limitation set forth in Section 5.1(a).
(d) Notwithstanding the foregoing, any Stock Appreciation Rights
outstanding as of the date of a Change of Control and not then
exercisable and vested shall become fully exercisable and vested to the
full extent of the original grant.
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5.13 Surrender of Option Following Death.
Following the death of an Employee, the Company may, in its sole
discretion, upon the request of such Employee's Beneficiary who holds
an exercisable option and in consideration for the surrender of such
option, pay the amount by which the Fair Market Value Per Share of the
Common Stock on the date of such request shall exceed the option price
per share multiplied by the number of shares as to which the request is
made.
5.14 Limited Stock Appreciation Rights.
Notwithstanding any other provision of this Program, upon a Change of
Control other than a Change in Control specified in Clause (a) of the
definition of Change of Control, arising as a result of beneficial
ownership (as defined therein) by the Employee of Outstanding Company
Common Stock or Outstanding Company Voting Securities (as such terms
are defined in the definition of Change of Control), in the case of
stock options other than incentive stock options granted prior to
January 22, 1990, during the 60-day period from and after a Change of
Control (the "Exercise Period" ), unless the Committee shall determine
otherwise at the time of grant, an Employee shall have the right, in
lieu of the payment of the exercise price of the shares of Common Stock
being purchased under the stock option and by giving notice to the
Company, to elect (within the Exercise Period) to surrender all or part
of the stock option to the Company and to receive in cash, within 30
days of such notice, an amount equal to the amount by which the Change
of Control Price per share of Common Stock on the date of such election
shall exceed the exercise price per share of Common Stock under the
stock option multiplied by the number of shares of Common Stock granted
under the stock option as to which the right granted under this Section
5.14 shall have been exercised.
6. RESTRICTED STOCK AWARDS
6.1 Shares Subject to Awards.
Awards of Restricted Shares shall be limited in number each fiscal
year as provided in Section 4(d). The shares which may be issued under
the Program may be reacquired, purchased or unissued shares, as the
Board may determine. Restricted Shares shall be awarded only in shares
of Common Stock.
6.2 Awards of Restricted Shares.
(a) Each award of Restricted Shares shall be evidenced by a written
agreement which shall contain such terms and conditions consistent with
the Program as shall from time to time be determined by the Committee,
in its sole discretion, and to the following terms and conditions:
(i) none of the Restricted Shares may be sold, assigned,
transferred, pledged or otherwise encumbered, except as otherwise
specifically provided, during the Restriction Period;
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(ii) all of the Restricted Shares shall be forfeited and shall be
returned to the Company and all rights of the Employee to such
Restricted Shares shall terminate without any payment of
consideration by the Company if the Employee fails to remain in the
continuous employment of the Company or a Participating Subsidiary
for such period as the Committee shall designate in accordance with
Section 6.4, unless the employment is terminated by reason of
death, Total Disability, or Retirement; and
(iii) if so provided in the terms of the award agreement, the
Restricted Shares, in whole or in part, shall be forfeited and
shall be returned to the Company and all rights of the Employee to
such Restricted Shares shall terminate without any payment of
consideration by the Company if performance goals or other factors
specified in the terms of the award agreement are not attained.
(b) With respect to any Covered Employee, the Committee, in its sole
discretion, may determine that such Restricted Shares will vest only
upon the achievement of specific performance goals that are established
by the Committee. If the award agreement requires performance goals,
the performance goals must:
(i) be in writing;
(ii) be established not later than 90 days after the commencement
of the period of service to which the performance goal relates,
provided that the outcome is substantially uncertain at the time
the goal is established. Regardless of when the goal is
established, it will not be considered to be substantially
uncertain or "preestablished" if it is established after 25 percent
of the period of service has elapsed;
(iii) include, in terms of an objective formula or standard, the
method for computing the amount of compensation payable to the
Covered Employee if the goal is reached.
Further, the Committee must certify in writing that the
performance goals established by the Committee and any other
material terms have been satisfied, before stock certificates are
distributed without restrictions under this Program.
(c) Upon and following the date a certificate for the Restricted
Shares is issued to an Employee (except following a forfeiture of the
Restricted Shares as set forth above in this Section 6.2), the Employee
shall have all of the rights of a shareholder including but not limited
to the right to receive all dividends paid on such shares (reduced by
any amounts the Company may be required to withhold for taxes) and the
right to vote such shares. Any securities or other property (excluding
cash in payment of normal dividends) that may be distributed with
respect to the Restricted Shares shall be received and held by the
Employee subject to the same restrictions as the Restricted Shares.
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6.3 Certificates for Shares.
(a) As soon as practicable after the receipt by the Company of an
award agreement executed by the Employee as provided in Section 6.2 and
of a stock power endorsed by the Employee in blank with respect to the
Restricted Shares covered by the award agreement, unless a later date
for issuance of stock certificates is provided in the award agreement,
the Company, in its sole discretion, upon the Employee's written
request, may cause to be issued a stock certificate, registered in the
name of the Employee, evidencing the Restricted Shares awarded by the
agreement. Each such certificate shall bear a legend substantially in
the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Management Incentive
Program of Cyprus Amax Minerals Company and an Agreement
entered into between the registered owner of such shares and
Cyprus Amax Minerals Company or one of its Participating
Subsidiaries. A copy of the Program and Agreement is on file
in the office of the Secretary of Cyprus Amax Minerals
Company, 9100 East Mineral Circle, Englewood, Colorado."
Such legend shall not be removed from any stock certificate
evidencing such Restricted Shares until the lapse or release of the
restrictions imposed pursuant to Section 6.2(a) on such Restricted
Shares.
(b) As an alternative to delivering any stock certificate to the
Employee pursuant to Section 6.3(a) above, the Company in its sole
discretion may cause each certificate in respect of Restricted Shares
awarded hereunder, together with a stock power relating to such
Restricted Shares, to be deposited by the Company with a custodian
(which may be the Company) to be designated by the Company. In such
event, the Company shall cause such custodian to issue to the Employee
a receipt evidencing any stock certificate held by it registered in the
name of such Employee. Notwithstanding the provisions of Subsection (a)
or this Subsection, the Company may adopt such other procedure that it,
in its sole discretion, deems appropriate to evidence the right of the
Employee to Restricted Shares.
(c) The Employee shall not be deemed for any purpose to be, or have
any rights as, a shareholder of the Company with respect to any
Restricted Shares awarded except if, as and when a stock certificate is
issued therefor and then only from the date such certificate is issued.
No adjustment shall be made for dividends or distributions or other
rights for which the record date is prior to the date such stock
certificate is issued.
(d) As soon as practicable after the lapse or release of the
restrictions imposed pursuant to Section 6.2(a) on any such Restricted
Shares, the Company shall cause to be issued in the Employee's name a
stock certificate evidencing the Restricted Shares
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with respect to which the restrictions have lapsed or been released,
free of the legend provided in Section 6.3(a), and shall cause such
stock certificate to be delivered to the Employee, upon surrender to
the Company of the previously issued certificate(s) representing the
same Restricted Shares.
6.4 Restriction Period.
The restrictions set forth in Section 6.2(a)(i) shall lapse only when
the restrictions set forth in Section 6.2(a)(ii) shall lapse and the
restrictions, if any, established pursuant to Section 6.2(a)(iii) shall
lapse. Subject to Section 6.5, the restrictions set forth in Section
6.2(a)(ii) shall lapse:
(i) after one year from the date of award with respect to not in
excess of 25% of the Restricted Shares comprising an award to an
employee,
(ii) after two years with respect to not in excess of 50% of such
Restricted Shares,
(iii) after three years with respect to not in excess of 75% of
such Restricted Shares, and
(iv) as to all Restricted Shares comprising an award to an
Employee no sooner than four years, as the Committee shall
determine in the case of each award.
The restrictions, if any, established pursuant to Section 6.2(a)(iii)
shall lapse at the time specified in the terms of the award agreement.
6.5 Lapse of Restrictions.
(a) In the event that the employment of an Employee is terminated
prior to the lapse of restrictions on Restricted Shares by reason of
death, Total Disability, or Retirement, the restrictions on all
Restricted Shares awarded to such Employee shall lapse on the date of
such termination, except as may otherwise be provided in the terms of
the award agreement.
(b) The Committee shall have the authority to accelerate the time at
which the restrictions will lapse or to remove any of such restrictions
whenever it may decide, in its sole discretion, that, by reason of
changes in applicable law or other material changes in circumstances
arising after the date of the award, such action is in the best
interests of the Company and equitable to the Employee. The Committee,
in its sole discretion and subject to such terms and conditions as the
Committee may determine, may include in any award of Restricted Shares,
and may amend any outstanding award to cause it to include, a right of
the Employee upon termination of employment, other than by reason of
death, Total Disability, or Retirement to receive cash equal to the
Fair Market Value Per Share of such Restricted Shares on the date of
such termination.
(c) Notwithstanding any other provision of the Program to the
contrary, in the event of a Change of Control, the restrictions
applicable to any Restricted Shares shall lapse and
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such Restricted shares shall become free of all restrictions and fully
vested to the full extent of the original grant.
7. ADJUSTMENTS FOR COMPANY CHANGES
7.1 Rights and Powers Reserved.
The existence of any outstanding option shall not affect in any way
the right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalization, reorganizations or
other changes in the Company's capital structure or its business, any
merger or consolidation of the Company, any issue or sale of bonds,
debentures, preferred or prior preference stock ahead of or affecting
the common stock of the Company, any sale or transfer of all or any
part of the assets or business of the Company, the liquidation or
dissolution of the Company or any other corporate act or proceeding,
whether of a similar character or otherwise. Except as expressly
provided in this Program, the issue or sale by the Company of shares of
stock of any class, or securities convertible into shares of stock of
any class, for cash, property, labor or services, either upon direct
sale or the exercise of rights or warrants to subscribe therefor or
upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of shares of Common Stock then subject to any outstanding
option.
7.2 Changes in Capitalization.
In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, shares of Common
Stock, other securities, or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of shares of
Common Stock or other securities of the Company, issuance of warrants
or other rights to purchase shares of Common Stock or other securities
of the Company, or other similar corporate transaction or event affects
the shares of common stock such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available
under this Program, then the Committee shall, in such manner as it may
deem equitable, adjust any or all of (i) the number and type of shares
of common stock (or other securities or property) which thereafter may
be made the subject of awards, (ii) the number and type of shares of
common stock (or other securities or property) subject to outstanding
grants and awards, and (iii) the grant, purchase, or exercise price
with respect to any grant or award, or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding grant or
award, and (iv) the aggregate number of shares which may be issued as
incentive stock options pursuant to Section 5.1(a); provided, however,
in each case, that with respect to grants of incentive stock options
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no such adjustment shall be authorized to the extent that such
authority would cause this Program to violate Section 422(b)(1) of the
Code or any successor provision thereto; and provided further, however,
that the number of shares subject to any grant or award denominated in
shares shall always be a whole number.
8. RELATIONSHIP OF PROGRAM TO BENEFIT PLANS
Unless otherwise determined by the Committee, no income of an Employee
attributable to this Program shall be included in the Employee's earnings for
purposes of any benefit plan in which the Employee may be eligible to
participate or any termination or severance pay of the Company or any
subsidiary or parent corporation of the Company nor affect any benefits under
any other benefit plan now or hereafter in effect under which the availability
or amount of benefits is related to the level of compensation.
9. EFFECT OF PROGRAM ON RIGHT TO CONTINUED EMPLOYMENT AND INTEREST IN
PARTICULAR PROPERTY
Neither the existence of this Program nor any grant of an option or award of
Restricted Shares pursuant to it shall create any right to continued
employment of any Employee or any other employee by the Company or any
subsidiary, nor shall there be a limitation in any way on the right of the
Company or any subsidiary of the Company by which an Employee is employed to
terminate such Employee's employment at any time. No person shall have, under
any circumstances, any interest whatsoever, vested or contingent, in any
particular property or asset of the Company or of any Participating Subsidiary
or in any particular share or shares of the Company that may be held either by
the Company or by any Participating Subsidiary (other than Restricted Shares
held by a custodian) by virtue of any grant of an option or award of
Restricted Shares.
This Program shall not be deemed a substitute for, and shall not preclude
the establishment or continuation of any other plan, practice, or arrangement
that may now or hereafter be provided for the payment of compensation, special
awards or employee benefits to employees generally, or to any class or group
of employees, such as and without limitation, any savings, thrift, profit-
sharing, pension, retirement, excess benefit, group insurance, health care or
other welfare plans. Any such arrangements may be authorized by the Board and
any payment thereunder made independently of this Program.
10. ADMINISTRATION
10.1 Committee Authority.
(a) The Committee shall have full authority to act under this Program
insofar as it relates to grants and awards of options, Stock
Appreciation Rights and Restricted Shares. The terms of grants and
awards need not be uniform.
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(b) The Committee is authorized to interpret and administer this
Program, and to establish general criteria and precedents for the terms
and conditions upon which awards shall be made and options granted. The
Committee shall have the authority to adopt, alter and repeal
administrative rules, guidelines and practices governing this Program
as it, from time to time, deems advisable; to interpret the terms and
provisions of this Program and any grant or award issued under this
Program (and any related agreement); and to otherwise supervise the
administration of this Program. The Committee may correct any defect,
supply any omission, conform the Program to any change in law or
regulation, or reconcile any inconsistency or ambiguity in this Program
or in any grant or award issued in the manner and to the extent it
shall deem necessary to carry this Program into effect.
(c) Notwithstanding any provision in this Program to the contrary,
the Committee may, in its sole discretion, extend the post-termination
exercise period, accelerate vesting, and waive any required period of
employment for any option, award or right granted or to be granted to
any Employee, and may amend the Program and/or the option agreement or
award agreement consistent herewith.
(d) The Committee, in its sole discretion, may at any time amend the
terms of any outstanding grant or award made prior to the Approval
Date, or the terms of any outstanding grant or award which may be made
thereafter, in any manner such that the terms of such grant or award as
so amended are not inconsistent with the provisions of this Program,
provided that no such amendment which may adversely affect the Employee
holding such grant or award shall become effective without the written
consent of such Employee.
(e) The Committee may delegate any or all of its administrative
responsibilities under the Program to one or more officers or employees
of the Company; provided however, that the Committee may not delegate
its responsibilities with respect to Covered Employees or to Employees
who are subject to Section 16. To the extent of any such delegation,
the delegate shall have the duties, powers, authority and discretion of
the Committee.
10.2 Finality of Determinations.
Any decision, interpretation, or other action made or taken in good
faith by the Board or the Committee within their respective areas of
authority under the provisions of this Program shall be final, binding
and conclusive on the Company, Participating Subsidiaries and all
Employees, and their respective heirs, executors, administrators,
successors and assigns.
11. AMENDMENT AND DISCONTINUANCE
11.1 Incentive Stock Options.
Subject to the limitations contained in Section 11.2, the Committee
may, without further action by the shareholders and without further
consideration to the Company,
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amend this Program so that options theretofore or thereafter granted
under this Program shall meet the requirements of any provision of the
Code applicable to incentive stock options, including without
limitation, requirements arising as a result of amendments to the Code
that become effective after adoption of this Program.
11.2 Other Amendments.
The Board may, from time to time, amend this Program, or any
provisions thereof, except that, without shareholder approval, the
Board may not amend the following:
(a) The maximum limitations with respect to the number of grants and
awards which may be made as incentive stock options and as Restricted
Shares shall not be amended. The aggregate number of shares which may
be issued under incentive stock options shall not be amended. The total
number of options granted plus Restricted Shares awarded to any Covered
Employee shall not be amended.
(b) The minimum price per share at which options granted as incentive
stock options may be exercised shall not be reduced below 100% of the
Fair Market Value Per Share of such shares on the date the option is
granted.
(c) The authority of the Committee may not be reduced.
(d) No option granted or Restricted Shares awarded to any Employee
before any amendment shall be adversely affected by such amendment
without such Employee's consent.
(e) This Section 11.2 may not be amended.
11.3 Discontinuance.
The Board may suspend or discontinue the Program, in whole or in
part, at any time, but any such suspension or discontinuance shall not
affect options granted or Restricted Shares awarded prior thereto.
12. GENERAL PROVISIONS
12.1 Certificates.
No certificate for shares of Common Stock distributable pursuant to
the Program shall be issued and delivered unless the issuance of such
certificates complies with all applicable legal requirements including,
without limitation, compliance with the provisions of the Securities
Act, the Exchange Act, and the requirements of the exchanges on which
the Common Stock may, at the time, be listed.
12.2 Severability.
If any provision of this Program or any grant or award is or becomes
invalid, illegal, or unenforceable in any jurisdiction, or as to any
person, or would disqualify this Program or any grant or award under
any law or regulation deemed applicable by the
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Committee (including regulations under Section 16), such provision
shall be construed or deemed amended to conform to applicable laws and
regulations, or if it cannot be so construed or deemed amended without,
in the determination of the Committee, materially altering the intent
of this Program or the grant or award, such provision shall be stricken
as to such jurisdiction or person and the remainder of this Program or
the grant or award shall remain in full force and effect.
12.3 Compliance with Foreign Law.
The Committee shall have the authority to adopt such modifications,
procedures, and subplans as may be necessary or desirable to comply
with provisions of foreign countries in which the Company may operate
to assure the viability of the benefits of awards and grants made to
Employees employed in such countries and to meet the intent of this
Program.
12.4 Liability.
No member of the Board or the Committee nor any employee of the
Company or any subsidiary or parent corporation of the Company shall be
liable for any act or action hereunder, whether of omission or
commission, by any other member or employee or by any agent to whom
duties in connection with the administration of this Program have been
delegated or, except in circumstances involving bad faith, gross
negligence or fraud, for anything done or omitted to be done by
himself.
12.5 Withholding of Taxes.
The Company, in its sole discretion, shall have the right either (a)
to reduce the number of shares of Common Stock otherwise deliverable
pursuant to this Program by an amount which would have a Fair Market
Value Per Share equal to the "Taxable Amount" or (b) to delay the
transfer of all shares of common stock otherwise deliverable pursuant
to the Program until the Employee has transferred to the Company a cash
payment equivalent to the "Taxable Amount." For purposes of this
Section, "Taxable Amount" means the amount of all Federal, state or
local taxes to be withheld, based upon the tax rates then in effect or
the tax rates that the Company reasonably believes will be in effect
for the applicable tax year or to deduct the amount of such taxes from
any cash payment to be made to an Employee, pursuant to this Program or
otherwise. In connection with such withholding, the Committee may make
such arrangements as are consistent with the Program as it may deem
appropriate.
12.6 Unfunded Status of Program.
This Program is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payment not
yet made to an Employee by the Company, nothing contained herein shall
give any such Employee any rights that are greater than those of a
general creditor of the Company.
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12.7 Governing Law.
This Program and actions taken in connection herewith shall be
governed and construed, to the extent not superseded by applicable
federal law, in accordance with the laws of the State of Colorado.
12.8 Construction.
Wherever any words are used in this Program in the masculine gender
they shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so
apply.
12.9 Costs.
The Company shall bear all expenses incurred in administering this
Program, including expenses of issuing Common Stock pursuant to any
grants or awards hereunder.
12.10 Successors.
This Program shall be binding upon and inure to the benefit of any
successor or successors of the Company.
12.11 Headings.
Article and section headings contained in this Program are included
for convenience only and are not to be used in construing or
interpreting this Program.
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CYPRUS AMAX MINERALS COMPANY
THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OR THE TRUSTEES NAMED BELOW
The undersigned hereby appoints Milton H. Ward, Philip C. Wolf, and Dale E.
Huffman, and each or any of them, the proxies and agents of the undersigned,
with full power of substitution, to represent and vote in accordance with the
instructions given herein all the shares of the common stock of Cyprus Amax
Minerals Company held of record by the undersigned at the close of business on
March 10, 1997 at the Annual Meeting of the Shareholders of Cyprus Amax
Minerals Company to be held in the Summit Room of the Inverness Hotel and Golf
Club, 200 Inverness Drive West, Englewood, Colorado 80112, on May 7, 1997 at
10:00 a.m. or at any adjournment thereof, and directs the Trustees of the
Cyprus Amax Minerals Company Savings Plan and Trust, Cyprus Amax Minerals
Company Thrift Plan For Bargaining Unit Employees, CSM Industries, Inc. Savings
Plan, and Luzenac America Employee Savings Plan (the "Plans") (as applicable,
with respect to shares of common stock held for the benefit of the undersigned)
to vote in person or by proxy at such annual meeting, all shares held by or for
the benefit of the undersigned. The Trustees for the Plans will vote
unallocated and/or undirected shares of the Company's stock held by them in
direct proportion to the voting of shares for which instructions have been
received.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2, AND 3 AND
AGAINST ITEM 4 EXCEPT AS NOTED ABOVE WITH RESPECT TO THE PLANS. UNLESS
AUTHORITY TO VOTE FOR NOMINEES IN ITEM 1 IS WITHHELD, A VOTE FOR THE ELECTION
OF DIRECTORS WILL BE DEEMED TO CONFER AUTHORITY TO VOTE FOR ANY NOMINEE WHOSE
NAME IS NOT LINED THROUGH ON THE REVERSE SIDE AND FOR ANOTHER NOMINEE IF ANY OF
THE NAMED NOMINEES IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE.
CYPRUS AMAX MINERALS COMPANY
P.O. BOX 11255
NEW YORK, N.Y. 10203-0255
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3 AND AGAINST
ITEM 4.
(Continued and to be signed and dated on the reverse side.)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1, 2 AND 3.
- --------------------------------------------------------------------------------
1. Election of Directors FOR all nominees [X] WITHHOLD AUTHORITY to vote [X]
listed below for all nominees listed below
Nominees: John Hoyt Stookey, Billie B. Turner, and Milton H. Ward
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
FOR ABOVE AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME.)
2. Approval of the Management Incentive Program, 3. Appointment of Price
as amended and restated. Waterhouse LLP as
independent accountants.
FOR [X] AGAINST [X] ABSTAIN [X] FOR [X] AGAINST [X] ABSTAIN [X]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT 5. OTHER MATTERS. In their discretion,
YOU VOTE "AGAINST" PROPOSAL 4. the proxies are authorized to vote
- --------------------------------------- upon other matters not known to the
4. Shareholder proposal relating to Board of Directors on March 21, 1997
an Independent Nominating Committee. that may come before the meeting and
FOR [X] AGAINST [X] ABSTAIN [X] upon matters incident to the conduct
- --------------------------------------- of the meeting.
Change of Address
and/or Comments
Mark Here [X]
NOTE: Please sign exactly as name
appears. Joint owners should each
sign. If signing as attorney,
executor, administrator, agent,
trustee or guardian, please give
full title as such. If signing on
behalf of a corporation, the full
corporate name should be indicated
and an authorized corporate officer
should sign.
Dated: ____________________, 19__
_________________________________
Signature
_________________________________
Signature (if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY VOTES MUST BE INDICATED (X)
CARD PROMPTLY USING THE ENCLOSED ENVELOPE. IN BLACK OR BLUE INK [X]
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