<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 13, 1998
----------------
CYPRUS AMAX MINERALS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10040 36-2684040
- --------------------------------------------------------------------------------
(State or other juris- (Commission I.R.S. Employer
diction of incorporation) File Number) (Identification No.)
9100 East Mineral Circle, Englewood, CO 80112
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 643-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Disposition of Assets
- -----------------------------
On October 13, 1998, pursuant to a Stock Purchase and Sale Agreement, dated as
of April 25, 1998, by and among Cyprus Amax Minerals Company ("Cyprus Amax"),
Cyprus Foote Mineral Company ("Foote"), Cyprus Specialty Metals Company ("Cyprus
Specialty") and Foote Acquisition Corporation ("Buyer"), Cyprus Amax completed
the sale of its Foote lithium subsidiary to an affiliate of Chemetall GmbH, a
specialty chemicals unit of Metallgesellschaft AG. Prior to the consummation of
the stock purchase transaction, Buyer was a significant customer of Foote. The
terms of the transaction were established through arm's length negotiation.
Cyprus Amax received $305 million in cash in the transaction and expects to
report a pre-tax gain of approximately $150 million from the sale. This should
result in an after-tax gain of slightly over $100 million in the fourth quarter.
However, as a result of the sale of assets earlier in the year, only a nominal
amount of federal income taxes are expected to be paid. Proceeds from the sale
are expected to be used for general corporate purposes, including debt
reduction, the share buyback program and to strengthen Cyprus Amax's financial
position and core mining businesses.
2
<PAGE>
Item 7. Financial Statements and Exhibits
- -----------------------------------------
(b) Unaudited Pro forma Financial Information
Cyprus Amax's unaudited Pro forma financial statements give effect to the sale
of its lithium subsidiary as if such transaction had occurred for balance
sheet purposes, on June 30, 1998 and for income statement purposes as of January
1, 1997. The Pro forma information is not necessarily indicative of the results
that would have been reported had such events actually occurred on the dates
specified, nor is it indicative of Cyprus Amax's future results.
<TABLE>
<CAPTION>
Cyprus Amax Minerals Company
Pro forma Balance Sheet at June 30, 1998
(In Millions)
Historical
------------------------------------ Pro forma
Disposition Consolidated
----------- Pro forma Without
Consolidated Lithium Adjustments Lithium
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Current Assets 847 $ 44 $ 305 /1/ $1,108
Properties - At Costs, Net 3,974 106 - 3,868
Other Assets 620 - - 620
------ ---- --------- ------
Total Assets $5,441 $150 $ 305 $5,596
====== ==== ========= ======
Current Liabilities $ 615 $ 8 $ 82 /2/ $ 689
Long-Term Debt and Capital Lease Obligations 1,791 - - 1,791
Other Liabilities 737 11 (16)/3/ 710
------ ---- --------- ------
Total Noncurrent Liabilities and Deferred Credits 2,528 11 (16) 2,501
Minority Interest 34 - - 34
Shareholders Equity
Preferred Stock 5 - - 5
Common Stock 1 - - 1
Paid-In Surplus 2,943 116 116 /4/ 2,943
Accumulated Deficit (568) 15 123 /4/ (460)
Other (13) - - (13)
------ ---- --------- ------
2,368 131 239 2,476
Treasury Stock at Cost (54) - - (54)
Loan to Savings Plan (50) - - (50)
------ ---- --------- ------
Total Shareholders' Equity 2,264 131 239 2,372
------ ---- --------- ------
Total Liabilities and Shareholders' Equity $5,441 $150 $ 305 $5,596
====== ==== ========= ======
</TABLE>
3
<PAGE>
Pro forma Income Statement for Year Ended December 31, 1997
(In Millions Except Per Share Data)
<TABLE>
<CAPTION>
Historical
--------------------------- Pro forma
Cyprus Disposition Consolidated
Amax ----------- Pro forma Without
Consolidated Lithium Adjustments/5/ Lithium
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue $3,346 $96 $ - $3,250
Costs and Expenses
Costs of Sales 2,257 60 - 2,197
Selling and Administrative 128 7 - 121
Depreciation, Depletion, and Amortization 444 8 - 436
Write-Downs and Special Charges 241 - - 241
Exploration Expense 43 - - 43
------ --- ------ ------
Total Costs and Expenses 3,113 75 - 3,038
-
Income From Operations 233 21 - 212
Other Income (Expense) -
Interest Income 36 6 - 30
Interest Expense (208) - - (208)
Capitalized Interest 10 - - 10
Earnings (Loss) on Equity Investments and Other (31) - - (31)
------ --- ------ ------
Income Before Income Taxes and Minority Interest 40 27 - 13
Income Tax Benefit (Provision) 22 (1) - 23
Minority Interest 7 - - 7
------ --- ------ ------
Net Income 69 26 - 43/5/
Preferred Stock Dividends (19) - - (19)
------ --- ------ ------
Income Applicable to Common Shares $ 50 $26 $ - $ 24
====== === ====== ======
Earnings per Common Share
Basic and Diluted/1/ $ 0.54 $ 0.26/5/
Weighted Average Common Shares Outstanding
Basic 93 93
Diluted 103 103
</TABLE>
/1/ Diluted earnings per share were anti-dilutive.
4
<PAGE>
Pro forma Income Statement for Period Ended June 30, 1998
(In Millions Except Per Share Data)
<TABLE>
<CAPTION>
Historical
------------------------------ Pro forma
Cyprus Disposition Consolidated
Amax ----------- Pro forma Without
Consolidated Lithium Adjustments/6/ Lithium
------------------------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ 1,351 $45 $ - $1,306
-
Costs and Expenses -
Costs of Sales 990 30 - 960
Selling and Administrative 76 3 - 73
Depreciation, Depletion, and Amortization 205 4 - 201
Write-Downs and Special Charges 4 - - 4
Exploration Expense 25 - - 25
------ --- --------- ------
Total Costs and Expenses 1,300 37 - 1,263
Income From Operations 51 8 - 43
Other Income (Expense)
Interest Income 7 1 - 6
Interest Expense (94) - - (94)
Capitalized Interest 3 - - 3
Earnings (Loss) on Equity Investments and Other (2) - - (2)
------ --- --------- ------
(Loss) Income Before Income Taxes and Minority Interest (35) 9 - (44)
Income Tax Benefit (Provision) 2 - - 2
Minority Interest 1 - - 1
------ --- --------- ------
Net (Loss) Income (32) 9 - (41)/6/
Preferred Stock Dividends (9) - - (9)
------ --- --------- ------
(Loss) Income Applicable to Common Shares $ (41) $ 9 $ - $ (50)
====== === ========= ======
Loss per Common Share
Basic and Diluted /1/ $(0.44) $(0.53)/6/
Weighted Average Common Shares Outstanding
Basic 94 94
Diluted 103 103
</TABLE>
/1/ Diluted loss per share was anti-dilutive.
Notes to Unaudited Pro forma Balance Sheet and Income Statements
(1) Reflects the gross proceeds of $305 million from the sale of the lithium
subsidiary.
(2) To adjust for expenses related to the lithium subsidiary sale, primarily
legal and outside services. Additionally, income taxes payable has been
adjusted to reflect the sale.
(3) To adjust deferred income taxes to reflect the effect of the lithium
subsidiary sale.
(4) To adjust shareholders' equity for the settlement of intercompany accounts
and notes receivables and the effect of adjustments in notes (1)-(3) above.
5
<PAGE>
(5) Assumes that the proceeds of $305 million from the sale of the lithium
subsidiary remains in cash. At an average interest rate of six percent,
interest income would increase by $18 million and income tax expense would
increase by $4 million, resulting in Pro Forma Consolidated Net Income
Without Lithium of $57 million, or $0.41 per share.
(6) Assumes that the proceeds of $305 million from the sale of the lithium
subsidiary remains in cash. At an average interest rate of six percent,
interest income would increase by $9 million and income tax expense would
increase by $2 million, resulting in Pro Forma Consolidated Loss Without
Lithium of $34 million, or $0.46 per share.
(c) Exhibits
Exhibit
Number Document
------- --------
2(a) Stock Purchase and Sale Agreement, dated April 25, 1998, by and
among Cyprus Amax Minerals Company, Cyprus Foote Mineral Company,
Cyprus Specialty Metals Company and Foote Acquisition Corporation.
(b) Supplemental Agreement, dated October 13, 1998, to Stock Purchase
and Sale Agreement, dated April 25, 1998, by and among Cyprus Amax
Minerals Company, Cyprus Foote Mineral Company, Cyprus Specialty
Metals Company and Foote Acquisition Corporation.
(c) Tax Sharing and Indemnification Agreement, dated October 13, 1998,
by and between Cyprus Amax Minerals Company, Cyprus Specialty
Metals Company, Cyprus Foote Mineral Company and Foote Acquisition
Corporation.
99 Press Release, dated October 13, 1998, issued by Cyprus Amax
Minerals Company.
The following exhibits and schedules are being omitted from this filing:
Exhibits to the Stock Purchase and Sale Agreement
- -------------------------------------------------
Exhibit A-1 Opinion of Counsel to Cyprus Amax and Cyprus Specialty
Exhibit A-2 Opinion of Counsel to The Chilean Partnership
Exhibit B-1 Opinion of Counsel to Buyer
Exhibit B-2 Opinion of Counsel to Dynamit-Nobel AG
Exhibit D Mutual Release
Exhibit E Transition and Administrative Services Agreement
Schedules to the Stock Purchase and Sale Agreement
- --------------------------------------------------
3.2.7 Company's Equity Interest
3.2.10 (a) Financial Statements
(b) Intercompany Balances
(c) Chilean Partnership Financial Statements
3.2.11 Real Property
3.2.12 (a) Intellectual Property
(b) Intellectual Property
6
<PAGE>
3.2.13 Material Contracts
3.2.14 Employee Relations
3.2.15 Litigation
3.2.16 Absence of Changes of Events
3.2.17 Compliance with Laws
3.2.19 Insurance
3.2.20 Employee Benefit Plans
3.2.21 Bank Relationships
3.2.22 Estimates
3.2.24 Transactions with Related Parties
4.2.2 Ordinary Course of Business
4.2.4 (b) Intercompany Agreements
4.2.6 Employees
4.3.9 Policies
5.1 Uranium Dust and Asbestos Litigation
5.2.1 Compliance with Governmental Environmental Requirements
5.2.2 (a) Material Permits and Authorizations
(b) Governmental Permits and Authorizations
5.2.3 Environmental Proceedings
Registrant will furnish supplementally a copy of any omitted exhibit or schedule
to any of the agreements listed above to the Securities and Exchange Commission
upon request.
7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 28, 1998 CYPRUS AMAX MINERALS COMPANY
BY: /s/ John Taraba
----------------
Name: John Taraba
Vice President and
Controller (Principal
Accounting Officer)
8
<PAGE>
Exhibit
Number Document
------- --------
2(a) Stock Purchase and Sale Agreement, dated April 25, 1998, by and among
Cyprus Amax Minerals Company, Cyprus Foote Mineral Company, Cyprus
Specialty Metals Company and Foote Acquisition Corporation.
(b) Supplemental Agreement, dated October 13, 1998, to Stock
Purchase and Sale Agreement, dated April 25, 1998, by and among
Cyprus Amax Minerals Company, Cyprus Foote Mineral Company, Cyprus
Specialty Metals Company and Foote Acquisition Corporation.
(c) Tax Sharing and Indemnification Agreement, dated October 13, 1998, by
and between Cyprus Amax Minerals Company, Cyprus Specialty Metals
Company, Cyprus Foote Mineral Company and Foote Acquisition
Corporation.
99 Press Release, dated October 13, 1998, issued by Cyprus Amax Minerals
Company.
9
<PAGE>
EXHIBIT 2.(a)
STOCK PURCHASE AND SALE AGREEMENT
BY AND AMONG
CYPRUS AMAX MINERALS COMPANY,
CYPRUS FOOTE MINERAL COMPANY,
CYPRUS SPECIALTY METALS COMPANY
AND
FOOTE ACQUISITION CORPORATION
DATED AS OF APRIL 25, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS AND OTHER MATTERS
Section 1.1 Certain Definitions........................................... 1
Section 1.2 Environmental Matters......................................... 6
Section 1.3 Tax Matters................................................... 7
ARTICLE II
THE TRANSACTION
Section 2.1 Purchase and Sale............................................. 7
Section 2.2 Working Capital and Book Value Adjustment to Purchase Price... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Buyer's Representations and Warranties....................... 9
3.1.1 Due Organization............................................. 9
3.1.2 Due Authorization............................................ 9
3.1.3 Enforceability............................................... 9
3.1.4 No Conflict.................................................. 9
3.1.5 No Contract Conflict......................................... 10
3.1.6 No Litigation Conflict....................................... 10
3.1.7 Regulatory Approvals......................................... 10
3.1.8 Buyer's Financial Capacity................................... 10
3.1.9 Investment Intent............................................ 10
3.1.10 Legend....................................................... 10
3.1.11 Access to Information........................................ 11
3.1.12 No Commissions............................................... 11
Section 3.2 Representations and Warranties of Cyprus Amax and Specialty.. 11
3.2.1 Due Organization............................................. 11
3.2.2 Due Authorization............................................ 11
3.2.3 Enforceability............................................... 12
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<PAGE>
3.2.4 No Conflict.................................................. 12
3.2.5 No Contract Conflict......................................... 12
3.2.6 Regulatory Approvals......................................... 12
3.2.7 Title to Stock............................................... 13
3.2.8 Capitalization............................................... 13
3.2.9 Articles of Incorporation, Bylaws, Minute Books.............. 13
3.2.10 Financial Statements......................................... 14
3.2.11 Property..................................................... 15
3.2.12 Intellectual Property........................................ 15
3.2.13 Material Contracts........................................... 16
3.2.14 Employee Relations........................................... 17
3.2.15 Litigation................................................... 18
3.2.16 Absence of Changes or Events................................. 19
3.2.17 Compliance with Laws......................................... 20
3.2.18 Licenses, Permits, Approvals................................. 21
3.2.19 Insurance.................................................... 21
3.2.20 Employee Benefit Plans....................................... 21
3.2.21 Bank Relationships........................................... 24
3.2.22 Reserve Information.......................................... 24
3.2.23 No Commissions............................................... 25
3.2.24 Transactions with Related Parties............................ 25
3.2.25 Disclaimer of Certain Warranties............................. 25
ARTICLE IV
COVENANTS AND AGREEMENTS
Section 4.1 Covenants and Agreements of Buyer............................ 25
4.1.1 Confidentiality.............................................. 26
4.1.2 No Solicitation by Buyer..................................... 26
Section 4.2 Covenants and Agreements of Cyprus Amax and Specialty........ 26
4.2.1 Access to Information........................................ 27
4.2.2 Ordinary Course of Business.................................. 27
4.2.3 Exclusivity.................................................. 27
4.2.4 Intercompany Accounts; Cash Accounts......................... 28
4.2.5 Noncompetition............................................... 28
4.2.6 No Solicitation by Cyprus Amax............................... 29
4.2.7 Confidentiality.............................................. 29
Section 4.3 Joint Covenants and Agreements............................... 29
4.3.1 No Acts or Omissions......................................... 30
4.3.2 Consents of Others........................................... 30
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<PAGE>
4.3.3 Conditions for the Closing................................... 30
4.3.4 Publicity.................................................... 30
4.3.5 Name Change.................................................. 30
4.3.6 Benefits Matters............................................. 30
4.3.7 Notice of Breach; Cure of Breach............................. 32
ARTICLE V
ENVIRONMENTAL PROVISIONS
Section 5.1 Definitions.................................................. 33
Section 5.2 Cyprus Amax's and Specialty's Representations................ 35
5.2.1 Compliance with Governmental Environmental Requirements...... 35
5.2.2 Authorizations............................................... 35
5.2.3 Proceedings.................................................. 36
5.2.4 Relevant Information......................................... 36
5.2.5 Limitations.................................................. 36
Section 5.3 Further Acknowledgements and Agreements...................... 36
5.3.1 Compliance with Governmental Environmental Requirements...... 36
5.3.2 Waiver of Rights and Agreement Not to Sue.................... 37
5.3.3 Survival of Environmental Representations, Warranties and
Agreements................................................... 37
5.3.4 ShieldAlloy Matter........................................... 38
Section 5.4 Indemnification; Administration and Defense; Uranium Dust
and Asbestos Litigation...................................... 38
5.4.1 Indemnification by Cyprus Amax............................... 38
5.4.2 Indemnification by Buyer..................................... 38
5.4.3 Notice....................................................... 39
5.4.4 Management, Control and Administration....................... 39
5.4.5 Investigation................................................ 39
Section 5.5 Insurance and Third Party Claims............................. 39
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
Section 6.1 Conditions Precedent to Buyer's Obligations.................. 41
6.1.1 Accuracy of Warranties and Performance of Covenants.......... 41
6.1.2 Approvals, Absence of Litigation............................. 42
6.1.3 No Injunction................................................ 42
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<PAGE>
6.1.4 Opinions of Counsel.......................................... 42
6.1.5 Central Bank................................................. 42
6.1.6 Buyer's Receipt of the Closing Documents..................... 42
Section 6.2 Conditions Precedent to Cyprus Amax's, Specialty's and the
Company's Obligations........................................ 42
6.2.1 Accuracy of Warranties and Performance of Covenant........... 42
6.2.2 Approvals, Absence of Litigation............................. 43
6.2.3 Legal Opinions............................................... 43
6.2.4 Cyprus Amax's Receipt of the Closing Documents............... 43
ARTICLE VII
THE CLOSING
Section 7.1 The Closing Date............................................. 43
Section 7.2 Deliveries at the Closing.................................... 43
7.2.1 Buyer's Execution and Delivery of Documents and Payment...... 44
7.2.2 Cyprus Amax's Execution and Delivery of Documents and
Certificates................................................. 44
Section 7.3 Simultaneous Closing......................................... 45
ARTICLE VIII
POST-CLOSING AGREEMENTS AND OTHER MATTERS
Section 8.1 Post-Closing Agreements...................................... 45
Section 8.2 Inspection of Records........................................ 46
Section 8.3 Mutual Assistance............................................ 46
Section 8.4 Further Assurances........................................... 46
Section 8.5 Transfer of Non-Lithium Assets............................... 46
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival for Representations, Warranties, Covenants,
Agreements and Indemnifications.............................. 46
Section 9.2 Indemnification by Cyprus Amax and Specialty of
Non-Lithium Matters and Certain Other Losses................. 47
Section 9.3 Indemnification by Buyer and the Company..................... 47
Section 9.4 Procedure for Third Party Claims............................. 48
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<PAGE>
Section 9.5 Procedure for Direct Claims................................. 48
Section 9.6 General Provisions Relating to Remedies
and Indemnification......................................... 49
Section 9.7 Exclusive Nature............................................ 50
ARTICLE X
TERMINATION
Section 10.1 Termination................................................. 51
10.1.1 Mutual Consent.............................................. 51
10.1.2 Litigation.................................................. 51
10.1.3 Conditions to Buyer's Obligations not Met................... 51
10.1.4 Conditions to Cyprus Amax's, Specialty's and the
Company's Obligations not Met............................... 51
Section 10.2 Effect of Termination....................................... 51
ARTICLE XI
MISCELLANEOUS
Section 11.1 Company Name................................................ 52
Section 11.2 Entire Agreement............................................ 52
Section 11.3 Amendments.................................................. 52
Section 11.4 Severability................................................ 52
Section 11.5 Counterparts................................................ 53
Section 11.6 No Waiver................................................... 53
Section 11.7 Assignment.................................................. 53
Section 11.8 Fees, Costs and Expenses.................................... 53
Section 11.9 Third Party Beneficiaries................................... 53
Section 11.10 Construction................................................ 53
Section 11.11 Table of Contents and Headings.............................. 54
Section 11.12 Notices..................................................... 54
Section 11.13 Governing Law; Jurisdiction................................. 55
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<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT is made as of the 25th day of April,
1998, by and among Cyprus AMAX Minerals Company, a Delaware corporation ("Cyprus
Amax"), Cyprus Foote Mineral Company, a Pennsylvania corporation ("Company" or
"Foote"), Cyprus Specialty Metals Company, a Delaware corporation ("Specialty")
and Foote Acquisition Corporation, a Delaware corporation ("Buyer") (Cyprus
Amax, Company, Specialty and Buyer are sometimes individually referred to herein
as a "party" and sometimes collectively as "parties").
WITNESSETH
WHEREAS, Specialty owns 100 shares of the common stock, par value $1.00 per
share, of the Company (the "Company Shares") which represent 100% of the issued
and outstanding shares of the capital stock of the Company;
WHEREAS, Cyprus Amax is the parent company of Specialty;
WHEREAS, Buyer desires to purchase from Specialty and Specialty desires to
sell to Buyer, all of the Company Shares upon the terms and conditions set forth
in this Agreement;
WHEREAS, Cyprus Amax and Specialty desire to make certain representations,
warranties, covenants and agreements as an inducement to Buyer; and
WHEREAS, Buyer desires to make certain representations, warranties,
covenants and agreements and the Company desires to make certain covenants and
agreements, in each case, as an inducement to Cyprus Amax and Specialty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS AND OTHER MATTERS
SECTION 1.1 CERTAIN DEFINITIONS
-------------------
In this Agreement, the following terms shall have the following
meanings:
"Accountant" means Deloitte & Touche LLP, or such other United
States of America accounting firm as Buyer and Cyprus Amax may mutually agree,
utilizing
<PAGE>
United States of America generally accepted accounting principles,
except as otherwise provided herein. In no event shall a firm serve as
Accountant if, at the time of its selection, it has a material relationship with
any party.
"Affiliate" means any corporation, partnership, trust or other entity
which, directly or indirectly, controls, is controlled by, or is under common
control with a specified Person.
"Agreement" means this Agreement, the Annexes, Schedules, Exhibits and
other attachments hereto, and all amendments and supplements to any of the
foregoing, made in accordance with Section 11.3.
"Annual Financial Statements" shall have the meaning set forth in
Section 3.2.10.
"Book Value" shall mean the assets less the liabilities of the Company
as of the Closing, computed in a manner consistent with the 1997 Balance Sheet
and the principles on Annex B (which principles shall take precedence over any
other principles employed in the 1997 Balance Sheet).
"Book Value Computation" shall have the meaning set forth in Section
2.2.1.
"Buyer" shall have the meaning set forth in the preamble.
"Buyer's Bring Down Certificate" shall have the meaning set forth in
Section 6.2.1.
"Chilean Partnership" means Sociedad Chilena de Litio Limitada, a
limited liability partnership organized under the laws of Chile and, unless the
context otherwise requires, shall also include Minera Cyprus Amax Chile
Limitada.
"Chilean Restructuring" shall mean a transaction or series of
transactions pursuant to which the non-lithium liabilities and non-lithium
assets relating to the copper, gold and other non-lithium businesses of the
Chilean Partnership shall be transferred out of the Chilean Partnership and any
other entities directly or indirectly owned by Foote and Foote shall directly or
indirectly become the owner of 100% of the equity interests of the Chilean
Partnership, all on terms reasonably satisfactory to Buyer.
"Closing" shall have the meaning set forth in Section 7.1.
"Closing Balance Sheet" shall have the meaning set forth in Section
2.2.1.
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<PAGE>
"Closing Date" shall have the meaning set forth in Section 7.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations and interpretations thereunder.
"Company" shall have the meaning set forth in the preamble, and except
as otherwise specifically provided herein, or unless the context otherwise
requires, shall be deemed to include the Chilean Partnership (whether or not the
Chilean Partnership is so named).
"Company Plan" shall have the meaning set forth in Section 3.2.20.
"Company Shares" shall have the meaning set forth in the preamble.
"Cyprus Amax" shall have the meaning set forth in the preamble.
"Cyprus Amax's Bring Down Certificate" shall have the meaning set
forth in Section 6.1.1.
"Cyprus Amax Plan" shall have the meaning set forth in Section 3.2.20.
"Data Room" means the rooms in Charlotte, North Carolina and
Englewood, Colorado containing certain documents and materials listed on the
Data Room Indices relating to the Company and its predecessors (including
properties formerly owned by the Company and its predecessors), to which Buyer
has been provided access.
"DOJ Consent Order" shall mean the order entered March 16, 1976 by the
Eastern District of Pennsylvania entitled United States v. Foote Mineral Co. and
Metallgesellschaft AG.
"Encumbrance" means any lien, security interest, option, right of
first refusal, mortgage or encumbrance, other than a Permitted Encumbrance.
"Equitable Relief" shall have the meaning set forth in Section 9.4.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and all regulations and rules issued thereunder.
"Estimates" shall have the meaning set forth in Section 3.2.22.
"Financial Statements" shall have the meaning set forth in Section
3.2.10.
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<PAGE>
"Foote" shall have the meaning set forth in the preamble.
"Foote Plan" shall have the meaning set forth in Section 4.3.6.
"Governmental Authority" means the government of the United States of
America, any state of the United States, any territory or possession of the
United States, the District of Columbia or any non-United States federal, state,
provincial, municipal, local or other government of competent jurisdiction, in
each case including any department, commission, board, bureau, agency,
instrumentality or administrative body thereof of competent jurisdiction.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"HSR Termination Date" shall have the meaning set forth in Section
6.2.2.
"Interim Financial Statements" shall have the meaning set forth in
Section 3.2.10.
"Knowledge", "known", "belief", "believe" or variances thereof
(whether or not capitalized) mean, when applied to the Company (at or before
Closing) or Cyprus Amax, the actual knowledge of those Persons listed on Annex
A-1 and, when applied to the Company (after Closing) or Buyer, the actual
knowledge of those persons listed on Annex A-2.
"Law" means any of the following of, or issued by, any Governmental
Authority, in effect and as interpreted on or prior to the date hereof,
including any amendment, modification, or supplement of any of the following
from time to time but subsequent to the original enactment, adoption, issuance,
announcement, promulgation, or granting thereof: any statute, law, act,
ordinance, code, rule, or regulation or any writ, injunction, award, decree,
judgment, or order.
"Losses" shall have the meaning set forth in Section 9.2.
"March 1998 Balance Sheet" shall have the meaning set forth in Section
3.2.10.
"Material Adverse Effect" means an event, condition or circumstance
that is materially adverse to the business, results of operations, assets, or
condition (financial or otherwise) of the Company, taken as a whole.
"Material Contracts" shall have the meaning set forth in Section
3.2.13.
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<PAGE>
"Material Restricted Contracts" shall have the meaning set forth in
Section 3.2.13.
"Partnership Agreement" shall have the meaning set forth in Section
3.2.9.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall have the meaning set forth in Section 3.2.20.
"Permitted Encumbrances" means (a) such of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced or, if commenced, is being contested in good faith or for which
adequate reserves have been set aside on the books and records of the Company:
(i) liens for taxes, assessments and governmental charges not yet due and
payable; (ii) encumbrances such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens for labor or services
arising in the ordinary course of business; (iii) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations; (b) survey exceptions, easement agreements and
other encumbrances on or exceptions to title to real property that (i) do not
result from the incurrence of any indebtedness and (ii) do not have a Material
Adverse Effect on the value or the use of such property for its present
purposes; (c) zoning restrictions and other limitations imposed by any authority
having jurisdiction over real property, and (d) reservations in federal patents.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity.
"Plans" shall have the meaning set forth in Section 3.2.20.
"Prohibited Activities" shall have the meaning set forth in Section
4.2.5.
"Purchase Price" shall have the meaning set forth in Section 2.1.
"Real Property" shall have the meaning set forth in Section 3.2.11.
"Related Agreements" means any agreement or instrument delivered
pursuant to this Agreement or the Chilean Restructuring, including, without
limitation, the Tax Sharing and Indemnification Agreement, the Release Agreement
and the Transition and Administrative Services Agreement.
"Related Party" shall have the meaning set forth in Section 3.2.24.
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"Representatives" shall have the meaning set forth in Section 9.7.2.
"Salaried Plan" shall have the meaning set forth in Section 4.3.6.
"Savings Plan" shall have the meaning set forth in Section 4.3.6.
"Specialty" shall have the meaning set forth in the preamble.
"Securities Act" shall have the meaning set forth in Section 3.1.10.
"Stated Price" shall have the meaning set forth in Section 2.1.
"Subsidiary" means any corporation, association, joint venture,
partnership or other business entity with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock (or equity
interests) or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (or the equivalent).
"Third Party Rights" shall have the meaning set forth in Section
9.6.7.
"Working Capital Excess" shall have the meaning set forth in Section
2.2.3.
"Working Capital Deficiency" shall have the meaning set forth in
Section 2.2.3.
"Working Capital Value" shall mean the sum of certain current assets
less the sum of certain current liabilities of the Company as of the Closing,
computed in a manner consistent with the 1997 Balance Sheet and the principles
contained on Annex B (which principles shall take precedence over any other
principles employed in the 1997 Balance Sheet).
"Working Capital Value Computation" shall have the meaning set forth
in Section 2.2.1.
"1997 Balance Sheet" shall have the meaning set forth in Section
3.2.10.
SECTION 1.2 ENVIRONMENTAL MATTERS
---------------------
The parties' sole representations, warranties, covenants and
agreements (including, without limitation, indemnities) with respect to
environmental matters and materials, interpreted in its reasonably broadest
sense (including, without limitation, environmental conditions associated with
the Company's properties, environmental liabilities and obligations, compliance
with environmental laws and other similar
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requirements) and any other subject matters contained in Article V
(collectively, "Environmental Matters") shall be as set forth in Article V
(including the sections cross-referenced therein). No other representation,
warranty, covenant or agreement (including, without limitation, indemnities) by
Cyprus Amax, Specialty, the Company, Buyer or Affiliates shall be deemed to
apply to such matters.
SECTION 1.3 TAX MATTERS
-----------
The parties' sole representations, warranties, covenants and
agreements (including, without limitation, indemnities) with respect to tax
matters (interpreted in its reasonably broadest sense) and any other subject
matters contained in the Tax Sharing and Indemnification Agreement (attached
hereto as Exhibit C) shall be as set forth therein. No other representation,
warranty, covenant or agreement (including, without limitation, indemnities) by
Cyprus Amax, Specialty, the Company, Buyer or Affiliates in this Agreement shall
be deemed to apply to such matters.
ARTICLE II
THE TRANSACTION
SECTION 2.1 PURCHASE AND SALE
-----------------
Subject to the terms and conditions of this Agreement, Specialty
hereby agrees to, and Cyprus Amax hereby agrees to cause Specialty, to sell,
transfer, assign convey and deliver to Buyer on the Closing Date all of the
Company Shares, free and clear of Encumbrances, and Buyer hereby agrees to
purchase all of the Company Shares from Specialty and to pay Specialty $305
million (the "Stated Price") by wire transfer in immediately available funds on
the Closing Date, subject to adjustment as herein provided (the "Purchase
Price"). All currency amounts herein refer to United States of America Dollars.
SECTION 2.2 WORKING CAPITAL AND BOOK VALUE ADJUSTMENT TO PURCHASE PRICE
-----------------------------------------------------------
2.2.1 Within sixty (60) days following the Closing, Cyprus Amax shall
prepare and deliver to Buyer, a consolidated balance sheet of the Company as of
the Closing Date (the "Closing Balance Sheet") prepared in a manner consistent
with the 1997 Balance Sheet (but subject to the principles set forth on Annex
B), together with a computation of the Working Capital Value as of the Closing
Date (the "Working Capital Value Computation") and Book Value as of the Closing
Date (the "Book Value Computation"). The Closing Balance Sheet shall be
accompanied by the Report of Price Waterhouse LLP (at the cost of Cyprus Amax),
stating that the accounting principles reflected in the Closing Balance Sheet
conform, in all material respects, to the requirements of this Section. Buyer
and the Company shall provide Cyprus
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Amax's representatives reasonable access to the books and records of the Company
and shall cause the Company's employees to provide reasonable assistance to
Cyprus Amax, both in connection with the preparation of the Closing Balance
Sheet, as well as any dispute with respect thereto. Cyprus Amax shall cause
Price Waterhouse LLP to coordinate with Buyer's accountants, if requested by
Buyer, in connection therewith.
2.2.2 Buyer shall have the right within forty-five (45) days
following the delivery of the Closing Balance Sheet to object in writing to the
Working Capital Value Computation or the Book Value Computation based thereon,
specifying in reasonable detail the basis for such objection(s). Buyer shall be
deemed to have agreed with all items and amounts contained in the Closing
Balance Sheet, Working Capital Value Computation and Book Value Computation,
except as specifically objected to in such notice. If Buyer does so object,
Cyprus Amax and Buyer shall cooperate with each other to attempt to reach a
mutual agreement thereon, or, failing such agreement within twenty (20) days,
the determination shall be made by the Accountant, the cost of which shall be
shared equally by Cyprus Amax and Buyer. Cyprus Amax and Buyer shall deliver to
the Accountant copies of any schedules or documentation which may be reasonably
required by the Accountant to make its determination. Cyprus Amax and Buyer
shall be entitled to make presentations to the Accountant in connection
therewith. Cyprus Amax and Buyer shall use all reasonable efforts to cause the
Accountant to promptly complete such determination. The determination of the
Accountant shall be final and binding on the parties.
2.2.3 (a) In the event that the actual Working Capital Value as so
determined is greater or less than $35,801,000 then:
(i) if greater (such amount being the "Working Capital
Excess"), Buyer shall pay to Specialty the amount of such
excess, and
(ii) if less (such amount being the "Working Capital
Deficiency"), Cyprus Amax shall cause Specialty to pay to
Buyer the amount of such deficiency.
(b) In the event that the Book Value as so determined is less
than: (i) $136,582,000 less (ii) the amount of any Working Capital Deficiency,
or plus (iii) the amount of any Working Capital Excess,
then Specialty shall pay to Buyer and Cyprus Amax shall cause Specialty to pay
to Buyer the amount of such deficiency. Buyer may offset any amount payable by
Specialty under (b) against any amount payable by Buyer under (a)(i).
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<PAGE>
(c) Such payments shall be made by check or wire transfer within
forty-five (45) days after delivery by Cyprus Amax to Buyer of the Closing
Balance Sheet, or five (5) business days after the resolution of any objection
pursuant to Section 2.2.2, whichever is later, with such payment accompanied by
interest at seven percent (7%) per annum from the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Buyer hereby represents and warrants to Cyprus Amax and Specialty, on
the date hereof, and as of the Closing Date, as set forth below, subject as set
forth below to the information, qualifications and exceptions set forth in the
Schedules attached hereto.
3.1.1 Due Organization. Buyer is a corporation duly incorporated,
----------------
validly existing and in good standing, under the laws of Delaware.
3.1.2 Due Authorization. Buyer has the full corporate power and
-----------------
authority to enter into and perform this Agreement and the Related Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by Buyer, the
consummation of the transactions contemplated hereby, and the performance by
Buyer of all of its obligations under this Agreement, the Related Agreements to
which it is a party and the transactions contemplated hereby and thereby have
been duly authorized and approved by Buyer. This Agreement has been duly
executed and delivered by duly authorized officers of Buyer.
3.1.3 Enforceability. This Agreement constitutes the legal, valid
--------------
and binding obligation of Buyer enforceable against Buyer in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, moratorium, or other similar laws affecting creditors' rights
generally or by principles governing the availability of equitable remedies.
3.1.4 No Conflict. Neither the execution and delivery of this
-----------
Agreement by Buyer, nor the consummation by Buyer of the transactions
contemplated hereby, will conflict with or result in a breach of its
organizational documents, as amended, or By-Laws, as amended, or assuming
compliance with the HSR Act and the notice filings and order referred to in
Section 3.1.7, Laws applicable to it.
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<PAGE>
3.1.5 No Contract Conflict. Neither the execution and delivery of
--------------------
this Agreement by Buyer, nor the consummation by Buyer of the transactions
contemplated hereby will conflict with, or result in a breach or give rise to a
default or violation on its part under any obligation, lease, license,
agreement, contract, plan, or other arrangement, which default or defaults (in
the aggregate) would interfere with its ability to consummate this Agreement or
the transactions contemplated hereby.
3.1.6 No Litigation Conflict. There is no action, suit or proceeding
----------------------
pending or, to Buyer's knowledge, threatened against or affecting Buyer, at law
or in equity, or before any Governmental Authority, which would interfere with
Buyer's ability to consummate this Agreement or the transactions contemplated
hereby.
3.1.7 Regulatory Approvals. Except as required by the HSR Act,
--------------------
routine notice filings with the German Federal Cartel Office and the possible
need to vacate the DOJ Consent Order, no governmental notice, filing,
authorization, approval, order or consent is required to be given, filed or
obtained by Buyer in connection with the execution, delivery and performance by
Buyer of this Agreement or the transactions contemplated hereby.
3.1.8 Buyer's Financial Capacity. No bankruptcy proceedings are
--------------------------
pending or contemplated by or, to Buyer's knowledge, threatened against Buyer.
Buyer is not insolvent and the execution of this Agreement, and the consummation
of the transactions contemplated hereunder, will not render Buyer insolvent. As
of the Closing Date, Buyer will be financially capable of consummating the
transactions contemplated by this Agreement. Buyer will have adequate funds to
pay the Purchase Price at Closing.
3.1.9 Investment Intent. Buyer is acquiring the Company Shares for
-----------------
its own account for investment purposes only and not with a view to, or for sale
or resale in connection with, any public distribution thereof or with any
present intention of selling, distributing, or otherwise disposing of the
Company Shares. Buyer is capable of evaluating the merits and risks of its
investment, has the capacity to protect its own interests, and has the financial
ability to bear the economic risks of the investment.
3.1.10 Legend. Buyer understands that the Company Shares are
------
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from Specialty in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Securities Act"), only in certain circumstances. It is
understood that the certificates evidencing the Company Shares shall bear the
following legend:
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<PAGE>
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION
THEREFROM."
3.1.11 Access to Information. Buyer has had an unlimited opportunity
---------------------
to discuss the Company's business, condition, management and financial affairs
with its management, and the opportunity to review in detail the Company's
properties, operations, liabilities, obligations, books, accounts, records,
contracts and documents. Notwithstanding the content of any such discussions,
Buyer acknowledges and confirms Section 3.2.25 hereof.
3.1.12 No Commissions. Except for SBC Warburg Dillon Read, whose
--------------
fees and indemnification obligations are the obligation of Buyer, Buyer has not
retained any broker or investment banker entitled to any commission or
compensation in connection with this Agreement or the transactions contemplated
by this Agreement.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF CYPRUS AMAX AND SPECIALTY
-----------------------------------------------------------
Cyprus Amax and Specialty, jointly and severally, hereby represent and
warrant to Buyer as set forth below, subject to the information, qualifications
and exceptions set forth in the Schedules attached hereto. Disclosure of any
items not otherwise required to be disclosed shall not create any inference of
materiality. In the event of any inconsistency between the headings contained
on or within a Schedule and the applicable representation or warranty, the
representation or warranty shall control.
3.2.1 Due Organization. Cyprus Amax, Specialty and the Company are
----------------
corporations duly incorporated, validly existing and in good standing, under the
laws of the States of Delaware, Delaware and Pennsylvania, respectively. The
Company is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the property owned,
leased or operated by it requires such qualification or license, except where
the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect. The Chilean Partnership is duly established and
validly existing under the laws of Chile. Each of the Company and the Chilean
Partnership has all requisite corporate and/or other power and authority to own,
lease and operate its property and to carry on its business as now being
conducted.
3.2.2 Due Authorization. Each of Cyprus Amax, Specialty and the
-----------------
Company has the full corporate power and authority to enter into and perform
this Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
by
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Cyprus Amax, Specialty and the Company, and the performance by Cyprus Amax,
Specialty and the Company of all of their respective obligations under this
Agreement, the Related Agreements and in connection with the transactions
contemplated hereby and thereby has been duly authorized and approved by all
required corporate action of Cyprus Amax, Specialty and the Company. This
Agreement has been duly executed and delivered by duly authorized officers of
Cyprus Amax, Specialty and the Company.
3.2.3 Enforceability. This Agreement and the Related Agreements
--------------
constitute the legal, valid and binding obligation of Cyprus Amax, Specialty and
(as to all matters arising on or before Closing, the Company), enforceable
against them in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, reorganization, moratorium, or other
similar laws affecting creditors' rights generally or by principles governing
the availability of equitable remedies.
3.2.4 No Conflict. Neither the execution and delivery of this
-----------
Agreement or any Related Agreement by Cyprus Amax, Specialty and the Company,
nor the performance by Cyprus Amax, Specialty and the Company of its respective
obligations hereunder or thereunder, will conflict with or result in a breach of
any of the terms, conditions or provisions of Cyprus Amax's, Specialty's or the
Company's Certificate of Incorporation or Articles of Incorporation, as the case
may be, as amended, By-Laws, as amended, the governing documents of the Chilean
Partnership, or, assuming compliance with the HSR Act and the DOJ Consent Order,
any Law applicable to it or the Chilean Partnership.
3.2.5 No Contract Conflict. Neither the execution and delivery of
--------------------
this Agreement or the Related Agreement by Cyprus Amax, Specialty and the
Company, nor the performance by Cyprus Amax, Specialty and the Company of its
respective obligations hereunder and thereunder, will conflict with, result in a
breach of, or constitute a default, on Cyprus Amax's, Specialty's, the Company's
or the Chilean Partnership's part, under any obligation, lease, contract, plan,
or other agreement or arrangement to which each is a party, which could
reasonably be expected to have a Material Adverse Effect or would materially
interfere with Cyprus Amax's, Specialty's or the Company's ability to consummate
this Agreement and the Related Agreements or the transactions contemplated
hereby and thereby.
3.2.6 Regulatory Approvals. Except as required by the HSR Act, and
--------------------
the possible need to vacate the DOJ Consent Order, no governmental notice,
filing, authorization, approval, order or consent is required to be given, filed
or obtained by Cyprus Amax, Specialty, the Company or the Chilean Partnership
from any Governmental Authority in connection with the execution, delivery and
performance by Cyprus Amax, Specialty or the Company of this Agreement, the
Related
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<PAGE>
Agreements or the transactions contemplated hereby or thereby, other
than possible consents of governmental authorities in connection with the
Chilean Restructuring.
3.2.7 Title to Stock. Specialty is the lawful record and beneficial
--------------
owner of, and has good and marketable title to the Company Shares, free and
clear of any Encumbrance and has the right, power, authority and capacity to
sell and transfer the Company Shares to Buyer in the manner provided herein,
free and clear of any Encumbrance. The Company Shares are not subject to any
voting trust or voting agreement, nor is any proxy in effect with respect to any
of the Company Shares. Upon Closing, the Company, directly and/or through its
ownership of 100% of the equity of other entities, will be the lawful record and
beneficial owner of, and will have good and marketable title to all of the
equity interest in the Chilean Partnership, free and clear of any Encumbrance
resulting from the actions of Specialty, Cyprus Amax or its Affiliates. Such
interest is not subject to any voting trust or voting agreement, nor is any
proxy in effect with respect thereto. Except with respect to the Chilean
Partnership and Minera Cyprus Amax Chile Limitada, and as contemplated by the
Chilean Restructuring the Company has no equity interest in any corporation,
partnership, limited liability company or other similar entity.
3.2.8 Capitalization. The authorized capital stock of the Company
--------------
consists of 100 shares of common stock, par value $1.00 per share, of which 100
shares have been issued and are outstanding. All of the issued and outstanding
shares of common stock have been duly authorized and validly issued, and are
fully paid and nonassessable, and are not subject to any preemptive rights. No
outstanding subscriptions, contracts to purchase capital stock or other
securities, conversion privileges, options, warrants or agreements of any kind,
with respect to the purchase, sale, issuance or voting of the capital stock of
the Company or the Chilean Partnership (other than among Foote and Persons
which, upon Closing will be direct or indirect wholly owned Subsidiaries of
Foote). The Company Shares represent all of the issued and outstanding shares
of capital stock of the Company of any class.
3.2.9 Articles of Incorporation, Bylaws, Minute Books. The Articles
-----------------------------------------------
of Incorporation and By-Laws of the Company, as amended, and the organizational
documents of the Chilean Partnership which have been made available to Buyer for
its inspection are complete and correct, have not been amended further and are
in full force and effect. Neither the Company nor the Chilean Partnership is in
violation of any of the provisions of its respective Articles of Incorporation
or By-Laws or other governing documents. The minute books of the Company, all
of which have heretofore been made available to Buyer, contain, in all material
respects, complete and accurate records of all formal actions of the
shareholders and board of directors of the Company and all formal actions of
committees, if any, of the board of directors within the prior five (5) years.
The Chilean Restructuring will be consummated in accordance with the provisions
of applicable Law without causing any liability, including for taxes, of the
Company or the Chilean Partnership, other than any liability
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<PAGE>
to be discharged by Cyprus Amax pursuant to the Tax Sharing and Indemnification
Agreement. The Chilean Partnership has been duly organized and is in good
standing under the laws of Chile. The Company's partnership interest in the
Chilean Partnership is held free and clear of all Encumbrances of any kind
except as set forth in the Limited Partnership Agreement, dated August 13, 1980,
as amended (the "Partnership Agreement"), and related agreements, true and
complete copies of which have heretofore been made available to the Buyer.
3.2.10 Financial Statements.
--------------------
(a) Attached as Schedule 3.2.10(a) are true copies of the
following:
(i) Balance sheets of the Company, and the related statements
of operations and cash flows of the Company as of and for the years ended
December 31, 1995, 1996 and 1997 (collectively, the "Annual Financial
Statements", and the balance sheet at December 31, 1997 being the "1997 Balance
Sheet"); and
(ii) Balance sheets of the Company and the related statements of
operations and cash flows of the Company as of and for the three months ended
March 31, 1998 (collectively, the "Interim Financial Statements" and with the
Annual Financial Statements, the "Financial Statements". The balance sheet at
March 31, 1998 is referred to as the "March 1998 Balance Sheet").
Except as reflected in the notes thereto, the Financial Statements present the
financial position of the Company at their respective dates and the results of
operations and cash flows for the periods covered thereby, in conformity, in all
material respects, with the books and records of the Company and in a manner
consistent, in all material respects, with the financial statements previously
prepared by the Company. Consistent with Section 1.2, nothing contained herein
shall be deemed to be a representation as to the adequacy of accruals or
reserves with respect to Environmental Matters. Other than with respect to
those matters listed on Schedule 3.2.10, to the Knowledge of Cyprus Amax, the
Financial Statements conform, in all material respects, with United States
generally accepted accounting principles.
(b) Schedule 3.2.10(b) hereto lists the intercompany balances between
the Company (including the Chilean Partnership) and Cyprus Amax, Specialty, or
any of their Affiliates as of March 31, 1998.
(c) Attached hereto as Schedule 3.2.10(c), are certain financial
statements of the Chilean Partnership which have been audited at the request of
Cyprus Amax. No representation is made as to such financial statements.
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<PAGE>
(d) Since April 1, 1998, the Company has been operated in the
ordinary course of business and from such date to the date of this Agreement, to
the Knowledge of Cyprus Amax, there has been no Material Adverse Effect.
(e) To the Knowledge of Cyprus Amax, the Company is not subject
to any liability or obligation, including contingent liabilities, which,
pursuant to FASB No. 5 would be required to be accrued for on or disclosed in
the footnotes to a balance sheet prepared in accordance with U.S. generally
accepted accounting principles, other than those (i) reflected in the Financial
Statements, (ii) disclosed in the Schedules hereto, (iii) arising in the
ordinary course of business consistent with past practice, or (iv) which are not
reasonably expected to result in a Material Adverse Effect. This representation
shall not be deemed to apply with respect to Environmental Matters.
3.2.11 Property.
--------
(a) Schedule 3.2.11 lists and briefly describes all real
property interests owned or leased by the Company (including the Chilean
Partnership) (the "Real Property"). Each of the Company and the Chilean
Partnership owns or has sufficient property rights in, or has valid leasehold
interests with respect to, all Real Property necessary to enable it to use the
Real Property in its business as it is now being used.
(b) Each of the Company and the Chilean Partnership owns or has
sufficient rights to its personal property and, except as set forth on Schedule
3.2.12, its intellectual property, as is necessary to permit the use and
enjoyment of such properties, substantially in the manner such properties are
now used by the Company (including the Chilean Partnership), free and clear of
any and all Encumbrances, except for any such Encumbrances that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(c) Except as set forth on Schedule 3.2.11, Cyprus Amax does
not have any Knowledge of any material actual, proposed or threatened
condemnation, requisition, taking, or termination of the Company's or the
Chilean Partnership's rights in, any Real Property, whether owned in fee simple,
leased, or possessed pursuant to patented or unpatented mining claims, by any
public authority, Governmental Authority, or any third Person.
3.2.12 Intellectual Property. Schedule 3.2.12(a) lists and describes
---------------------
all patents, trademarks, service marks, trade names, copyrights and applications
therefor owned by or registered in the name of the Company or the Chilean
Partnership. Except as set forth on Schedule 3.2.12(b), to Cyprus Amax's
Knowledge, the Company is not infringing, in any material respect, on any valid
patent right, trademark, service mark, trade name or copyright of others, nor to
Cyprus Amax's
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Knowledge, are any such material valid rights owned by the Company being
infringed upon by any other party in any material respect.
3.2.13 Material Contracts. Schedule 3.2.13 lists and describes all
------------------
contracts and agreements to which the Company (including the Chilean
Partnership) is a party or bound (the "Material Contracts"):
(a) for the purchase or sale of real or personal property at a price
in excess of $1 million per annum other than with respect to the sale of
inventory or the purchase of materials in the ordinary course of business;
(b) for the lease or sublease of real or personal property by the
Company, either as lessee, sublessee, lessor or sublessor, at an annual amount
in excess of $1 million;
(c) for the purchase or sale of services, other than utility
contracts, at an annual amount in excess of $1 million and with an unexpired
mandatory term as of the Closing Date in excess of one (1) year;
(d) for the employment of any Person, as an officer, employee or
consultant, with an annual cash salary in excess of $100,000;
(e) for the borrowing of money in excess of $100,000;
(f) for the payment or receipt of license fees, commissions or
royalties to or from any Person in excess of $500,000 annually;
(g) restricting in any material manner the Company's right to
compete with any other Person;
(h) any material partnership or joint venture agreement;
(i) any other contract which provides for the receipt or expenditure
by the Company of more than $1 million individually during any 12-month period,
other than contracts entered into in the ordinary course of business;
(j) collective bargaining agreements or any agreements that contain
any severance pay liabilities or obligations (other than general corporate
policies or practices);
(k) bonus, deferred compensation, pension, profit-sharing, stock
option or purchase plans, retirement retainer, welfare or incentive plans, or
other material employee benefit plans or arrangements other than as provided on
Schedule 3.2.20;
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<PAGE>
(l) notes, bonds, indentures or guarantees that involve a potential
liability of either the Company or the Chilean Partnership of more than $1
million; or
(m) agreements, contracts or commitments relating to capital
expenditures and involving future payments that, together with future payments
under all other agreements, contracts or commitments relating to the same
capital project, exceed $1 million.
Except as otherwise set forth in Schedule 3.2.13, to Cyprus Amax's
Knowledge, the Material Contracts are in full force and effect, are valid,
binding and enforceable against the parties thereto, except to the extent that
the enforcement of rights and remedies in respect thereof may be subject to
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditor's rights generally, and none are terminable as a result of the
transactions contemplated by this Agreement or the Related Agreements. No
default by the Company or, to Cyprus Amax's Knowledge, by the other contracting
parties has occurred thereunder which could reasonably be expected to have a
Material Adverse Effect. To Cyprus Amax's Knowledge, no event, occurrence or
condition exists which, with the lapse of time, or the giving of notice or both,
would become a default by the Company or by the other contracting parties
thereunder which could reasonably be expected to have a Material Adverse Effect.
No Material Contract is terminable or subject, by its terms, to
material modification as a result of the transactions contemplated by this
Agreement or the Related Agreements except as specified in the next succeeding
sentence. The Material Contracts set forth on Schedule 3.2.13 to which a
consent or approval to the transactions provided for in this Agreement is
required are designated with an asterisk and are referred to herein as "Material
Restricted Contracts".
3.2.14 Employee Relations.
------------------
(a) Except as disclosed on Schedule 3.2.14, to Cyprus Amax's
Knowledge, the Company has applied its employee policies, rules and regulations
in a manner generally consistent with any legal obligations it may have
excepting any breach which could not reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth on Schedule 3.2.14, neither the Company nor
the Chilean Partnership is a party to any collective bargaining agreements with
a labor union and no such agreements are currently being negotiated by the
Company or the Chilean Partnership. The Company has no present duty to
recognize or bargain with any labor organization under the National Labor
Relations Act or any comparable state statute applicable to it.
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<PAGE>
(c) No labor strike or material organized work stoppage against the
Company or the Chilean Partnership is pending or, to Cyprus Amax's Knowledge,
threatened. Except as set forth on Schedule 3.2.14, the Company and the Chilean
Partnership have not engaged in and are not, to Cyprus Amax's Knowledge,
threatened with any material action, suit, proceeding, claim or charge with
respect to any (i) labor dispute, grievance, or litigation relating to labor
matters involving any of its employees for purposes of bargaining or otherwise
negotiating with the Company, (ii) charges of unfair labor practices or (iii)
employment discrimination (whether on the basis of sex, age, race, national
origin, handicap or veteran status) or (iv) wrongful discharge or termination of
employment, which in any of the foregoing cases, individually or in the
aggregate could reasonably be expected to result in a Material Adverse Effect.
To Cyprus Amax's Knowledge, no efforts are currently being made and no petition
is being circulated or filed to organize any employees of the Company or the
Chilean Partnership for purposes of bargaining or otherwise negotiating with the
Company or the Chilean Partnership to designate or certify any labor
organization or other Person or entity as bargaining agent or to hold any
election relating to the foregoing.
(d) The Company (i) is in compliance with all laws, rules and
regulations of Governmental Authorities respecting employment, employment
practices, terms and conditions of employment, wages and hours, except for those
instances which, in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect; (ii) has withheld all material amounts required by
Law from the wages, salaries and other payments to employees; (iii) is not
liable for any material arrears of wages or any material penalty for failure to
comply with any of the foregoing; and (iv) except in the ordinary course of
business, is not liable for any material payment to any trust or other fund or
to any Governmental Authority, with respect to unemployment compensation
benefits, social security or other legally mandated benefits for employees;
provided, however, that the foregoing representation is not intended to cover
- -------- -------
matters addressed in Section 3.2.20.
(e) Except as disclosed on Schedule 3.2.14, to Cyprus Amax's
Knowledge, there are no pending investigations of the Company by the Equal
Employment Opportunity Commission, any state civil rights commission, or any
other Governmental Authority responsible for investigation of worker complaints
for discrimination, which could reasonably be expected to have a Material
Adverse Effect. Further, to Cyprus Amax's Knowledge, there are no pending
investigations of the Company by the U.S. Department of Labor, any state
department of labor, the Mine Safety and Health Administration or the
Occupational Safety and Health Administration, which could reasonably be
expected to have a Material Adverse Effect.
3.2.15 Litigation. Except as set forth in Schedule 3.2.15, (i) there
----------
are no actions, suits or proceedings of which Cyprus Amax has notice, or to the
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Knowledge of Cyprus Amax, any Governmental investigations pending or any
actions, suits or proceedings threatened, against the Company or the Chilean
Partnership which could reasonably be expected to result in a Material Adverse
Effect, or which seek to delay or question the validity of this Agreement or the
Related Agreements or of any action taken or to be taken by the Company,
Specialty or Cyprus Amax pursuant hereto or thereto or in connection herewith or
therewith or the transactions contemplated hereby or thereby, and (ii) there are
no outstanding judicial or administrative orders or decrees to which the Company
or the Chilean Partnership is subject, which could reasonably be expected to
result in a Material Adverse Effect, other than those applicable generally to
the industry in which the Company operates.
3.2.16 Absence of Changes or Events. Except as set forth in Schedule
----------------------------
3.2.16, in connection with the Chilean Restructuring, or contemplated by Section
4.2.4, since January 1, 1998, the Company has conducted its business in the
ordinary course and has not:
(a) declared, set aside, or paid any dividend or distribution
to its stockholders, other than cash payments;
(b) incurred or committed with a third party to incur (i) any single
capital expenditures outside the ordinary course of business in an amount in
excess of $1 million or (ii) aggregate capital expenditures in an amount in
excess of $5 million outside the ordinary course of business and in any event,
materially in excess of plan;
(c) made any change in the Company's authorized or actual
capitalization;
(d) sold or transferred, assigned or granted material rights under
any material assets or properties except in the ordinary course of business;
(e) suffered any damage, destruction or casualty loss which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect;
(f) increased the compensation, including salary, bonuses, special
compensation, severance or termination pay, payable to any employee or increased
any benefit plan obligations, other than in the ordinary course of business
consistent with past practice;
(g) acquired any asset, or incurred, assumed or guaranteed any
indebtedness, liability or obligation, or subjected or permitted to be subjected
any material amount of assets to any Encumbrance of any kind, except in
transactions in the ordinary course of business consistent with past practice;
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<PAGE>
(h) forgave, compromised, canceled, released, waived or permitted to
lapse any material rights or claims, except in the ordinary course of business
consistent with past practice;
(i) entered into or terminated any material agreements, commitment or
transaction, or made any changes in material leases or agreements, other than
renewals or extensions thereof, and leases, agreements, transactions and
commitments (including changes thereto) entered into in the ordinary course of
business and consistent with past practices;
(j) wrote up the book value of any material amount of assets;
(k) redeemed, purchased or otherwise acquired, or issued, sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to changes of the terms and conditions of any such rights outstanding
as of the date of this Agreement;
(l) entered into any collective bargaining agreement with any Person
or group or employment agreements, other than in the ordinary course of business
consistent with past practice; or
(m) agreed or committed to do any of the foregoing.
3.2.17 Compliance with Laws. To Cyprus Amax's Knowledge, except as
--------------------
provided on Schedule 3.2.17 hereto, the Company (including the Chilean
Partnership) is in compliance with all Laws, and is not in default or violation
of any, Laws, of all Governmental Authorities applicable to its business,
operations and assets, the failure to comply with which could reasonably be
expected to have a Material Adverse Effect. To Cyprus Amax's Knowledge, neither
Cyprus Amax, the Company, nor the Chilean Partnership either on its own behalf
or on behalf of any of its respective officers, agents, consultants, or
employees, has, with respect to the business of the Company (including the
Chilean Partnership) (i) made or agreed to make any contributions, payments or
gifts of their funds or property to any Governmental official, employee, or
agent where the payment of such contribution, payment or gift was illegal under
any applicable Law; (ii) established or maintained any unrecorded fund or asset
for any such purpose, or made any intentional false or artificial entry on any
of its books or records in connection with any such activity; or (iii) made or
agreed to make any contribution, or reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state, local, or foreign, where such contribution was a violation of
applicable Law by either Cyprus Amax or any of its Affiliates.
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<PAGE>
3.2.18 Licenses, Permits, Approvals. The Company (including the
----------------------------
Chilean Partnership) possesses all licenses, permits, grants and governmental
approvals and authorizations which are required in order to operate its
businesses as currently operated, other than those which, the failure to possess
could not reasonably be expected to have a Material Adverse Effect. To Cyprus
Amax's Knowledge, each of the Company and the Chilean Partnership has duly filed
all reports and returns required to be filed by it with any Governmental
Authority and obtained all Governmental permits and licenses and other
Governmental consents (including the Chilean Nuclear Energy Commission) which
are required in connection with the businesses and operations of each of the
Company and the Chilean Partnership, the failure of which could reasonably be
expected to have a Material Adverse Effect. To the Knowledge of Cyprus Amax,
all of such permits, licenses and consents are in full force and effect, and to
the Knowledge of Cyprus Amax, no proceedings for the suspension or cancellation
of any of them are pending or threatened, which could reasonably be expected to
have a Material Adverse Effect.
3.2.19 Insurance. To Cyprus Amax's Knowledge, Schedule 3.2.19 lists
---------
all policies of fire, liability, or other material forms of third party
insurance issued solely in the name of the Company or the Chilean Partnership
and, to the Knowledge of Cyprus Amax, no premiums are past due. To Cyprus
Amax's Knowledge, Schedule 3.2.19 also lists all bonds, including reclamation
bonds, currently in force with respect to the Company or its operations issued
solely in the name of the Company.
3.2.20 Employee Benefit Plans.
----------------------
(a) Schedule 3.2.20 lists all deferred compensation, pension, profit
sharing and retirement plans, and all life or other welfare or employee benefit
insurance, incentive compensation, stock option, severance or termination pay,
hospitalization or other medical plan, arrangement or agreement, bonus and other
employee benefit, welfare or fringe benefit plans, arrangements or practices,
written or otherwise, or any other "employee benefit plan," as defined in
Section 3(3) of ERISA, whether formal or informal, in effect as of the Closing
with respect to which contributions, premiums or other payments are made or
required by the Company with respect to any current or former employees (the
"Plans"). Schedule 3.2.20 identifies each Plan to be in effect at the Closing
as either (i) a Plan maintained by the Company ("Company Plan") or (ii) a Plan
maintained by Cyprus Amax, but under which the Company is a participating
employer ("Cyprus Amax Plan"). None of the Plans are, and the Company has never
contributed or had an obligation to contribute to a "multiemployer plan," as
defined in Section 3(37) of ERISA (a "Multiemployer Plan") or a "multiple
employer plan," as defined in ERISA or the Code. Except as provided in Section
4.3.6, neither Cyprus Amax nor the Company has any agreement or commitment to
create any additional Plan or modify or change any Plan. Subject to any
applicable collective bargaining agreement, each of the Company Plans
(including, without limitation, any Company Plan providing retiree medical
benefits) can be
-21-
<PAGE>
amended, modified or terminated by Cyprus Amax or the Company within a period of
thirty (30) days without payment of any additional compensation or amount, or
the additional vesting or acceleration of any such benefits, except to the
extent that such vesting is required under the Code upon the complete or partial
termination of any Company Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code. To the Knowledge of Cyprus Amax, no statement of any
kind, written or oral, has been made by Cyprus Amax, the Company, or any of
their officers, directors, employees, or agents, with respect to any Company
Plan that was inconsistent with the ability of Cyprus Amax or the Company to so
amend, modify or terminate such Company Plan. True and complete copies of the
Plans have been made available to Buyer.
(b) With respect to the Plans, the Company is in compliance, in all
material respects, with the Plan terms, and, where applicable, the Code, ERISA
and any other applicable Laws, and has performed and complied in all material
respects with all of its obligations under and with respect to the Plans and any
applicable collective bargaining agreement. Each Plan has, at all times, in
form, operation and administration, complied in all material respects with its
terms, and where applicable, the Code, ERISA, and any other applicable Laws.
(c) Each Company Plan, which is intended to be "qualified" within the
meaning of Section 401(a) of the Code, has received a favorable determination
letter from the Internal Revenue Service and, to the Knowledge of Cyprus Amax
and the Company, no event has occurred and no condition exists which could
reasonably be expected to result in the revocation of any such determination.
Except as provided on Schedule 3.2.20 hereto and except as provided in Section
4.3.6, since the date of the Company Plans and documents related thereto made
available to Buyer, there has not been any change in the terms or operations of
the Company Plan which could reasonably be expected to affect or alter the tax
status or materially affect the cost of maintaining any Company Plan, and none
of the Company Plans has been or will be amended prior to the Closing Date,
without Buyer's consent.
(d) All contributions which are due from the Company under any Plan
have been paid to each such Plan or accrued in accordance with the past practice
of Cyprus Amax and the Company. All premiums or other payments that are due
before the Closing Date have been paid with respect to each Plan that is an
employee welfare benefit plan (as defined in Section 3(1) of ERISA).
(e) Neither the Company, Cyprus Amax, or any of its subsidiaries nor,
to the Knowledge of Cyprus Amax or the Company, any other "disqualified Person"
or "party in interest" as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively, have engaged in any transaction in connection with
any Company Plan that could reasonably be expected to result in the
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<PAGE>
imposition of a material penalty pursuant to Section 502(i) of ERISA, damages
pursuant to Section 409 of ERISA, or a tax pursuant to Section 4975(a) of the
Code or any other material penalty, damage, tax or other sanction or liability
under the Code, ERISA, or any other applicable Laws.
(f) Except as set forth on Schedule 3.2.20, no action, suit,
proceeding or investigation with respect to the administration or investment of
assets of any Company Plan (other than routine claims for benefits) is pending
or, to Cyprus Amax's Knowledge, threatened that could reasonably be expected to
have a Material Adverse Effect and no filing, application or other matter is
pending with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation (the "PBGC"), the United States Department of Labor or any other
governmental body.
(g) Each Company Plan that is a "group health plan" (as defined in
Section 607(l) of ERISA and Section 5000(b)1 of the Code), has complied in all
material respects with the requirements of Part 6 of Subtitle B of Title I of
ERISA and of Section 4980B of the Code, except where non-compliance could not
reasonably be expected to have a Material Adverse Effect. The calculation of
the projected liability of the Company for post-retirement benefits other than
pensions that was provided to Buyer was made in accordance with Financial
Accounting Statement 106 of the Financial Accounting Standards Board, and, as of
March 31, 1998, the total "accumulated postretirement benefit obligation" for
such benefits for current employees does not exceed $1.7 million.
(h) With respect to each Plan subject to Section 412 of the Code,
there has occurred no failure to meet the minimum funding standards of Section
412 of the Code (whether or not waived in accordance with Section 412(d) of the
Code) or failure to make by its due date a required installment under Section
412(m) of the Code. With respect to each Plan which is an "employee pension
benefit plan," as defined in Section 3(2) of ERISA (a "Pension Plan"): (i) all
required premium payments to the PBGC have been paid when due, (ii) no
reportable event, as described in Section 4043 of ERISA (for which reporting has
not been waived), has occurred with respect to any Pension Plan, (iii) no excise
taxes are payable under the Code, (iv) no amendment with respect to which
security is required under Section 307 of ERISA or Section 401(a)(29) of the
Code has been made or is reasonably expected to be made, and (iv) there has been
no event which could subject the Company to liability under Section 4064 or 4069
of ERISA.
(i) The Company has not incurred any liability or taken any action
and, to the Knowledge of Cyprus Amax, no action or event has occurred, that
could cause the Company to incur any liability (i) under Section 412 of the Code
or Title IV of ERISA with respect to any "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA, (ii) on account of a partial or complete
withdrawal (as defined in Sections 4203 and 4205 of ERISA, respectively) with
respect to any
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<PAGE>
Multiemployer Plan, or (iii) on account of unpaid contributions to any
Multiemployer Plan.
(j) Except as provided in Section 4.3.6 or on the Schedules hereto,
neither the execution and delivery of this Agreement nor the consummation of any
or all of the contemplated transactions will: (i) entitle any current or former
employee of the Company to severance pay, unemployment compensation or any
similar payment from the Company, (ii) accelerate the time of payment or vesting
or increase the amount of any compensation due to any such employee or former
employee from the Company, or (iii) directly or indirectly result in any payment
made or to be made to or on behalf of any Person to constitute a "parachute
payment" within the meaning of Section 280G of the Code.
(k) Notwithstanding anything contained herein to the contrary, the
representations and warranties contained in this Section 3.2.20((a)-(j)), are
made only as to the Company, excluding the Chilean Partnership. To the
Knowledge of Cyprus Amax, all employee benefit plans of the Chilean Partnership
comply in all material respects with applicable Laws, except where noncompliance
could not reasonably be expected to have a Material Adverse Effect.
3.2.21 Bank Relationships. Schedule 3.2.21 sets forth: (i) the
------------------
names of all banks that are depositories of funds of the Company and/or the
Chilean Partnership; (ii) the names of all Persons authorized to draw or sign
checks or drafts upon such accounts; (iii) the names and locations of any
institutions in which the Company and/or the Chilean Partnership has safe
deposit boxes; (iv) the names of the Persons having access to such safe deposit
boxes; and (v) the names of all officers of the Company and/or the Chilean
Partnership who, according to the records of banks or other lending
institutions, are authorized and empowered to make any borrowings on behalf of
the Company and/or the Chilean Partnership.
3.2.22 Reserve Information.
-------------------
(a) Certain estimates of the proven and probable Lithium reserves of
the Company (including the Chilean Partnership) are attached hereto as Schedule
3.2.22 (the "Estimates"). To Cyprus Amax's Knowledge, the Estimates were
prepared, in all material respects: (i) by Persons qualified to make such
estimates, and (ii) using reasonable geologic, hydrologic and engineering
methods, practices and assumptions. Since the date of the Estimates, to Cyprus
Amax's Knowledge, nothing has come to Cyprus Amax's attention which would cause
it to believe that the Estimates were overstated, in any material respect, and
to Cyprus Amax's Knowledge there has been no material change in the reserves set
forth in the Estimates other than changes arising from mining, acquisitions and
dispositions since the date thereof in the ordinary course of business.
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<PAGE>
(b) The lithium concession at the Salar de Atacama in favor of the
Chilean Partnership (which concession to the Knowledge of Cyprus Amax, is in
full force and effect in accordance with its terms) provides that, absent
dissolution or bankruptcy, it will be in full force and effect until the
production and sale by the Chilean Partnership of lithium or lithium products
containing 200,000 metric tons of metallic lithium equivalent free of any annual
volume restrictions beginning in July 2001, of which concession less than 25,000
metric tons of metallic lithium will be utilized prior to the Closing Date.
This Agreement, the Related Agreements and the transactions contemplated hereby
and thereby do not constitute a dissolution or bankruptcy of the Chilean
Partnership.
3.2.23 No Commissions. Except for Merrill Lynch & Co., whose fees
--------------
(and indemnification obligations) are solely the obligation of Cyprus Amax,
neither Cyprus Amax, Specialty nor the Company (including the Chilean
Partnership) has retained any broker or investment banker entitled to any
commission or compensation in connection with this Agreement or the transactions
contemplated by this Agreement.
3.2.24 Transactions with Related Parties. Except as set forth on
---------------------------------
Schedule 3.2.24, general and administrative support and the matters contemplated
by the Transition and Administrative Services Agreement (a) there have been no
material transactions by the Company with Cyprus Amax, any Affiliate, or any
officer or director of Cyprus Amax or any Affiliate (a "Related Party") since
January 1, 1997, and (b) there are no material agreements or understandings now
in effect between the Company, on the one hand, and any Related Party, on the
other hand. After the Closing Date there will be no obligations or other
liabilities between the Company, on the one hand, and any Related Party, on the
other hand, other than pursuant to this Agreement and the Related Agreements.
3.2.25 Disclaimer of Certain Warranties. EXCEPT AS SPECIFICALLY
--------------------------------
PROVIDED IN THIS AGREEMENT OR THE TAX SHARING AND INDEMNIFICATION AGREEMENT,
NEITHER CYPRUS AMAX NOR SPECIALTY MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY
NATURE, EXPRESS OR IMPLIED INCLUDING ANY RELATED TO MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
ARTICLE IV
COVENANTS AND AGREEMENTS
SECTION 4.1 COVENANTS AND AGREEMENTS OF BUYER
---------------------------------
Buyer further covenants and agrees that:
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<PAGE>
4.1.1 Confidentiality. In addition to, and not in limitation of, any
---------------
other confidentiality agreements previously entered into by Affiliates of Buyer
(with which Buyer agrees to comply) Buyer shall not disclose to any third party
(other than to the directors, officers, and employees of Buyer and its
Affiliates having need to know such information in connection with the
transactions contemplated hereby, or to their attorneys, accountants,
representatives and lenders), or use for any purpose other than as contemplated
by this Agreement, any confidential information regarding the Company. The
preceding sentence shall not apply to information which (i) was or becomes
generally available to the public other than as a result of a disclosure by
Buyer or any of said parties, (ii) was available to Buyer or its Affiliates
prior to its disclosure by Cyprus Amax, the Company or their representatives or
becomes available to Buyer or its Affiliates from a Person other than Cyprus
Amax, the Company or their representatives who is not, to the knowledge of
Buyer, bound by a confidentiality agreement with Cyprus Amax or its Affiliates
(iii) is compelled to be disclosed pursuant to any requirement of Law, court
order, subpoena or similar legal authority provided that Buyer shall give Cyprus
Amax prompt notice thereof and mark all information so disclosed as confidential
business information of the Company. Buyer shall advise Cyprus Amax of any such
requirement to disclose any such confidential information, so that Cyprus Amax
may seek appropriate legal relief. In the event that the contemplated
transactions under this Agreement are not consummated for any reason, Buyer will
promptly, upon the request of Cyprus Amax or the Company, deliver to Cyprus Amax
a certification that all such confidential information furnished to Buyer or
their representatives by Cyprus Amax, the Company or their representatives has
been destroyed, or returned to Cyprus Amax. This provision and all other
confidentiality obligations of Buyer and its Affiliates pertaining to
information with respect to the Company, shall be of no further force or effect
after the Closing.
4.1.2 No Solicitation by Buyer. In addition to, and not in
------------------------
limitation of any other agreements pertaining to the Company's, Specialty's or
Cyprus Amax's employees previously entered into by Buyer, commencing on the date
of this Agreement and ending on the termination or consummation of this
Agreement, Buyer on behalf of itself and its Affiliates, agrees not to hire or
attempt to hire any employees of Cyprus Amax, Specialty or the Company to the
extent prohibited by the Confidentiality Agreement dated December 20, 1997,
other than (i) those persons responding to advertisements of general
solicitation, and (ii) those persons who have been terminated by Cyprus Amax,
Specialty or the Company. Nothing contained herein shall prevent Buyer from
conducting interviews of employees of the Company (including the Chilean
Partnership) prior to Closing with the consent of Cyprus Amax not to be
unreasonably withheld.
SECTION 4.2 COVENANTS AND AGREEMENTS OF CYPRUS AMAX AND SPECIALTY
-----------------------------------------------------
Cyprus Amax and Specialty further covenant and agree that until the
Closing:
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4.2.1 Access to Information. Cyprus Amax shall cause the Company to
---------------------
afford Buyer and its employees and representatives access, during normal
business hours and upon reasonable notice, to all of the books, records,
agreements and properties of the Company, and shall furnish to Buyer and its
employees and representatives such information regarding the Company as Buyer
may reasonably request; provided, however, that any such investigation shall be
-------- -------
conducted in such a manner as not to interfere unreasonably with the operation
of the business of the Company or of Cyprus Amax.
4.2.2 Ordinary Course of Business. Except as otherwise contemplated
---------------------------
by this Agreement or as set forth on Schedule 4.2.2 (including the Chilean
Restructuring, and subject to such changes in the manner of implementing such
restructuring described on Schedule 4.2.2 which are not adverse to Buyer),
Cyprus Amax shall not permit the Company to enter into any material transaction
outside of its ordinary course of business without the express written consent
of Buyer, including, without limitation, (i) the sale, issuance or transfer of
any capital stock or other equity interest or any action in connection
therewith, (ii) the borrowing from third parties of money, (iii) the merger or
consolidation with any entity, or (iv) the transfer of assets other than in the
ordinary course of business consistent with past practice. Notwithstanding
anything contained herein to the contrary, prior to Closing, the Company may
transfer the Naturita and Newmire properties to an Affiliate of Cyprus Amax.
Cyprus Amax shall cause the Company to use all reasonable efforts consistent
with past practices to preserve and maintain substantially intact its business,
operations, assets and present relationships with its customers, suppliers and
employees. Except to the extent required by any applicable Laws, as
contemplated by this Agreement or in the ordinary course of business consistent
with past practice, Cyprus Amax shall not permit the Company to increase the
rate of compensation or other remuneration of any employee, enter into any
agreement or commitment to create any additional Plan, contract, agreement or
arrangement concerning any current or former employee, or otherwise amend,
modify or terminate any existing Plan.
4.2.3 Exclusivity. Prior to the Closing or termination of this
-----------
Agreement in accordance with Article X, Cyprus Amax shall not enter into and
shall cause the Company and Cyprus Amax's other Affiliates not to solicit,
encourage, enter into or continue negotiations or substantive discussions with,
or provide confidential information to, parties other than Buyer with respect to
the sale or transfer of the Company, the Chilean Partnership, the Company Shares
or any other form of business combination transaction involving the Company, the
Company Shares or the Company's or the Chilean Partnership's assets.
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<PAGE>
4.2.4 Intercompany Accounts; Cash Accounts.
------------------------------------
(a) All intercompany accounts, including any intercompany promissory
notes, providing for the payment of any amounts between the Company (including
the Chilean Partnership) on the one hand, and Cyprus Amax and its Affiliates
(other than the Company and the Chilean Partnership) on the other hand, shall be
settled via dividend to the extent of retained earnings and then a return of
capital if the amount is a receivable on the Company books, or as an increase of
paid-in capital if the amount is a payable on the Company books as of the
Closing Date, with no cash or other payments being made. Nothing in this
Section 4.2.4(a) shall limit the provisions of Section 2.2 hereof.
(b) Except as otherwise contemplated by this Agreement, all
agreements between the Company (including the Chilean Partnership) on one hand,
and Cyprus Amax and its Affiliates (other than the Company or the Chilean
Partnership) on the other hand, each of which are set forth on Schedule
4.2.4(b), shall be terminated and of no further force and effect, as of the
Closing Date.
(c) At or before the Closing, all cash and cash equivalents of the
Company (including the Chilean Partnership) will be transferred to Cyprus Amax
or its Affiliates for no consideration. Nothing in this Section 4.2.4(c) shall
limit the provisions of Section 2.2 hereof.
4.2.5 Noncompetition.
--------------
(a) As additional consideration for the payments to be made by Buyer
hereunder, Cyprus Amax agrees for five (5) years from the Closing Date, not to
directly or indirectly, including through Affiliates, engage or have any
material ownership interest (except as provided below) in a business that
engages in, or otherwise, directly or indirectly, manages, operates or controls
a business engaged in the activities of (i) the extracting of lithium from
spodumene ore, brine or other natural conditions or (ii) the processing, sale,
marketing or exploitation of products (including downstream products derived
therefrom) where the primary component which is the subject of such activities
is lithium (collectively, the "Prohibited Activities"). Nothing contained in
this Section shall limit the activities of Cyprus Amax or its Affiliates with
respect to (i) any business acquired after the date hereof if the Prohibited
Activities did not generate greater than 25% of the revenues of such business
during its fiscal year immediately prior to the acquisition and if the
Prohibited Activities would not constitute a "significant subsidiary" (as
defined in the rules and regulations under the Securities Exchange Act of 1934)
of Foote if Foote were to acquire such business, or (ii) any business conducted
by an entity which hereafter directly or indirectly acquires Cyprus Amax. In no
event shall the ownership of a passive interest less than five percent of any
publicly traded company be deemed to be a violation of this Section.
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(b) The parties agree that the duration and area (which shall be
worldwide) for which the covenant not to compete set forth in this Section 4.2.5
is to be effective are reasonable. In the event that any court of competent
jurisdiction determines that the time period or area provided for in this
Section 4.2.5., or both of them, are unreasonable and that such covenant is to
that extent unenforceable, such covenant shall remain in full force and effect
for the greatest time period and in the greatest geographical area that would
not render it unenforceable.
(c) The parties agree that damages would be an inadequate remedy for
Buyer in the event of a breach or threatened breach of this Section and thus, in
any such event, Buyer may, either with or without pursuing any potential damage
remedies, immediately seek to obtain and enforce an injunction prohibiting
Cyprus Amax and its Affiliates from violating this Section.
4.2.6 No Solicitation by Cyprus Amax. Commencing on the date of this
------------------------------
Agreement and ending on the third anniversary of the Closing Date, Cyprus Amax,
on behalf of itself and its Affiliates, agrees not to hire or attempt to hire
any employees of the Company, other than those persons (i) identified on
Schedule 4.2.6, (ii) responding to advertisements of general solicitation, (iii)
who have been terminated by the Company, or (iv) who, after one (1) year from
Closing, approach without solicitation, Cyprus Amax or its Affiliates.
4.2.7 Confidentiality. For seven (7) years following Closing,
---------------
neither Cyprus Amax nor Specialty shall directly or indirectly, disclose to any
third party or use for any purpose other than as contemplated by this Agreement,
any confidential information regarding the Company. The preceding sentence
shall not apply to information which (i) was or becomes generally available to
the public other than as a result of disclosure by Cyprus Amax, Specialty or
their Affiliates, (ii) becomes available to Cyprus Amax, Specialty or their
Affiliates from a Person other than the Company or its representatives who is
not, to the Knowledge of Cyprus Amax, Specialty or their Affiliates bound by a
confidentiality agreement with the Company, or (iii) is compelled to be
disclosed pursuant to any requirement of Law, court order, subpoena, or similar
legal authority provided, that, Cyprus Amax shall give the Company prompt notice
thereof and mark all information so disclosed as confidential business
information of the Company. Cyprus Amax shall advise the Company of any such
requirement to disclose any such confidential information, so that the Company
may seek appropriate legal relief.
SECTION 4.3 JOINT COVENANTS AND AGREEMENTS
------------------------------
All obligations of the Company contained in this Section 4.3 shall be
deemed, upon Closing, to have been solely obligations of Cyprus Amax to cause
the Company to take such actions, and shall not be deemed to have been direct
obligations of the Company.
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4.3.1 No Acts or Omissions. No party shall intentionally and in bad
--------------------
faith perform any act which, if performed, or omit to perform any act which, if
omitted to be performed, would prevent or excuse the performance of this
Agreement by any party hereto.
4.3.2 Consents of Others. Each party shall use its reasonable
------------------
efforts prior to the Closing to obtain all authorizations, consents and permits
required of them to permit them to consummate the transactions contemplated by
this Agreement or the Related Agreements; provided that as to consents, Cyprus
Amax's obligations shall be limited to the Material Restricted Contracts and
Cyprus Amax shall have no liability from its failure to obtain any consent with
respect to any Material Restricted Contract. In addition, while the parties
believe that the DOJ Consent Order is not applicable to the transactions
contemplated hereby, they agree to use all reasonable efforts to cause the Order
to be vacated or modified to the extent necessary to fulfill the Closing
conditions. Each party shall promptly file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice a pre-
merger notification in accordance with the HSR Act with respect to the sale of
the Company Shares. The parties shall reasonably cooperate to expedite the
termination of the waiting period under the HSR Act.
4.3.3 Conditions for the Closing. Each party shall use all
--------------------------
reasonable efforts to cause all conditions for the Closing to be met.
4.3.4 Publicity. During the period prior to the Closing, each party
---------
shall obtain the other party's consent before issuing any press release or
otherwise making any public announcement with respect to this Agreement, and
shall not issue any such press release or make any such public announcement
prior to obtaining such consent, which consent shall not be unreasonably
withheld or delayed, except as may be required by law or by obligations under
any listing agreement with a stock exchange.
4.3.5 Name Change. At the Closing, the parties shall take all
-----------
actions required to change the name of the Company to a name designated by Buyer
which is not similar to, and does not employ any portions of the name of Cyprus
Amax.
4.3.6 Benefits Matters.
----------------
(a) Effective as of the Closing, employees of the Company
shall cease to participate in the Retirement Plan for Salaried Employees of
Cyprus Amax Minerals Company (the "Salaried Plan") and the Company shall cease
to be a participating employer thereunder. As of the Closing, employees of the
Company shall be fully vested in their accrued benefits under the Salaried Plan,
determined as of the Closing. Effective as of the Closing, employees of the
Company shall accrue no additional benefits under the Salaried Plan and shall
accumulate no further years of service thereunder after the Closing. Such
accrued benefits shall be distributed to
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employees of the Company in accordance with the terms of the Salaried Plan. The
term Company as used in Section 4.3.6((a)-(g)) does not include the Chilean
Partnership.
(b) Effective as of, or prior to, the Closing, Cyprus Amax and the
Company shall take such action as is necessary to substitute Cyprus Amax for the
Company as the sponsoring employer of the Pension Plan for Certain Hourly-Rated
Employees of Cyprus Foote Mineral Company (the "Foote Plan"). Effective as of
the Closing, employees of the Company shall cease to participate in the Foote
Plan and the Company shall cease to be a participating employer thereunder. As
of the Closing, employees of the Company shall be fully vested in their accrued
benefits under the Foote Plan, determined as of the Closing. Effective as of
the Closing, employees of the Company shall accrue no additional benefits under
the Foote Plan and shall accumulate no further years of service thereunder after
the Closing. Such accrued benefits shall be distributed to employees of the
Company in accordance with the terms of the Foote Plan.
(c) Effective as of the Closing, employees of the Company shall cease
to participate in the Cyprus Amax Minerals Company Savings Plan and Trust (the
"Savings Plan") and the Company shall cease to be a participating employer
thereunder. As of the Closing, no further employer contributions shall be
credited to the accounts of the employees of the Company, except as may be
required by the terms of the Savings Plan. Account balances shall be
distributed to employees of the Company in accordance with the terms of the
Savings Plan.
(d) Effective as of the Closing, Buyer shall cause the Company to
adopt or to become a participating employer in a savings plan that qualifies
under Sections 401(a) and 401(k) of the Code. Such plan shall provide for the
immediate participation of the employees of the Company thereunder, and shall
allow employees of the Company to roll over into such plan distributions from
Cyprus Amax's Savings Plan, including, to the extent permitted by Law, the roll
over of an in-kind distribution of any outstanding loan balances and shares of
common stock of Cyprus Amax, provided, however, that the Company shall not be
obligated (i) to permit employees to make any additional investments in shares
of common stock of Cyprus Amax, or (ii) to permit employees who rollover in-kind
distributions of shares of common stock of Cyprus Amax to retain such shares as
an investment for more than two years after the Closing.
(e) Prior to the Closing and effective no later than the Closing,
Cyprus Amax shall cause the Company to establish welfare benefit plans
(including plans providing medical, dental, vision care, long-term disability,
short-term disability, group term life insurance, dependent life insurance,
business travel accident insurance and a cafeteria plan under Section 125 of the
Code with a healthcare spending account and a dependent care spending account)
that provide benefits to employees
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of the Company which shall not be materially more favorable in the aggregate
than current benefits provided to employees. The plans so established by the
Company shall be the Company Plans (as defined in Section 3.2.20). Buyer shall
cause the Company to continue to maintain such plans, subject to the Company's
right to amend or terminate such plans, on and after the Closing.
(f) Buyer shall cause the Company to establish a retiree medical plan
providing retiree medical benefits for current employees of the Company as of
the Closing who meet the eligibility requirements thereunder. Buyer shall cause
the Company not to amend or terminate such plan until December 31, 1998, or such
later date determined by Buyer.
(g) Effective as of the Closing, Buyer shall cause the Company to
adopt a severance pay plan with terms and conditions substantially similar to
those of Cyprus Amax's severance pay plan as it applies to employees of the
Company. The plan so established by the Company shall be a Company Plan (as
defined in Section 3.2.20). Buyer shall cause the Company not to amend or
terminate such plan for at least twelve (12) months after the Closing. No
severance or other payment shall be payable by the Company under such plan as a
result of the change of control or other events caused by the transactions
contemplated herein.
(h) Nothing in this Agreement, expressed or implied, shall confer
upon Buyer, or the Company (i) except as specifically provided in Sections
4.3.6(d), (f) and (g), the obligation to continue to provide (or to provide any
benefit in lieu of) any benefits currently provided to current and former
employees under the Plans for any specific period of time after the Closing,
(ii) the obligation to continue to employ any employee of the Company for any
specific period of time after the Closing or otherwise interfere with the right
of Buyer or the Company to terminate any such employee at any time for any
reason, subject to applicable Law, or (iii) require Buyer or the Company to
continue to provide (or provide any benefit in lieu of) benefits that are paid
in or based on the value of any stock or other securities of Buyer or the
Company or that consist of options or other rights to buy such stock or
securities.
4.3.7 Notice of Breach; Cure of Breach. Prior to the Closing, Cyprus
--------------------------------
Amax and Specialty on the one hand, and Buyer on the other hand, shall promptly
notify the other if the notifying party has knowledge of a breach of this
Agreement by the other party. If a breach is cured (whether or not the subject
of a notice) prior to the time established for the Closing, such breach shall be
deemed not to have occurred for all purposes of this Agreement. In the event
that any party is in breach of this Agreement, it may elect, on one occasion,
upon notice to the other parties to defer the Closing to a date not later than
seven (7) days after the date on which the Closing would otherwise have occurred
to allow for cure of such breach.
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ARTICLE V
ENVIRONMENTAL PROVISIONS
SECTION 5.1 DEFINITIONS
-----------
"Company Properties" means (i) all properties, sites, and facilities
owned or operated at the present time by the Company and all properties, sites
and facilities which were owned or operated at any previous time by the Company
or its predecessors and (ii) for which a Governmental Authority or any other
Person seeks to hold the Company responsible or liable in whole or in part.
"Cyprus Amax and/or Affiliates" shall have the meaning set forth in
Section 5.3.2.
"Cyprus Amax Responsibilities" shall mean those matters as to which
Cyprus Amax must indemnify pursuant to Section 5.4.1.
"Environment" means any surface water, ground water, drinking water
supply, surface or subsurface land strata, or ambient air, and includes any
natural resources (including fish, wildlife, and biota) therein or thereon.
"Environmental Conditions Associated with the Company Properties"
means the existence and condition of any waste materials or other substances on
the Company Properties; any release or threat of release of Hazardous Substances
into the Environment from or at the Company Properties or from materials which
the Company disposed of or arranged for the disposal of offsite; any adverse
effect or potential adverse effect on humans or the Environment deriving from
such existence or releases or threatened releases of Hazardous Substances; and
any alleged hazards or damage to health, property, or the Environment posed or
caused by the Company Properties or by Hazardous Substances thereon or by
Hazardous Substances released or threatened to be released into the Environment
from or at the Company Properties or from materials which the Company disposed
of or arranged for the disposal of offsite or from any actual or alleged
noncompliance with Governmental Environmental Requirements.
"Environmental Loss Amounts" shall have the meaning set forth in
Section 5.4.1.
"Environmental Representation Amounts" shall have the meaning set
forth in Section 5.4.1.
"Environmental Survival Period" shall have the meaning set forth in
Section 5.3.3.
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"Foote Policies" shall have the meaning set forth in Section 5.5.
"Foote-Vanadium Policies" shall have the meaning set forth in Section
5.5.
"Governmental Environmental Requirements" means, to the extent
applicable, any requirements under laws, rules, regulations, directives, or
orders of Governmental Authorities relating to the protection of human health or
the Environment, relating to the injury or damage to, or restoration or
replacement of, natural resources, or relating to land reclamation, including,
but not limited to, to the extent applicable, requirements under the Resource
Conservation and Recovery Act ("RCRA") (42 U.S.C. (S)6901 et seq.) and any
-- ---
amendments thereto; the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") (42 U.S.C. (S)9601 et seq.) and any amendments thereto;
-- ---
Title III of the Superfund Amendments and Reauthorization Act ("SARA Title III")
(known as the Emergency Planning and Community Right-To-Know Act or "EPCRA") (42
U.S.C. (S)11001 et seq.) and any amendments thereto; the Federal Water Pollution
-- ---
Control Act (known as the "Clean Water Act") (33 U.S.C. (S)1251 et seq.) and any
-- ---
amendments thereto; the Safe Drinking Water Act ("SDWA") (42 U.S.C. (S)300f et
--
seq.) and any amendments thereto; the Clean Air Act (42 U.S.C. (S)7401 et seq.)
- --- -- ---
and any amendments thereto; the Toxic Substances Control Act ("TSCA") (15 U.S.C.
(S)2601 et seq.) and any amendments thereto; the Atomic Energy Act (42 U.S.C.
-- ---
(S)2011 et seq.) and any amendments thereto; the Uranium Mill Tailings Radiation
-- ---
Control Act ("UMTRCA") (42 U.S.C. (S)7901 et seq) and any amendments the
-- ---
Endangered Species Act (16 U.S.C. (S)1536 et seq.) and any amendments thereto;
-- ---
and any similar environmental Laws of any Governmental Authority.
"Hazardous Substances" shall mean any substance to the extent listed,
defined, designated or classified, by type and quantity, as hazardous or toxic
under any applicable laws, rules, regulations, directives, or orders of
Governmental Authorities relating to the protection of human health or the
Environment; provided, however, that Hazardous Substances shall not be deemed to
-------- -------
include all of the Occupational Safety and Health Act, as amended ("OSHA")
hazardous chemicals as defined under the OSHA Hazardous Communication Standard
Regulations, 29 CFR 1920.1200, except in the context of complying with Material
Safety Data Sheet requirements under SARA Title III regulations. "Hazardous
Substances", for the purposes of this Agreement, shall include
petroleum/hydrocarbon products to the extent they are regulated as hazardous or
toxic to human health or the Environment.
"Historic Liability Policies" shall have the meaning set forth in
Section 5.5.
"Lithium Business" means the business currently conducted by the
Company (including the Chilean Partnership) and the lithium business previously
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conducted by the Company (and the Chilean Partnership) and including in each
case all activities related to the lithium operations, such as activities
associated with potash, crushed rock, lime, spodumene and related by-products or
co-products.
"Lithium Facilities" means the following Company Properties (without
regard to clause (ii) of the definition of such term) to the extent used in the
Lithium Business: Kings Mountain, North Carolina; New Johnsonville, Tennessee;
Silver Peak, Nevada; Salar de Atacama, Chile, and La Negra, Chile and the
Company's formerly operated facilities at Frazer, Pennsylvania, Sunbright,
Virginia and Exton, Pennsylvania (the "Former Lithium Facilities"). To the
extent such current or former properties were not used in the Lithium Business,
they shall not be considered to be Lithium Facilities.
"Lithium Matters" shall mean all operations, acts, omissions,
circumstances and matters to the extent related to or arising (whether prior to
or after the date hereof) from the Lithium Business or the Lithium Facilities.
"Non-Lithium Matters" shall mean all operations, acts, omissions,
circumstances and matters to the extent not related to or arising (whether prior
to or after the date hereof) from the Lithium Business or the Lithium
Facilities, and including without limitation the gold and copper exploration
activities of the Chilean Partnership.
"Pre-Closing Insured Losses" shall have the meaning set forth in
Section 5.5.1.
"Uranium Dust and Asbestos Litigation" shall mean those matters
contained on Schedule 5.1.
SECTION 5.2 CYPRUS AMAX'S AND SPECIALTY'S REPRESENTATIONS
---------------------------------------------
5.2.1 Compliance with Governmental Environmental Requirements.
-------------------------------------------------------
Schedule 5.2.1 lists all instances to Cyprus Amax's Knowledge in which: (i)
since January 1, 1995, a Governmental Authority has alleged that any of the
Company Properties is not in compliance with Governmental Environmental
Requirements; (ii) since January 1, 1995, a Governmental Authority has proposed
or indicated its intent to require the Company to comply with Governmental
Environmental Requirements with which the Company does not now comply; or (iii)
the Company has liability or an obligation arising from noncompliance with
Governmental Environmental Requirements that could reasonably be expected to
have a Material Adverse Effect.
5.2.2 Authorizations. Cyprus Amax represents that Schedule 5.2.2 (a)
--------------
lists all material permits and authorizations held by the Company under
applicable Governmental Environmental Requirements. Cyprus Amax further
represents that, to Cyprus Amax's Knowledge, except as set forth in Schedule
5.2.2(b), (i) all governmental licenses, permits, consents, and authorizations
which pertain to
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Environmental Conditions Associated with the Company Properties
and which are necessary for the operations on, or continued maintenance of,
those properties have been obtained, and (ii) that all necessary plans, notices,
applications, monitoring reports, and other documents pertaining to
Environmental Conditions Associated with the Company Properties have been
submitted to the appropriate Governmental Authorities.
5.2.3 Proceedings. To Cyprus Amax's Knowledge, Schedule 5.2.3 sets
-----------
forth an accurate and complete list of all legal, administrative, investigatory,
or other proceedings, pending or threatened against the Company which relate to
Environmental Conditions Associated with the Company Properties. Cyprus Amax
further represents that, to Cyprus Amax's Knowledge, except for the proceedings
so listed, the Company is not a party to and has not been threatened with any
litigation or proceedings which relate to Environmental Conditions Associated
with the Company Properties and which, if decided adversely to the Company,
could reasonably be expected to have a Material Adverse Effect.
5.2.4 Relevant Information. Cyprus Amax represents that the Data
--------------------
Room and other materials to which Buyer has been provided access, contain
information regarding all Environmental Conditions Associated with the Company
Properties which, to Cyprus Amax's Knowledge are material, including information
and documents, to the extent applicable, relating to: (i) the nature, type, and
estimated quantities of waste materials and other substances on the Company
Properties and the chemical constituents thereof; (ii) releases of Hazardous
Substances from the Company Properties; (iii) the instances of alleged or
potential noncompliance with applicable Governmental Environmental Requirements
listed in Schedule 5.2.1; (iv) the permits and other authorizations listed in
Schedule 5.2.2(a) and the matters listed in Schedule 5.2.2(b); (v) the
proceedings listed in Schedule 5.2.3, and (vi) the transactions related to
environmental matters, if any, set forth in Schedules 3.2.16 and 4.2.2. Cyprus
Amax does not, however, warrant that it has complete knowledge, or that the Data
Room contains complete information about each of these matters.
5.2.5 Limitations. The provisions of Section 3.2.25 shall be
-----------
applicable in this Article V.
SECTION 5.3 FURTHER ACKNOWLEDGEMENTS AND AGREEMENTS
---------------------------------------
5.3.1 Compliance with Governmental Environmental Requirements. Buyer
-------------------------------------------------------
acknowledges that Cyprus Amax may not have complete knowledge regarding whether
the Company Properties are in compliance with all applicable Governmental
Environmental Requirements. Furthermore, Buyer acknowledge that Cyprus Amax's
representations with respect to the matters covered by this Article V are
limited to a statement of certain factual matters of which Cyprus Amax has
Knowledge, specifically as set forth herein.
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<PAGE>
5.3.2 Waiver of Rights and Agreement Not to Sue. (a) Except for any
-----------------------------------------
indemnification claims duly and properly made by or for the benefit of Buyer or
the Company under and in accordance with the requirements of Section 5.4 hereof
(i) Buyer and the Company waive and relinquish all rights and claims that they
may have or may hereafter acquire against Cyprus Amax, its Affiliates, and their
respective officers, directors, employees, agents, successors and assigns
(collectively, "Cyprus Amax and/or Affiliates") relating to responsibility or
liability for Environmental Matters, and (ii) Buyer and the Company agree that
none of them shall commence any action of any kind whatsoever against Cyprus
Amax and/or Affiliates, in connection with any claims, losses, suits, costs,
damages, judgments, expenses, or other liabilities, of any kind or character
whatsoever and whether now existing or hereafter arising (and whether based upon
acts, events or conditions occurring prior to or after the execution of this
Agreement), relating to Environmental Matters. Such liabilities shall include,
without limitation, any civil fines or penalties, assessments, damages, or other
noncriminal or, to the extent permitted by law, criminal liabilities of any
kind, arising in any manner, including under any Laws of Governmental
Authorities relating to the protection of public health or the Environment, to
restoration or replacement of natural resources, or to land reclamation.
(b) Except for any indemnification claims duly and properly made by
or for the benefit of Cyprus Amax under and in accordance with the requirements
of Section 5.4 hereof (i) Cyprus Amax waives and relinquishes all rights and
claims that it may have or may hereafter acquire against the Company, its
Affiliates after Closing, and their respective officers, directors, employees,
agents, successors and assigns (collectively, the "Company and/or Affiliates")
relating to responsibility or liability for Environmental Matters, and (ii)
Cyprus Amax agrees that it shall not commence any action of any kind whatsoever
against the Company and/or Affiliates, in connection with any claims, losses,
suits, costs, damages, judgments, expenses, or other liabilities, of any kind or
character whatsoever and whether now existing or hereafter arising (and whether
based upon acts, events or conditions occurring prior to or after the execution
of this Agreement), relating to Environmental Matters. Such liabilities shall
include, without limitation, any civil fines or penalties, assessments, damages,
or other noncriminal or, to the extent permitted by law, criminal liabilities of
any kind, arising in any manner, including under any Laws of Governmental
Authorities relating to the protection of public health or the Environment, to
restoration or replacement of natural resources, or to land reclamation.
5.3.3 Survival of Environmental Representations, Warranties and
---------------------------------------------------------
Agreements. The representations and warranties of Cyprus Amax and Specialty
- ----------
under Section 5.2, which representations and warranties are joint and several,
shall survive for a period of eighteen (18) months after the Closing Date as to
Non-Lithium Matters and four (4) years after the Closing Date with respect to
Lithium Matters (the "Environmental Survival Period") and shall thereafter be of
no further force or effect, except as they relate to claims for which written
notice specifying with particularity
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<PAGE>
the facts underlying the claim, has been provided prior to the expiration of
such applicable period. The provisions of Section 5.3 shall continue without
limitation of time.
5.3.4 ShieldAlloy Matter. Cyprus Amax acknowledges that if Foote is
------------------
required by applicable Governmental Authorities to increase the amount of the
current letter of credit to a maximum of $9 million, Cyprus Amax will do so at
Cyprus Amax's expense.
SECTION 5.4 INDEMNIFICATION; ADMINISTRATION AND DEFENSE; URANIUM DUST AND
-------------------------------------------------------------
ASBESTOS LITIGATION
- -------------------
5.4.1 Indemnification by Cyprus Amax. Subject to the terms of this
------------------------------
Article V, Cyprus Amax agrees to indemnify and hold Buyer and its Affiliates,
including the Company (and the Chilean Partnership), as well as their respective
officers, directors, employees, agents, successors and assigns, harmless from
any damages, losses, costs or expenses, suffered or paid, as a result of any and
all claims, damages, suits, causes of action, proceedings, judgments,
liabilities, losses, damages, penalties, interest, costs or expenses including
reasonable attorneys' fees incurred in litigation or otherwise, assessed,
incurred or sustained by or against such Persons (collectively, "Environmental
Loss Amounts") with respect to or arising out of (i) the failure of any
representation or warranty made by Cyprus Amax or Specialty in Section 5.2 to be
true and correct when made (the "Environmental Representation Amounts"), (ii)
Environmental Conditions Associated with the Company Properties or Governmental
Environmental Requirements with respect thereto, but only to the extent arising
from Non-Lithium Matters and (iii) Uranium Dust and Asbestos Litigation. The
indemnification provided in (ii) and (iii) is not limited as to amount or time.
The obligations of Cyprus Amax to indemnify under Section 5.4.1(i) shall be
subject to the provisions of Sections 9.6.1, 9.6.3, 9.6.4, 9.6.6 and 9.6.7 of
this Agreement, and, for such purpose, the term "Losses" therein shall be deemed
to include any and all Environmental Representation Amounts. The obligations of
Cyprus Amax to indemnify under Section 5.4.1(ii) and (iii) shall be subject to
the provision of Sections 9.6.4 and 9.6.6.
5.4.2 Indemnification by Buyer. Subject to the terms of this Article
------------------------
V, Buyer and the Company jointly and severally, without limit as to amount or
time, shall indemnify and hold Cyprus Amax and/or Affiliates harmless from and
against any and all damages, losses, costs or expenses suffered or paid, as a
result of any and all claims, damages, suits, causes of action, proceedings,
judgments, liabilities, losses, damages, penalties, interest, costs or expenses,
including reasonable attorneys' fees incurred in litigation or otherwise,
assessed, incurred or sustained by or against Cyprus Amax and/or Affiliates with
respect to or arising out of Environmental Conditions Associated with the
Company Properties or Governmental Environmental Requirements, but only to the
extent arising from Lithium Matters. This obligation of
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Buyer and the Company to indemnify shall include, without limitation, any claim
asserting the responsibility or liability of Cyprus Amax and/or Affiliates, as
an owner or operator, either derivatively or directly, by way of Cyprus Amax's
and/or Affiliates' previous ownership or control over the Company, or their
participation in the operations or activities of the Company or the Company
Properties, or otherwise, only to the extent arising from Lithium Matters.
5.4.3 Notice. Each party shall give the other prompt written notice,
------
specifying with particularity the facts underlying the matter, of any claim,
suit, action, proceeding, demand, condition or discovery of which such party
receives notice, and as to which it has reason to believe may give rise to an
indemnification obligation of the others pursuant to this Article V.
5.4.4 Management, Control and Administration. Cyprus Amax, to the
--------------------------------------
exclusion of Buyer and the Company, shall manage and control, at its sole cost
and expense, the administration, contest, defense, settlement or other
resolution of all matters giving rise to Cyprus Amax Responsibilities. Upon the
request of the Company, Cyprus Amax shall keep the Company reasonably informed
of the management of any Cyprus Amax Responsibility. Each of Buyer and the
Company shall, at its expense, provide reasonable assistance, cooperation and
access to Cyprus Amax in connection therewith (including as provided in Section
8.3). Buyer and the Company shall provide Cyprus Amax with all notices and
correspondence and written summaries of oral communications delivered by any
Governmental Authority or other Person with respect to the Cyprus Amax
Responsibilities. In addition to the obligations of Cyprus Amax in the
Transition and Administrative Services Agreement, at the request of the Company,
Cyprus Amax will also consider providing services, at the sole cost of the
Company, in connection with the administration and defense of environmental
claims with respect to Former Lithium Facilities, and, in any event, shall at
its expense provide reasonable assistance, cooperation and access to the Company
in connection therewith, including as provided in Section 8.3.
5.4.5 Investigation. Neither Buyer nor the Company shall, directly
-------------
or indirectly (i) instigate, arrange, conduct or otherwise facilitate intrusive
investigation or remediation or similar activities of any conditions or matters
which constitute Cyprus Amax Responsibilities, or (ii) volunteer to any
Governmental Authority or other Person any matters designed to create or expand
Cyprus Amax Responsibilities, in any case with the known consequence or intended
goal of creating or expanding Cyprus Amax Responsibilities, other than in each
case as required by applicable Law.
SECTION 5.5 INSURANCE AND THIRD PARTY CLAIMS
5.5.1 Policies. Cyprus Amax and the Company have experienced losses
--------
with respect to Environmental Matters (i) as to which potential recoveries with
respect thereto are not reflected as assets on the March 1998 Balance Sheet, and
(ii) that they
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<PAGE>
contend are insured ("Pre-Closing Insured Losses") under historic insurance
policies, including (without limitation) certain comprehensive general, umbrella
and excess liability insurance policies described on Schedule 4.3.9, (all of
such policies, whether or not so listed, being the "Foote Policies"). Some or
all of the Company's predecessor or subsidiary or affiliated entities, including
(without limitation) Vanadium Corporation of America were also insured under
other historic insurance policies, as well as under the Foote Policies (the
"Foote-Vanadium Policies"). Cyprus Amax also may incur losses relating to
Cyprus Amax Responsibilities that it contends are insured under these policies.
(Hereafter the Foote Policies and the Foote-Vanadium Policies, together with
such other historic liability policies as may from time-to-time be discovered or
documented by the Company or by Cyprus Amax, shall be referred to collectively
as the "Historic Liability Policies.").
5.5.2 Claims. With respect to the Pre-Closing Insured Losses and the
------
Cyprus Amax Responsibilities only (the "Covered Losses") if a Covered Loss is
covered by a Historic Liability Policy, the Company shall assign and, following
the Closing, Buyer shall cause the Company to assign claims under the Historic
Liability Policy to Cyprus Amax, and Cyprus Amax shall be subrogated to all
rights with respect to such claim under the Historic Liability Policy. The
Company hereby irrevocably appoints Cyprus Amax as its limited agent and
attorney-in-fact to manage and administer the Historic Liability Policies in the
name of the policy owner and to make and receive the benefit of claims
thereunder relating to Covered Losses. As the Company's limited agent and
attorney-in-fact, Cyprus Amax, at its sole expense, may prosecute claims, accept
payments, and discharge obligations and rights, in whole or in part, arising
under the Historic Liability Policies relating to Covered Losses and shall be
entitled to all proceeds recovered by the Company or otherwise in connection
therewith. The Company shall cooperate with Cyprus Amax in connection therewith
(including as provided in Section 8.3). This limited agency and attorney-in-
fact appointment is coupled with an interest and shall be irrevocable. To the
extent that there are multiple claims of multiple parties against a single
Historic Liability Policy which in the aggregate exceed any alleged policy
limits, subject to the remainder of this Section, the proceeds shall be applied
in order of priority determined by the date of notice of a claim provided to the
carrier (i.e. the earlier claim has priority). Any two or more notices of
claims provided by different parties under the same policy after the date hereof
and within the same calendar year shall be deemed to be given for purposes of
the prior sentence on the same date. If, as a result of such claims, any such
policy limit is exhausted such that at least one of such claims is not fully
satisfied, the parties shall allocate between themselves the aggregate proceeds
received by them in a proportion equivalent to the respective losses that each
would have been entitled to recover under the policy, without regard to any
policy limits.
5.5.3 Other Third Party Claims. In the event that there are any
------------------------
claims in existence or hereafter arising against third parties (as to which
potential recoveries with respect thereto are not reflected as assets on the
March 1998 Balance Sheet)
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<PAGE>
arising out of (i) losses previously incurred by Cyprus Amax or the Company with
respect to Environmental Matters, or (ii) Cyprus Amax Responsibilities, the
Company hereby assigns all rights thereto to Cyprus Amax and hereby irrevocably
appoints Cyprus Amax as its limited agent and attorney-in-fact for pursuing such
claims and agrees to cooperate with Cyprus Amax in connection therewith
(including as provided in Section 8.3). This limited agency and attorney-in-fact
appointment is coupled with an interest and shall be irrevocable.
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
SECTION 6.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
The obligations of Buyer to consummate the transactions
contemplated hereby are subject to the fulfillment of all of the following
conditions on or prior to the Closing Date (unless waived in writing in the sole
discretion of Buyer):
6.1.1 Accuracy of Warranties and Performance of Covenants. The
---------------------------------------------------
representations and warranties of Cyprus Amax and Specialty contained herein
shall be accurate in all material respects when made and as of the Closing Date,
except as to matters arising from the date of this Agreement through the Closing
in the ordinary course of business (and not in violation of a covenant) or
otherwise contemplated by this Agreement, and also except for such instances
which in the aggregate could not reasonably be expected to result in a Material
Adverse Effect. In no event shall a Material Adverse Effect be deemed to result
from pricing fluctuations in lithium carbonate. Cyprus Amax shall have
performed all of its obligations and complied with each and all of the covenants
and agreements required to be performed or complied with on or prior to the
Closing Date, except for such instances which in the aggregate could not
reasonably be expected to result in a Material Adverse Effect. Cyprus Amax
shall have delivered an Officer's Certificate confirming the matters in each of
the foregoing sentences ("Cyprus Amax's Bring Down Certificate"); provided,
--------
however, that such certificate may disclose any facts or circumstances arising
- -------
after the date hereof or coming to the attention of Cyprus Amax as having caused
the condition specified in this Section 6.1.1 not to be satisfied; and (i) if
Buyer, nevertheless, decides to Close, the breach or failure shall be deemed
cured and may not be relied upon by Buyer or the Company to avoid any of their
obligations hereunder, impose any liabilities or obligations upon Cyprus Amax or
Specialty or otherwise recover from Cyprus Amax or Specialty with respect
thereto, or (ii) if Buyer decides not to Close, this Agreement and the proposed
transactions contemplated hereunder shall terminate, and each party hereto shall
thereafter have no obligation or liability hereunder. Buyer's sole and
exclusive remedy, in law or in equity, for any claim related to or arising out
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of a failure of a condition or breach, whether in contract, tort or otherwise,
shall be to refuse to complete the Closing under this Agreement.
6.1.2 Approvals, Absence of Litigation. Any applicable waiting
--------------------------------
period (and any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated. No suit or proceeding which remains pending at the
time for Closing shall have been commenced by any Governmental Authority to
restrain, enjoin or hinder, or to seek material damages on account of the
consummation of the transactions herein contemplated. The DOJ Consent Order
shall have been vacated or modified to permit the transactions contemplated
hereby, if deemed necessary by a relevant Governmental Authority, which action
shall not require or impose any materially burdensome condition on the ownership
or operation by Buyer and its Affiliates of the Company following the Closing.
6.1.3 No Injunction. No preliminary or permanent injunction nor
-------------
other order by any federal or state court in the United States, or any court in
any other country, of competent jurisdiction which prevents the consummation of
the transactions contemplated by this Agreement or by the Related Agreements or
prohibits or limits materially the ownership and operation by Buyer of all or
any material portion of the business or assets of the Company shall have been
issued and remain in effect (each party agreement to use all commercially
reasonably efforts to have any such injunction lifted).
6.1.4 Opinions of Counsel. Buyer shall have received legal opinions
-------------------
of counsel to Cyprus Amax, Specialty and the Chilean Partnership substantially
as to the matters set forth on Exhibits A-1 and A-2 hereto.
6.1.5 Central Bank. The Chilean Central Bank shall have issued an
------------
approval or other form of acquiescence to the continuation following Closing of
the Sales Agency Agreement between Foote and the Chilean Partnership, provided
that if Cyprus provides a notice to Buyer that it is deleting this exception
with respect to the Sales Agency Agreement from Schedule 3.2.13, this Section
6.1.5 shall be deemed to be terminated and of no further effect.
6.1.6 Buyer's Receipt of the Closing Documents. Buyer shall have
----------------------------------------
received from Cyprus Amax the Closing documents referred to in Section 7.2.2
SECTION 6.2 CONDITIONS PRECEDENT TO CYPRUS AMAX'S, SPECIALTY'S AND THE
----------------------------------------------------------
COMPANY'S OBLIGATIONS
- --------- -----------
The obligations of Cyprus Amax, Specialty and the Company to
consummate the transactions contemplated hereby are subject to fulfillment of
all of the following conditions on or prior to the Closing Date (unless waived
in writing in the sole discretion of Cyprus Amax):
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6.2.1 Accuracy of Warranties and Performance of Covenants. The
---------------------------------------------------
representations and warranties of Buyer contained herein shall be accurate in
all material respects as if made on and as of the Closing Date. Buyer shall
have performed in all material respects all of its obligations and complied in
all material respects with each and all of the covenants and agreements required
to be performed or complied with on or prior to the Closing. Buyer shall have
delivered an Officer's Certificate confirming the matters in each of the
foregoing sentences (the "Parent's and Buyer's Bring Down Certificate").
6.2.2 Approvals, Absence of Litigation. Any applicable waiting
--------------------------------
period (and any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated (such date being the "HSR Termination Date"). No suit
or proceeding, which remains pending at the time for Closing, shall have been
commenced by any Governmental Authority to restrain, enjoin or hinder, or to
seek material damages on account of, the consummation of the transactions herein
contemplated. The DOJ Consent Order shall have been vacated or modified to
permit the transactions contemplated hereby, if deemed necessary by a relevant
Governmental Authority.
6.2.3 Legal Opinions. Cyprus Amax and Specialty shall have received
--------------
legal opinions of counsel to Buyer substantially as to the matters set forth on
Exhibit B hereto.
6.2.4 Cyprus Amax's Receipt of the Closing Documents. Cyprus Amax
----------------------------------------------
shall have received from Buyer the Closing documents referred to in Section
7.2.1.
ARTICLE VII
THE CLOSING
SECTION 7.1 THE CLOSING DATE
----------------
Subject to the terms of this Agreement, consummation of the
transactions contemplated by this Agreement (the "Closing") shall take place on
the third business day following the HSR Termination Date (the "Closing Date")
or at such other time as the parties hereto shall mutually agree; provided,
however, that at the election of Cyprus Amax, the Closing may be delayed for
such purpose to allow for the completion of the Chilean Restructuring but in no
event beyond August 15, 1998. The Closing shall be consummated at the offices
of Cyprus Amax, at 9100 East Mineral Circle, Englewood, Colorado, or such other
place as the parties hereto shall mutually agree.
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<PAGE>
SECTION 7.2 DELIVERIES AT THE CLOSING
-------------------------
7.2.1 Buyer's Execution and Delivery of Documents and Payment.
-------------------------------------------------------
Buyer shall deliver or execute and deliver, as the case may be, to Cyprus Amax
or Specialty, as the case may be, all of the following:
(a) A certificate of valid existence and good standing of
Buyer issued not earlier than five (5) and no later than fifteen (15) days,
respectively, prior to the Closing, executed by the appropriate governmental
official;
(b) Buyer's Bring Down Certificates;
(c) Certificates certifying to Cyprus Amax the incumbency
of Buyer's officers and bearing the authentic signatures of all such officers
who have executed this Agreement or the Related Agreements;
(d) Payment to Specialty of the amounts provided in
Article II, by wire transfer of immediately available funds to a bank account
designated by Specialty;
(e) A receipt, executed by Buyer, acknowledging receipt
of the certificates representing the Company Shares and establishing the time of
the Closing;
(f) Tax Sharing and Indemnification Agreement, in the
form of Exhibit C, duly executed by Buyer;
(g) Release Agreement in the form of Exhibit D, duly
executed by the Company; and
(h) Transition and Administrative Services Agreement, in
the form of Exhibit E, duly executed by Buyer.
(i) The opinions referred to in Section 6.2.3.
7.2.2 Cyprus Amax's Execution and Delivery of Documents and
-----------------------------------------------------
Certificates. Cyprus Amax shall deliver or execute and deliver, as the case may
- ------------
be, or cause to be delivered or executed and delivered to Buyer all of the
following:
(a) Certificates of valid existence and good standing of
Cyprus Amax, Specialty and the Company issued not earlier than five (5) days
prior to the Closing, by the Secretaries of State of Delaware, Delaware and
Pennsylvania, respectively;
(b) Cyprus Amax's Bring Down Certificate;
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(c) The opinions referred to in Section 6.1.3.
(d) A certificate certifying to Buyer the incumbency of Cyprus
Amax's and Specialty's officers and bearing the authentic signatures of all such
officers who have executed this Agreement or the Related Agreements;
(e) If requested by Buyer, the resignations of all of the
Company's directors and officers;
(f) The Company's By-Laws, minute books, stock record books,
all similar corporate records and all the Company seals, if any, unless in the
possession of the Company;
(g) One or more certificates duly endorsed by Specialty and in
proper form for transfer to Buyer, or accompanied by duly executed stock powers,
evidencing all of the Company Shares;
(h) A receipt, executed by Specialty, acknowledging receipt of
payment for the Company Shares;
(i) Tax Sharing and Indemnification Agreement, in the form of
Exhibit C, duly executed by Cyprus Amax and Specialty;
(j) Release Agreement in the form of Exhibit D, duly executed
by Cyprus Amax and Specialty; and
(k) Transition and Administrative Services Agreement in the
form of Exhibit E, duly executed by Cyprus Amax.
SECTION 7.3 SIMULTANEOUS CLOSING
--------------------
All actions taken at the Closing are to be part of a simultaneous
transaction, and no action is to be considered completed until all actions
necessary to be completed at the Closing have been completed.
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ARTICLE VIII
POST-CLOSING AGREEMENTS AND OTHER MATTERS
SECTION 8.1 POST-CLOSING AGREEMENTS
-----------------------
From and after the Closing, the parties shall have the respective
rights and obligations which are set forth in the remainder of this Article, as
well as elsewhere in this Agreement.
SECTION 8.2 INSPECTION OF RECORDS
---------------------
The Company shall maintain and make its books and records, to the
extent they relate to the period prior to Closing, or as otherwise required by
this Agreement or a Related Agreement, available for inspection by Cyprus Amax,
or by its duly authorized representatives, for reasonable business purposes at
all reasonable times during normal business hours, for a period equal to any
statutorily determined record retention period or as otherwise reasonably
requested by Cyprus Amax (but in no event less than eight (8) years after the
Closing) with respect to all matters related to the period prior to the Closing.
As used in this Section, the right of inspection includes the right to make
extracts or copies at the expense of the party requesting such extracts or
copies.
SECTION 8.3 MUTUAL ASSISTANCE
-----------------
The parties shall cooperate with each other, and make available the
reasonable assistance of their employees to each other at no charge, with
respect to the defense or prosecution of any claims or litigation made or
commenced by or against third parties subsequent to the Closing, including,
without limitation, insurance and other cost recovery claims, rights, causes of
action and choses in action.
SECTION 8.4 FURTHER ASSURANCES
------------------
The parties shall execute such further documents, and perform such
further acts, as may be reasonably necessary to effect the transactions
contemplated hereby, on the terms herein contained and otherwise to comply with
the terms of this Agreement. The parties shall not intentionally take any
action inconsistent with their obligations hereunder or which could hinder or
delay the consummation of the transactions contemplated hereby.
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<PAGE>
SECTION 8.5 TRANSFER OF NON-LITHIUM ASSETS
------------------------------
In the event that the Chilean Restructuring is not completed prior
to the Closing, Buyer shall, at Cyprus Amax's request, cause the Company and the
Chilean Partnership thereafter to complete such transfer, and Buyer and the
Company shall take all actions reasonably requested by Cyprus Amax in connection
therewith.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 SURVIVAL FOR REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS
---------------------------------------------------------------
AND INDEMNIFICATIONS
- --------------------
The representations and warranties contained in this Agreement shall
survive the Closing and be enforceable for a period of eighteen (18) months
(provided, however, that the representations and warranties contained in
- --------- -------
Sections 3.2.7, 3.2.8 and 3.2.20 shall survive the Closing for a period of seven
(7) years, the representation and warranty contained in Section 3.22(b) shall
survive the Closing until December 31, 2001 and the representations and
warranties contained in Sections 3.1.2, 3.1.3, 3.2.2 and 3.2.3 shall survive the
Closing without limitation as to time). Upon expiration of the applicable
survival period, the representations and warranties (other than those which
survive without limitation as to time) shall thereafter be of no force or
effect, except as they relate to claims for which written notice, specifying
with particularity the facts underlying the claim, has been provided prior to
the expiration of the applicable survival period of the representation or
warranty. All covenants and agreements contained in this Agreement shall
survive the Closing in accordance with their terms.
SECTION 9.2 INDEMNIFICATION BY CYPRUS AMAX AND SPECIALTY OF NON-LITHIUM MATTERS
-------------------------------------------------------------------
AND CERTAIN OTHER LOSSES
- ------------------------
Subject to the remaining provisions of Article IX, Cyprus Amax and
Specialty, jointly and severally, agree to indemnify Buyer and, after the
Closing, the Company and their respective Affiliates, against and hold them
harmless from any and all actual out-of-pocket damages, liabilities, losses,
claims, suits, causes of action, judgments, penalties, costs and expenses
(including reasonable attorneys' fees and expenses in connection with any third
party proceeding relating thereto to the extent hereafter provided)
(collectively, "Losses") paid or suffered by Buyer, or after the Closing, the
Company to the extent arising from any claims, demands, suits, causes of action,
proceedings or judgments arising from (i) the breach or inaccuracy of any
representations or warranties or any failure to comply, in whole or in part,
with the covenants or agreements made by Cyprus Amax or Specialty in this
Agreement
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(including the Schedules hereto) or any certificates delivered to
Cyprus Amax or Specialty in connection herewith, or (ii) the Non-Lithium Matters
(other than as to Environmental Matters including Uranium Dust and Asbestos
Litigation which are dealt with in Article V) without limitation, in the case of
(ii), as to dollar amount or time.
SECTION 9.3 INDEMNIFICATION BY BUYER AND THE COMPANY
----------------------------------------
Subject to the remaining provisions of Article IX, Buyer and the
Company, jointly and severally, agree to indemnify each of Cyprus Amax and
Specialty and their respective Affiliates against and hold them harmless from
any and all Losses to the extent arising from the breach or inaccuracy of any
representations or warranties of Buyer or any failure to comply, in whole or in
part with the covenants or agreements made by Buyer or, upon Closing, the
Company (as to matters to be performed after the Closing) in this Agreement
(including the Schedules hereto) or any certificate delivered by either of them
in connection herewith.
SECTION 9.4 PROCEDURE FOR THIRD PARTY CLAIMS
--------------------------------
An indemnified person shall give prompt written notice, specifying
with particularity the facts underlying the matter, to the indemnifying person
of any claim, suit, action, proceeding or demand of which such indemnified
person has received notice from a third party (that is, a party other than a
party to this Agreement) and as to which such indemnified person has reason to
believe that it may be entitled to indemnification under this Agreement
(provided, however, that any failure to give such notice shall not relieve the
- --------- -------
indemnifying person from liability hereunder to the extent such party is not
prejudiced thereby). The indemnifying person shall have the right to
participate in or assume and direct the defense and resolution at its own
expense against any such matter, in its name or in the name of the indemnified
person, as the case may be, and with counsel selected by the indemnifying
person; provided, however, that if an order, injunction or other equitable
-------- -------
relief against the indemnified person is being sought (collectively, "Equitable
Relief"), then the indemnified person may employ separate counsel at the
indemnifying person's expense and participate in and direct the defense of such
matter to the extent necessary to protect its interest with respect to Equitable
Relief. Except as provided in the preceding sentence with respect to Equitable
Relief, after notice from the indemnifying person of its election to assume the
defense thereof, the indemnifying person shall not be liable to the indemnified
person for any legal or other expense incurred by the indemnified person in
connection with such claim. The indemnified person shall have the right to
participate in the defense of any matter so assumed, with separate counsel
selected by it and at its own expense. The indemnified person shall cooperate
with the indemnifying person, and keep the indemnifying person reasonably
informed, in the participation or defense of any such matter. The indemnifying
person will not settle or compromise any such pending matter, without the prior
written consent of the indemnified person, which consent shall not be
unreasonably withheld. If the
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indemnifying person does not elect to assume and direct the defense of such
matter, the indemnified person shall defend such matter in a competent and
diligent manner and may settle or compromise such pending matter, upon receiving
the prior written consent of the indemnifying party, which consent shall not be
unreasonably withheld.
SECTION 9.5 PROCEDURE FOR DIRECT CLAIMS
---------------------------
An indemnified person shall give prompt written notice, to an
indemnifying person of any claim it may have for indemnification under this
Article IX, specifying with particularity the facts underlying the claim;
provided, however, that any failure to give such notice, shall not relieve the
- -------- -------
indemnifying person from liability thereunder to the extent such party is not
prejudiced thereby, provided that such notice is given within any applicable
survival period.
SECTION 9.6 GENERAL PROVISIONS RELATING TO REMEDIES AND INDEMNIFICATION
-----------------------------------------------------------
9.6.1 (a) Neither Cyprus Amax nor Specialty shall be required to
make any payments pursuant to Articles V or IX (these being the only Articles in
addition to Article II, pursuant to which payment may be required hereunder)
relating to breach of a representation or warranty unless and until the
aggregate amount of all Losses for breach of representations and warranties
shall exceed $4 million, as to which Cyprus Amax and Specialty shall thereafter
be responsible only for the excess of the aggregate of such Losses over $4
million (the "Deductible"). The Deductible, however, shall not be applicable to
breaches of Sections 3.2.7, 3.2.8 or 3.2.22(b).
(b) The maximum aggregate amount recoverable hereunder from Cyprus
Amax or Specialty for breaches of all representations or warranties shall be
$100 million, provided that (i) as to a breach or breaches of Sections 3.2.7,
3.2.8 and 3.2.20 (the "Primary Sections"), such aggregate limit shall be (x) the
Purchase Price, less (y) all other indemnified Losses from breaches of all other
representations and warranties other than the Primary Sections; and provided
further that (ii) as to a breach or breaches of Section 3.2.22(b), the aggregate
limit shall be (x) $183 million, less (y) all indemnified Losses from breaches
of representations and warranties under all Sections other than Section
3.2.22(b).
9.6.2 No party shall have any obligation to indemnify a party for
any Losses to the extent they represent the cost of repairs, replacements or
improvements which enhance the value of the repaired, replaced or improved asset
above its value on the Closing Date.
9.6.3 No party shall bring a claim or be entitled to
indemnification with respect to any acts, omissions or circumstances resulting
in a breach of any representation, warranty, covenant or agreement, which acts,
omissions or circumstances it had actual knowledge of on or before the Closing
Date. Except as
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provided in Section 6.1.1, the foregoing provisions shall not limit any
claims or entitlement of Buyer for indemnification with respect to any such
acts, omissions or circumstances of which Cyprus Amax had Knowledge of on or
before the date hereof.
9.6.4 An indemnifying Person shall have no obligation to indemnify an
indemnified Person or otherwise have liability to an indemnified Person for
consequential damages, incidental damages or similar items except with respect
to Losses incurred by an indemnified Person pursuant to an award in favor of a
third party.
9.6.5 An indemnified Person shall take all reasonable steps to
mitigate all indemnifiable Losses upon and after becoming aware of any event
which could reasonably be expected to give rise to any Losses that are
indemnifiable hereunder.
9.6.6 (a) Each party's Losses shall be reduced by any realizable
federal and state income tax reductions or other benefits which are available in
connection with the Losses, after giving effect to any tax detriment to the
indemnified party arising from the receipt of the indemnification payment with
respect to such Losses.
9.6.7 If any Loss is covered by insurance or subject to other third
party recoveries (collectively, "Third Party Rights"), Buyer shall use
commercially reasonable efforts to recover or cause the Company to recover, the
amount of coverage or claim from the insurer or such third party, which recovery
(after deduction of costs of collection) shall reduce Losses hereunder. Buyer
agrees to assign or cause the Company to recover, all Third Party Rights to
Cyprus Amax and to appoint Cyprus Amax as its limited agent and attorney-in-fact
for seeking such recovery to the extent Buyer fails to recover, does not timely
proceed with recovery actions, or obtains excess recovery with respect thereto,
and to cooperate with Cyprus Amax in the collection thereof. Such appointment
as limited agent and attorney-in-fact is coupled with an interest and is
irrevocable. To the extent that Cyprus Amax or Specialty on the one hand, or
Buyer or the Company on the other hand, discharges any claim for indemnification
hereunder, it shall be subrogated to all related rights of the other party
against third parties.
SECTION 9.7 EXCLUSIVE NATURE
----------------
9.7.1 The indemnification provisions of Articles V and IX and the
applicable provisions of the Tax Sharing and Indemnification Agreement shall be
the exclusive remedy against Cyprus Amax, Specialty, Buyer and its Affiliates
and their officers, directors, employees, shareholders, partners, Affiliates,
agents or representatives, following the Closing for any breaches or alleged
breaches of any representation, warranty or other provision of this Agreement or
the transactions contemplated hereby except for non-monetary remedies being
sought with respect to the breach of the non-competition provisions of Section
4.2.5 or any other agreement
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or covenant contained herein which requires performance on or after Closing and
except for matters arising from the fraud of Cyprus Amax or Specialty. No party
shall have any right to setoff any claims hereunder against any payments to be
made by such party to another party pursuant to this Agreement or otherwise.
9.7.2 Each of the parties hereto, on behalf of itself and its
officers, directors, employees, shareholders, partners, Affiliates, agents or
representatives (collectively, such party's "Representatives") agrees not to
bring any actions or proceedings, at law, in equity, in tort or otherwise,
against any other party or its Representatives, in respect of any breaches or
alleged breaches of any representation, warranty or other provision of this
Agreement, except pursuant to and subject to the express provisions of Articles
V and IX, including, without limitation, Section 9.7.1.
ARTICLE X
TERMINATION
SECTION 10.1 TERMINATION
-----------
This Agreement may be terminated prior to the Closing as follows:
10.1.1 Mutual Consent. Upon the mutual written consent of the
--------------
parties;
10.1.2 Litigation. By Cyprus Amax or Buyer if a final non-
----------
appealable injunction or other order shall have been issued by a Governmental
Authority, which restrains or otherwise makes unlawful the consummation of the
transactions contemplated by this Agreement or by Buyer if a final non-
appealable order shall have been issued by a Government Authority which
prohibits or limits materially the ownership or operation by Buyer of all or any
material portion of the business or assets of the Company;
10.1.3 Conditions to Buyer's Obligations not Met. By Buyer if
-----------------------------------------
any of the conditions provided in Section 6.1 shall not have been satisfied,
complied with or performed, in any material respect, on or before December 31,
1998, or if the Cyprus Amax's Bring Down Certificate reflects such a failure at
the time of delivery, and Buyer has not waived, in writing, such failure of
satisfaction, noncompliance or nonperformance; or
10.1.4 Conditions to Cyprus Amax's, Specialty's and the Company's
----------------------------------------------------------
Obligations not Met. By Cyprus Amax, Specialty and the Company if any of the
- -------------------
conditions provided in Section 6.2 shall not have been satisfied, complied with
or performed, in any material respect, on or before December 31, 1998, or if the
Buyer's Bring Down Certificate reflects such a failure at the time of delivery,
and Cyprus
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Amax, Specialty and the Company have not waived, in writing, such failure of
satisfaction, noncompliance or nonperformance.
SECTION 10.2 EFFECT OF TERMINATION
---------------------
In the event of termination of this Agreement, this Agreement and the
proposed transactions contemplated hereunder shall terminate and, except as
provided in the following sentence, each party hereto shall have no further
obligation or liability hereunder. Except as provided in Section 6.1.1, nothing
in this Section 10.2 shall relieve any party from any liability for any breach
of this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 COMPANY NAME
------------
As soon as practicable after the Closing, but in no event later than
sixty (60) days after the Closing, Buyer shall remove or cause to be removed the
names, marks and identifications heretofore used by Cyprus Amax and the Company
and all variations and derivatives thereof and logos (including the logo of "C"
with two lions) relating thereto from the properties of the Company to the
extent they include the word "Cyprus, AMAX or Cyprus AMAX."; provided, however
that the Company shall have the right to use the phrase "Formerly Cyprus Foote
Mineral Company" or any substantially similar phrase for a period of one (1)
year from the Closing.
SECTION 11.2 ENTIRE AGREEMENT
----------------
This Agreement and the Related Agreements constitute the entire
agreement between the parties and supersedes any and all other prior or
contemporaneous understandings, negotiations or agreements between the parties
relating to the transactions contemplated hereby, and shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives.
SECTION 11.3 AMENDMENTS
----------
Any amendment, supplement, variation, alteration or modification to
this Agreement must be made in writing and duly executed by an authorized
representative or agent of each of the parties hereto.
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SECTION 11.4 SEVERABILITY
------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any other
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, each party
hereby waives any law which renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 11.5 COUNTERPARTS
------------
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, and all such counterparts shall be deemed to
constitute one and the same instrument.
SECTION 11.6 NO WAIVER
---------
The failure in any one or more instances of a party to insist upon
performance of any of the terms, covenants or conditions of this Agreement, to
exercise any right or privilege in this Agreement conferred, or to waive any
breach of any of the terms, covenants or conditions of this Agreement, shall not
be construed as a subsequent waiver of any such terms, covenants, conditions,
rights or privileges, but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized representative of
the waiving party.
SECTION 11.7 ASSIGNMENT
----------
This Agreement and all the rights and obligations granted hereby shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns, it being expressly agreed that this Agreement shall not
be assigned nor shall any rights or obligations arising hereunder be transferred
by one party without the prior written consent of the other party, provided that
Buyer may assign its rights hereunder to any Affiliate of Buyer, provided that
Buyer, in an agreement reasonably satisfactory to Cyprus Amax, agrees to remain
fully responsible with respect to the liabilities and obligations of Buyer
hereunder.
SECTION 11.8 FEES, COSTS AND EXPENSES
------------------------
Except as otherwise provided herein, each party shall be responsible
for its own fees, costs and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
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<PAGE>
SECTION 11.9 THIRD PARTY BENEFICIARIES
-------------------------
Nothing in this Agreement is intended to create, nor shall anything in
the Agreement be deemed to create or have created, any third party beneficiary
rights.
SECTION 11.10 CONSTRUCTION
------------
In this Agreement, (a) references to this Agreement shall include all
attachments hereto, and (b) words importing the singular shall include the
plural and vice versa, and words importing a gender shall include other genders.
Regardless of whether or not expressly stated in each circumstance, Buyer and
the Company, jointly and severally, agree that upon Closing, each shall be fully
liable and responsible for any and all liabilities and obligations of any nature
of the other, arising under this Agreement, including under the Related
Agreements.
SECTION 11.11 TABLE OF CONTENTS AND HEADINGS
------------------------------
The table of contents and descriptive section headings contained in
this Agreement are for convenience of reference only and shall not control or
effect the meaning or construction of any provision of this Agreement.
SECTION 11.12 NOTICES
-------
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered, or two (2)
business day after sending via Federal Express or similar overnight courier
service, or when receipt is confirmed when sent by facsimile. Such notices or
other communications shall be sent to the following addresses, unless other
addresses are subsequently specified in writing:
Buyer (and the Company after the Closing):
-----------------------------------------
Foote Acquisition Corporation
c/o Dynamit Nobel Holdings, Inc.
520 Madison Avenue, 28th Floor
New York, New York 10020
Attention: Arthur Taylor
Tel. No.: (212) 715-5215
Fax No.: (212) 826-9042
-54-
<PAGE>
With a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, 16th Floor
Los Angeles, California 90067
Attention: Barry L. Dastin
Fax No.: (310) 788-1200
Tel. No.: (310) 788-1000
Cyprus Amax, Specialty (and the Company prior to the Closing):
-------------------------------------------------------------
c/o Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Attention: Philip Wolf, Senior Vice President
and General Counsel
Fax No.: (303) 643-5269
Tel. No.: (303) 643-5084
With a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
Attention: Grant A. Bagan
Fax No.: (312) 984-3669
Tel. No.: (312) 984-7567
SECTION 11.13 GOVERNING LAW; JURISDICTION
---------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONTROLLED AS TO ITS VALIDITY,
ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE THEREOF) APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED IN THAT STATE. ALL DISPUTES, LEGAL ACTIONS, SUITS AND PROCEEDINGS
WHICH, IN WHOLE OR IN PART, ARISE OUT OF OR RELATE TO THIS AGREEMENT SHALL BE
BROUGHT IN A STATE OR FEDERAL DISTRICT COURT LOCATED IN NEW YORK, NEW YORK.
EACH PARTY HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL DISTRICT COURTS IN NEW YORK, NEW YORK. EACH PARTY HEREBY IRREVOCABLY
WAIVES ALL CLAIMS OR DEFENSES OF LACK OF JURISDICTION OR OF IMMUNITY FROM
JURISDICTION, AND ANY RIGHT TO OBJECT ON THE BASIS THAT ANY DISPUTE, ACTION,
SUIT OR PROCEEDING
BROUGHT IN THE STATE OR FEDERAL DISTRICT COURT OF NEW YORK, NEW YORK
-55-
<PAGE>
HAS BEEN BROUGHT IN AN IMPROPER OR INCONVENIENT VENUE OR FORUM. THIS PROVISION
ON CHOICE OF LAW AND JURISDICTION SHALL NEITHER GOVERN NOR AFFECT CHOICE OF LAW
OR JURISDICTION PERTINENT TO CLAIMS AGAINST PERSONS NOT A PARTY TO THIS
AGREEMENT.
* * *
-56-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Attest: CYPRUS AMAX MINERALS COMPANY
/s/ D.E. Huffman By: /s/ John Taraba
- ---------------------- --------------------------
Name: J. Taraba
Title: V.P.
Attest: CYPRUS FOOTE MINERAL COMPANY
/s/ D.E. Huffman By: /s/ P.C. Wolf
- ---------------------- --------------------------
Name: P.C. Wolf
Title: Sr. V.P.
Attest: CYPRUS SPECIALTY METALS COMPANY
/s/ D.E. Huffman By: /s/ P.C. Wolf
- ---------------------- --------------------------
Name: P.C. Wolf
Title: Sr. V.P.
Attest: FOOTE ACQUISITION CORPORATION
/s/ Arthur G. Taylor By: /s/ M. Latsch
- ---------------------- --------------------------
Name:
Title:
-57-
<PAGE>
ANNEX A-1
Corey Bromley
Chris L. Crowl
Les Darling
David Flemming
Mike Kegley
Brian Miller
John Taraba
Philip Wolf
Ron France
P.J. Seaman
E. Arteaga
Mark Cook
James Sanderson
S. Watson
Bradley Hamilton
<PAGE>
ANNEX A-2
Chemetall Knowledge List
(1) Jurgen Deberitz, Ph.D.
(2) Jurgen Faesel, Ph.D.
(3) Helmut Fuhrmann
(4) Helmut Ley
(5) Phil Kelly
(6) Michael Latsch
(7) Clemens Rollman
(8) Thomas McKeever
<PAGE>
ANNEX B
A. Working Capital Computation: Current Assets and Current Liabilities
to be Reflected; Computation as of December 31, 1997.
(in thousands of dollars)
Accounts Receivable $11,517
Inventory 30,748
Prepaid Expenses 577
-------
Total Current Assets $42,842
Accounts Payable $ 3,600
Accrued Liabilities 3,431
Taxes Payable 10
-------
Total Current Liabilities $ 7,041
Working Capital $35,801
=======
B. Book Value Computation
(in thousands of dollars)
Total Assets $151,107
Total Liabilities 14,525
--------
Book Value 136,582
========
C. Principles to be Applied.
All positive and negative cash balances to be excluded;
All intercompany accounts to be excluded;
No accruals, reserves or similar amounts shall be reflected for contingent
liabilities, Environmental Matters (including, without limitation, reclamation);
<PAGE>
No liabilities for Taxes (as defined in the Tax Sharing and Indemnification
Agreement), other than property taxes, employment taxes, payroll taxes and
employee wage withholding taxes;
No amortization, depletion or depreciation shall be reflected for periods
after December 31, 1997; and
All accounts shall be valued based upon consistent application of past
practices as reflected in the 1997 Balance Sheet, except as noted on the
Financial Statements or this Annex B.
<PAGE>
EXHIBIT 2.(b)
SUPPLEMENTAL AGREEMENT
----------------------
This SUPPLEMENTAL AGREEMENT entered into this 13 day of October, 1998 by
and among the parties listed on the signature page hereto (the "Parties").
WHEREAS, the Parties have entered into a Stock Purchase and Sale Agreement
as of April 25, 1998 (the "Stock Purchase Agreement") and a Tax Sharing
Agreement and Indemnification Agreement as of October 13, 1998 (the "Tax
Sharing and Indemnification Agreement"); and
WHEREAS, the Parties wish to amend certain provisions thereof;
NOW, THEREFORE, the Parties hereby agree as follows:
1. (A) THE FOLLOWING DEFINITIONS CONTAINED IN SECTION 1.1 OF THE STOCK
PURCHASE AGREEMENT SHALL BE AMENDED AND RESTATED AS FOLLOWS:
"Book Value" shall mean the assets less the liabilities of the Company
as of the Financial Closing Date, computed in a manner consistent with the 1997
Balance Sheet and the principles on Annex B (which principles shall take
precedence over any other principles employed in the 1997 Balance Sheet).
"Chilean Partnership" means Sociedad Chilena de Litio Limitada, a
limited liability partnership organized under the laws of Chile and, unless the
context otherwise requires, shall also include Minera Cyprus Amax Chile Limitada
(until its disposition by the Company pursuant to the Chilean Restructuring) and
Foote Minera Inversiones Ltda., and Foote Chile Holding Company, upon their
direct or indirect ownership by the Company pursuant to the Chilean
Restructuring.
"Working Capital Value" shall mean the sum of certain current assets
less the sum of certain current liabilities of the Company as of the Financial
Closing Date, computed in a manner consistent with the 1997 Balance Sheet and
the principles contained on Annex B (which principles shall take precedence over
any other principles employed in the 1997 Balance Sheet).
(B) THE FOLLOWING DEFINITION SHALL BE ADDED TO SECTION 1.1 OF THE STOCK
PURCHASE AGREEMENT:
"Financial Closing Date" shall mean as of 12:01 a.m. Eastern Standard
Time on October 1, 1998.
2. SECTION 2.1 OF THE STOCK PURCHASE AGREEMENT SHALL BE AMENDED:
to delete the phrase "by wire transfer" and to insert in its place the
phrase "by intrabank transfer".
-1-
<PAGE>
3. SECTIONS 2.2.1 AND 2.2.3 OF THE STOCK PURCHASE AGREEMENT SHALL BE AMENDED
AND RESTATED AS FOLLOWS:
2.2.1 Within sixty (60) days following the Financial Closing Date,
Cyprus Amax shall prepare and deliver to Buyer, a consolidated balance sheet of
the Company as of the Financial Closing Date (the "Closing Balance Sheet")
prepared in a manner consistent with the 1997 Balance Sheet (but subject to the
principles set forth on Annex B), together with a computation of the Working
Capital Value as of the Financial Closing Date (the "Working Capital Value
Computation") and Book Value as of the Financial Closing Date (the "Book Value
Computation"). The Closing Balance Sheet shall be accompanied by the Report of
Price Waterhouse LLP (at the cost of Cyprus Amax), stating that the accounting
principles reflected in the Closing Balance Sheet conform, in all material
respects, to the requirements of this Section. Buyer and the Company shall
provide Cyprus Amax's representatives reasonable access to the books and records
of the Company and shall cause the Company's employees to provide reasonable
assistance to Cyprus Amax, both in connection with the preparation of the
Closing Balance Sheet, as well as any dispute with respect thereto. Cyprus Amax
shall cause Price Waterhouse LLP to coordinate with Buyer's accountants, if
requested by Buyer, in connection therewith.
2.2.3 (a) In the event that the actual Working Capital Value as so
determined is greater or less than $31,984,000 then:
(i) if greater (such amount being the "Working Capital
Excess"), Buyer shall pay to Specialty the amount of such
excess, and
(ii) if less (such amount being the "Working Capital
Deficiency"), Cyprus Amax shall cause Specialty to pay to
Buyer the amount of such deficiency.
(b) In the event that the Book Value as so determined is less
than: (i) $132,765,000 less (ii) the amount of any Working Capital Deficiency,
or plus (iii) the amount of any Working Capital Excess,
then Specialty shall pay to Buyer and Cyprus Amax shall cause Specialty to pay
to Buyer the amount of such deficiency. Buyer may offset any amount payable by
Specialty under (b) against any amount payable by Buyer under (a)(i).
(c) Such payments shall be made by check or wire transfer
within forty-five (45) days after delivery by Cyprus Amax to Buyer of the
Closing Balance Sheet, or five (5) business days after the resolution of any
objection pursuant to Section 2.2.2, whichever is later, with such payment
accompanied by interest at seven percent (7%) per annum from the Financial
Closing Date.
-2-
<PAGE>
4. SECTION 4.2 OF THE STOCK PURCHASE AGREEMENT SHALL BE AMENDED AND RESTATED
AS FOLLOWS:
4.2.4 Intercompany Accounts; Cash Accounts.
------------------------------------
(a) All intercompany accounts, including any intercompany
promissory notes, providing for the payment of any amounts between the Company
(including the Chilean Partnership) on the one hand, and Cyprus Amax and its
Affiliates (other than the Company and the Chilean Partnership) on the other
hand, shall be settled via dividend to the extent of retained earnings and then
a return of capital if the amount is a receivable on the Company books as of the
Financial Closing Date, or as an increase of paid-in capital if the amount is a
payable on the Company books as of the Financial Closing Date, with no cash or
other payments being made. Notwithstanding the foregoing sentence, intercompany
transactions resulting from the Chilean Restructuring shall be settled without
cash based on intercompany balances through the Closing Date, in lieu of the
Financial Closing Date. Nothing in this Section 4.2.4(a) shall limit the
provisions of Section 2.2 hereof.
(b) Except as otherwise contemplated by this Agreement, all
agreements between the Company (including the Chilean Partnership) on one hand,
and Cyprus Amax and its Affiliates (other than the Company or the Chilean
Partnership) on the other hand, each of which are set forth on Schedule
4.2.4(b), shall be terminated and of no further force and effect, as of the
Closing Date.
(c) At or before the Closing, all cash and cash equivalents of
the Company (including the Chilean Partnership) as of the Financial Closing Date
will be transferred to Cyprus Amax or its Affiliates for no consideration (the
"Financial Cash Transfer"); provided, however, that approximately $207,500 of
cash and cash equivalents of the Company (including the Chilean Partnership)
(the "Retained Cash") will not be transferred to Cyprus Amax or its Affiliates
to enable the Company to maintain certain cash balances during the ownership
transition. An amount equal to the Retained Cash shall be paid by the Buyer or
the Company to Specialty no more than thirty (30) days following the Closing
Date, with such payment accompanied by interest at seven percent (7%) per annum
from the Closing Date. Nothing in this Section 4.2.4(c) shall limit the
provisions of Section 2.2 hereof. For purposes of clarity, the Financial Cash
Transfer shall reflect earnings through the Financial Closing Date and shall not
reflect earnings from the Financial Closing Date through the Closing Date which
shall accrue to the benefit of Buyer (although cash generated during this period
may be used to fund such transfer but not in the aggregate in excess of the
amount as of the Financial Closing Date).
5. SECTION 6.1.5 AND SCHEDULE 3.2.13 OF THE STOCK PURCHASE AGREEMENT SHALL
REFLECT THE FOLLOWING CHANGE:
Pursuant to Section 6.1.5, Cyprus Amax is hereby providing notice to Buyer
that it is deleting from Schedule 3.2.13 the asterisk and the exception that the
possible consent of the Chilean Central Bank may be required with respect to
change of control of the Company under the Sales Agency Agreement.
-3-
<PAGE>
Except as expressly provided herein, the Stock Purchase Agreement shall remain
in effect in accordance with its terms.
6. SCHEDULE 3.2.16 OF THE STOCK PURCHASE AGREEMENT SHALL BE AMENDED AND
RESTATED AS FOLLOWS:
By deleting the Chilean Restructuring Schedule attached to the Stock
Purchase Agreement and replacing it with Annex A.
7. SECTION 9.2 OF THE STOCK PURCHASE AGREEMENT SHALL BE AMENDED AS FOLLOWS:
By deleting the phrase which reads "or any certificates delivered to Cyprus
Amax" with the phrase "or any certificates delivered by Cyprus Amax"
8. SECTION 19(D) OF THE TAX SHARING AGREEMENT SHALL BE AMENDED TO INSERT THE
FOLLOWING SENTENCE:
Seller and Buyer agree that the purchase price allocated to the Chilean
Partnership shall not exceed $100,000,000.
9. SECTION 3.2.26 SHALL BE ADDED TO THE STOCK PURCHASE AGREEMENT AS FOLLOWS:
a. Attached hereto as Annex B is a list of all material documents
in connection with the Chilean Restructuring.
b. Neither Foote Minera e Inversiones Limitada ("FMI") nor Foote
Chile Holding Company ("Foote Chile") has conducted any operations other
than the receipt and ownership of certain interests as provided on Annex A
in connection with the Chilean Restructuring and neither has assumed any
liabilities or obligations other than through the ownership of such
interests.
c. Foote owns 100% of the equity interests of Foote Chile and FMI
owns 45% of the equity interests of Sociedad Chilena de Litio Ltda ("SCL");
d. Foote Chile and the Company, in the aggregate, own all of the
equity interests of FMI; and
e. There are no intercompany obligations arising between the
Financial Closing Date and the Closing Date, from the Company (including
the Chilean Partnership) on the one hand, to Cyprus Amax and its affiliates
(other than the Company and the Chilean Partnership) on the other hand,
other than (i) reimbursement for transition and administrative services and
other ordinary course charges consistent with past practice (excluding any
allocation of indirect selling,
-4-
<PAGE>
general or administrative costs), and (ii) in connection with the Chilean
Restructuring, which have been satisfied at or prior to Closing.
IN WITNESS WHEREOF, the parties have executed this Supplemental
Agreement as of the date first above written.
Attest: CYPRUS AMAX MINERALS COMPANY
/s/ D.E. Huffman By: /s/ P.C. Wolf
- ------------------------- --------------------------------
Name: P.C. Wolf
Title: Sr. V.P.
Attest: CYPRUS FOOTE MINERAL COMPANY
/s/ D.E. Huffman By: /s/ P.C. Wolf
- ------------------------- --------------------------------
Name: P.C. Wolf
Title: Sr. V.P.
Attest: CYPRUS SPECIALTY METALS COMPANY
/s/ D.E. Huffman By: /s/ P.C. Wolf
- ------------------------- --------------------------------
Name: P.C. Wolf
Title: Sr. V.P.
Attest: FOOTE ACQUISITION CORPORATION
/s/ Arthur G. Taylor By: /s/ M. Latsch
- ------------------------- --------------------------------
Name: Michael Latsch
Title: Vice President
-5-
<PAGE>
ANNEX A
The Chilean Restructuring was modified as follows:
STEP 1 FORMATION OF CHILEAN NEWCO NON-LITHIUM
--------------------------------------
Pursuant to a deed of division and related documents, the non-lithium
assets and liabilities of Sociedad Chilena de Litio Limitada (Chile)
("SCL") will be transferred to SCL Exploraciones Limitada, a Chilean
limitada owned by SCL's partners, (55%) Cyprus Foote Mineral Company
(Pennsylvania) ("Company") and (45%) Minera Cyprus Amax Limitada
(Chile) ("MCA"), respectively.
STEP 2 FORMATION OF FOOTE MINERA E INVERSIONES LIMITADA
------------------------------------------------
Pursuant to a deed of division and related documents, the lithium
assets and liabilities of MCA will be transferred to Foote Minera e
Inversiones Limitada owned equally by MCA's partners, (50%) Company
and (50%) Cyprus Specialty Metals Company (Delaware) ("Specialty").
STEP 3 TRANSFER BY COMPANY OF (55%) SCL EXPLORACIONES LIMITADA TO MCA
---------------------------------------------------------------
The Company will transfer its interest in SCL Exploraciones Limitada
to MCA in return for additional capital in MCA. The Company's entire
interest in the non-lithium assets and liabilities which were owned by
SCL will now be owned by MCA. As a result of this transfer, SCL
Exploraciones Limitada will be absorbed into MCA.
STEP 4 TRANSFER BY THE COMPANY OF ITS NON-LITHIUM INTEREST IN MCA
-----------------------------------------------------------
The Company will transfer its interest in MCA and its interest in
Minera Cyprus Chile Limitada to Cyprus Amax Chile Holdings, Inc.
(Delaware) owned by a Cyprus Amax affiliate. After this step, the
Company will no longer own non-lithium assets.
STEP 5 TRANSFER BY SPECIALTY OF ITS INDIRECT OWNERSHIP IN LITHIUM ASSETS TO
--------------------------------------------------------------------
THE COMPANY
-----------
The remaining interest in SCL (45%) owned indirectly by Specialty will
be transferred to the Company by Specialty through the transfer of
Specialty's 50% interest in Foote Minera e Inversiones Limitada to
Foote Chile Holding Company. Foote Chile Holding Company will then
be transferred
-6-
<PAGE>
to the Company. After this step, all lithium assets will be owned
indirectly by the Company.
-7-
<PAGE>
ANNEX B
Cyprus Amax Minerals Company
1998 Lithium Restructuring
Document List
1. May 29, 1998 deed dividing SCL and creating SCL Exploraciones Limitada
2. June 30, 1998 deed dividing Minera Cyprus Amax Chile Limitada ("MCAC") and
creating Foote Minera e Inversiones Limitada ("(Inversiones")
3. July 16, 1998 Articles of Incorporation Foote Chile Holding Company
4. September 30, 1998 Cyprus Amax officer's certificate funding Foote Chile
Holding Company and Cyprus Amax Chile Holdings, Inc.
5. October 2, 1998 deed of sale Cyprus Foote Mineral Company ("Foote") sale
of 50% equity interest in MCAC to Cyprus Amax Chile Holdings, Inc.
6. October 2, 1998 deed of sale Foote sale of 92% equity interest in Minera
Cyprus Chile Limitada to Cyprus Amax Chile Holdings, Inc.)
7. October 2, 1998 deed of sale Cyprus Specialty Metals Company ("Specialty
Metals") sale of a 50% interest in Inversiones to Foote Chile Holding
Company
8. October 2, 1998 deed of sale Foote, Specialty Metals and Guanaco Mining
Company, Inc. sale of equity interests in Compania Minera Amax Guanaco to
Guanaco Holdings, Inc.
9. October 1, 1998 deed of correction: a) July 5, 1998 division of MCAC, b)
the by-laws of Inversiones, c) the increase of capital in MCAC, and d) the
dissolution of SCL Exploraciones Limitada
10. October 9, 1998 Foreign Investment Committee Resolution 144
11. October 7, 1998 officer's certificate of Cyprus Amax, and resolutions of
Cyprus Metals Company, Specialty Metals, and Foote contributing 100% of the
shares of Foote Chile Holding Company to the capital of Foote
12. October 12, 1998 Specialty Metals resolution contributing its accounts
receivable from Foote and its subsidiaries to Foote as a contribution to
capital surplus.
13. October 12, 1998 Foote resolution declaring a dividend of $31,350,000 of
accounts receivable from Cyprus Amax
14. August 31, 1998 Letter Agreement regarding transfer of Guanaco interests
15. October 5, 1998 Foote assignment of Harbor Maintenance Tax refund claim to
Specialty Metals
-8-
<PAGE>
EXHIBIT 2.(c)
TAX SHARING AND INDEMNIFICATION AGREEMENT
This Tax Sharing and Indemnification Agreement (this "Agreement"), is made
as of the 13th day of October, 1998 by and between Cyprus Amax Minerals Company,
a Delaware corporation ("Cyprus Amax"), Cyprus Specialty Metals Company, a
Delaware corporation ("Specialty") (Cyprus Amax and Specialty together referred
to herein as "Seller"), Cyprus Foote Mineral Company, a Pennsylvania corporation
("Company") and Foote Acquisition Corporation a Delaware corporation ("Buyer")
(Cyprus Amax, Specialty, Company and Buyer are sometimes individually referred
to herein as a "party" and sometimes collectively as "parties").
WHEREAS, Seller, Buyer, and the Company have entered into the Stock
Purchase and Sale Agreement, dated as of April 25, 1998 (the "Stock Purchase and
Sale Agreement"), for the sale by Specialty of all the outstanding capital stock
of the Company to Buyer, and
WHEREAS, Cyprus Amax desires to make certain representations, warranties
and covenants and agreements regarding tax matters as an inducement to Buyer,
and
WHEREAS, Seller, Buyer and the Company wish to set forth their agreement
with respect to certain Tax matters as set forth below.
NOW THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used in this Agreement and not
-----------
otherwise defined herein have the respective meanings given those terms in the
Stock Purchase and Sale Agreement. Capitalized terms defined both in this
Agreement and the Stock Purchase and Sale Agreement have the respective meanings
given those terms in this Agreement. For purposes of this Agreement, the
following terms, when capitalized, have the following meanings:
"Accountant" means Deloitte & Touche LLP, or such other
internationally recognized accounting firm as Buyer and Cyprus Amax may mutually
agree. In no event shall a firm serve as an Accountant if, at the time of its
election, it has a material relationship with any party.
"Tax Affiliate" or "Tax Affiliates" means, with respect to any Person,
any other Person who, directly or indirectly, controls, is controlled by, or is
under common control with, such Person (including the Chilean Partnership);
provided, however, that for the purposes of this Agreement, the Seller and the
- -------- -------
Company will
<PAGE>
not be Tax Affiliates with respect to any period in which the Seller and the
Company are not members of the same affiliated group (as such term is defined in
Section 1504(c) of the Code).
"Book Value Computation" shall have the meaning set forth in Section
2.2.1 of the Stock Purchase and Sale Agreement.
"Chilean Income Taxes" means any Income Taxes imposed by the
Government of Chile or any other governmental authority within Chile.
"Chilean Refunds" means individually and collectively the refunds of
the following not included on the Closing Balance Sheet: (1) Impuesto al Valor
Agregada ("IVA") Taxes paid by the Chilean Partnership and claimed as a refund
for the month of November, 1997; (2) the refund of an overpayment of Chilean
Income Taxes paid by the Chilean Partnership with respect to its tax year ending
December 31, 1997; (3) IVA Tax refunds available as of the Closing Date; (4)
Chilean customs duty Tax refunds available as of the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations and interpretations thereunder.
"Final Determination" means with respect to any Tax for any period the
later of (i) the date on which the statute of limitations for instituting a
claim for refund of such Tax has expired, or if such claim was filed, the
expiration of the time for instituting suit with respect thereto; and (ii) the
date on which all administrative and judicial proceedings with respect to any
such assessments or refunds of such Tax have been finally settled through
agreement of the parties to the proceeding or by an administrative or judicial
decision from which no appeal can be taken or the time for taking any such
appeal has expired.
"Financial Closing Date" shall mean as of 12:01 a.m. Eastern Standard
Time on October 1, 1998.
"Income Taxes" means any Tax based on or measured by or with respect
to gross or net income (including, without limitation, capital gains taxes,
minimum taxes, income taxes collected by withholding and Taxes on Tax
preferences items) or receipts (together with any interest, penalties or
additions imposed with respect thereto).
"Income Tax Return" means any Tax Return with respect to Income Taxes.
"Knowledge", "known", "belief", "believe" or variances thereof
(whether or not capitalized) mean, when applied to the Company (at or before
Closing) or Cyprus Amax, the actual knowledge of those Persons listed on Annex
-2-
<PAGE>
A-1 to the Stock Purchase and Sale Agreement and, when applied to the Company
(after Closing) or Buyer, the actual knowledge of those persons listed on Annex
A-2 to the Stock Purchase and Sale Agreement.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
association, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
"Seller Consolidated Return" means any consolidated, combined or
unitary Tax Return that includes Seller or its Tax Affiliates as the common
parent.
"Subsidiary" means any corporation, association, joint venture,
partnership or other business entity with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock (or equity
interests) or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors (or the equivalent).
"Working Capital Value" shall mean the sum of certain current assets
less the sum of certain current liabilities of the Company as of the Closing,
computed in a manner consistent with the 1997 Balance Sheet and the principles
contained on Annex B to the Stock Purchase and Sale Agreement (which principles
shall take precedence over any other principles employed in the 1997 Balance
Sheet.)
"Tax" or "Taxes" means any federal, state, local, foreign (including
all taxes imposed by the government of Chile or any other authority within
Chile), or other tax of any kind whatsoever (together with any interest,
penalties, or additions imposed with respect thereto), including, without
limitation, income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, service, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, branch profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, rental, lease, ad valorem, or other tax.
"Tax Returns" means all returns, declarations, reports, claims for
refunds, information returns, statements, and other forms required to be filed
with respect to any Taxes, including any schedule or attachment thereto, and
including any amendments or supplements thereof.
2. Taxes Allocated to Seller. Seller will be responsible for, will pay or
-------------------------
cause to be paid, and will indemnify and hold harmless the Company, Buyer, and
their Tax Affiliates from and against any and all of the following Taxes:
-3-
<PAGE>
i. all Taxes imposed on Seller, the Company or any of their
Tax Affiliates or Subsidiaries with respect to all taxable
periods of Seller, the Company or any of their Tax
Affiliates or Subsidiaries that end on or prior to the
Closing Date;
ii. all Taxes imposed on the Company arising out of the
inclusion of the Company in a Seller Consolidated Return;
iii. all Taxes imposed upon the Company, the Chilean
Partnership, Buyer or any of their Tax Affiliates or
Subsidiaries arising from the separation of the non-
lithium assets from the Company, the Chilean Partnership
or any of their Tax Affiliates whether occurring before,
on, or after the Closing Date (the "Separation
Transactions"), or arising from any transfers of interests
undertaken as part of the Separation Transactions in any
Chilean Partnership to the Company or any of its Tax
Affiliates or Subsidiaries;
iv. all Taxes allocated to Seller pursuant to Section 3
hereof; and
v. all Income Taxes and all other Taxes (including any
subsequent assessments and any interest or penalties)
imposed on the transfers consummated under the Stock
Purchase and Sale Agreement;
vi. all Taxes arising as a result of the Section 338(h)(10)
Election made pursuant to Section 19 hereof;
provided, however, that the Taxes set forth in clauses (i) through (vi) above
- -------- -------
will not include any Taxes arising as a result of actions taken by the Company,
or by Buyer or any of their Tax Affiliates with respect to the Company, on the
Closing Date but after the Closing that are not in the ordinary course of
business.
Any reference in this Agreement to the Company will be deemed to include a
reference to any Subsidiaries of the Company immediately prior to the Closing.
3. Straddle Periods.
----------------
(a) With respect to any taxable period of the Company or any of its Tax
Affiliates that would (absent an election) include, but not end until after, the
Closing Date (a "Straddle Period"), Buyer and Seller will, to the extent
permitted by applicable law, elect with the relevant Tax authority to close such
Straddle Period as of the close of the Closing Date. As a result of such
election, Taxes will be allocated to Seller and Buyer pursuant to the provisions
of Sections 2 and 4, respectfully; provided, however, that notwithstanding any
-------- -------
provision to the contrary
-4-
<PAGE>
contained in this Agreement, Seller will not be responsible for any Taxes to the
extent accrued as a liability of the Company or any of its Tax Affiliates in the
determination of the Working Capital Value and Book Value.
(b) Except as provided in Section 3(c), in any case where applicable law
does not permit the Company or any of its Tax Affiliates to close a Straddle
Period as of the close of the Closing Date, Seller will be allocated any Income
Taxes imposed on the Company or such Tax Affiliates for the portion of the
Straddle Period up to and including the Closing Date. For purposes of this
Section 3(b), Income Taxes for the portion of a Straddle Period up to and
including the Closing Date will be determined based upon an interim closing of
the books of the Company or such Tax Affiliates as of the Closing Date based
upon tax accounting practices and procedures used by the Company or such Tax
Affiliates in preparing its Tax Returns; provided, however, that such Income
-------- -------
Taxes will not include any Income Taxes arising as a result of actions taken by
the Company, or by Buyer or any of their Tax Affiliates with respect to the
Company, on the Closing Date but after the Closing that are not in the ordinary
course of business of the Company.
(c) With respect to any Straddle Period, Chilean Income Taxes initially
will be allocated to Seller based upon Seller's preparation of a pro forma Tax
Return for the portion of the Straddle Period up to and including the Financial
Closing Date (the "Chilean Pro forma Tax Return"). Within one hundred and
twenty (120) days following the Closing, Seller shall prepare and deliver to
Buyer, the Chilean Pro forma Tax Return prepared in a manner consistent with
past Tax accounting practices. Buyer shall provide Seller's representatives
reasonable access to the books and records of the Company and shall cause the
Company's employees to provide reasonable assistance to Seller, both in
connection with the preparation of the Chilean Pro forma Tax Return, as well as
any dispute with respect thereto. Buyer shall have the right within sixty (60)
days following the delivery of the Chilean Pro forma Tax Return to object in
writing to the allocation of Chilean Income Tax based thereon, specifying in
reasonable detail the basis for such objection(s). Buyer shall be deemed to
have agreed to file Chilean Income Tax Returns with all items and amounts
contained in the Chilean Pro forma Tax Return, except as specifically objected
to in such notice. If Buyer does so object, Seller and Buyer shall cooperate
with each other to attempt to reach a mutual agreement thereon, or, failing such
agreement within twenty (20) days, the determination shall be made by the
Accountant pursuant to the dispute resolution provisions contained in Section
16. Nothing contained in this Section 3(c) shall be deemed to limit the rights
of the Company, Buyer or their Tax Affiliates to obtain indemnification from
Seller with respect to Chilean Income Taxes, including, without limitation,
their right to indemnification under Section 2 hereof.
(d) As to any Tax other than an Income Tax (a "Non-Income Tax"), for any
Straddle Period, Seller will be allocated (i) for any Non-Income Tax that is
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<PAGE>
determined based upon specific transactions (including, but not limited to,
value added, sales and use Taxes), all Non-Income Taxes applicable to
transactions which have occurred during the period through the Financial Closing
Date and (ii) for any Non-Income Tax that is not based upon specific
transactions (including, but not limited to, license, real property, personal
property, franchise and doing business Taxes), any Non-Income Tax equal to the
full amount of such Non-Income Tax for the entire Straddle Period multiplied by
a fraction, the numerator of which is the number of days in the Straddle Period
ending on the Financial Closing Date and the denominator of which is the number
of days in the entire Straddle Period.
4. Taxes Allocated to Buyer and the Company. Buyer and the Company will be
----------------------------------------
responsible for, will pay or cause to be paid, and will indemnify and hold
harmless Seller and its Tax Affiliates from and against any and all Taxes other
than those for which Seller is responsible pursuant to Sections 2 and 3 hereof,
including, without limitation, Taxes attributable to periods ending after the
Closing Date (other than any Taxes allocated to Seller pursuant to Sections 2 or
3 hereof).
5. Refunds of Indemnified Taxes.
----------------------------
(a) Buyer will remit (and will cause the Company and its Tax Affiliates to
remit) to Seller within five business days of receipt an amount equal to all
refunds (including interest thereon and any amounts applied against a Tax
liability for other taxable periods) of any Taxes for which Buyer is indemnified
pursuant to this Agreement ("Seller's Refunds") (including but not limited to
the Chilean Refunds) net of any net Tax liability that is imposed on the Company
or any of its Tax Affiliates in connection with the receipt and remittance of
Seller's Refunds therewith.
Seller will remit (and will cause its Tax Affiliates to remit) to Buyer
within five business days of receipt all refunds (including interest thereon and
any amounts applied against a Tax liability for other taxable periods) of any
Taxes for which Seller is indemnified pursuant to this Agreement ("Buyer's
Refunds") net of any net Tax liability that is imposed on the Seller or any of
its Tax Affiliates in connection with the receipt and remittance of Buyer's
Refunds therewith.
(b) Upon the reasonable request of Seller, Buyer will file, or cause the
Company or its Tax Affiliates to file, claims for Seller's Refunds, in such form
as Seller may reasonably request; provided that Buyer shall not be required to
file or prosecute any such claim if it would be inconsistent with, or
detrimental to, Tax positions previously or currently adopted by the Company, in
filing its Tax Returns (in the sole reasonable judgment of Buyer). If permitted
pursuant to the preceding sentences, Seller will have the right to prosecute any
claims for Seller's Refunds (by suit or otherwise) at Seller's expenses and with
counsel of Seller's choice (if such Counsel is reasonably satisfactory to
Buyer). Buyer will cooperate, and cause
-6-
<PAGE>
the Company and their Tax Affiliates to cooperate, fully with Seller and its
counsel in connection therewith.
Upon the reasonable request of Buyer, Seller will file, or cause its Tax
Affiliates to file, claims for Buyer's Refunds, in such form as Buyer may
reasonably request; provided that Seller shall not be required to file or
prosecute any such claim if it would be inconsistent with, or detrimental to,
Tax positions previously or currently adopted by the Company, in filing its Tax
Returns (in the sole reasonable judgment of Seller). If permitted pursuant to
the preceding sentences, Buyer will have the sole right to prosecute any claims
for Buyer's Refunds (by suit or otherwise) at Buyer's expense and with counsel
of Buyer's choice (if such counsel is reasonably satisfactory to Seller).
Seller will cooperate, and cause its Tax Affiliates to cooperate, fully with
Buyer and its counsel in connection therewith.
(c) For the avoidance of doubt (and except as provided in Section 6(b)
hereof), any refunds of Taxes other than Seller's Refunds and Buyer's Refunds
will be the property of the payee of such refunds and no other party to this
Agreement or its Tax Affiliates will have any right to such refunds.
6. Tax Benefits.
------------
(a) Buyer will remit (or cause the Company to remit) to Seller within five
business days the amount of any Tax Benefit recognized by Buyer, the Company, or
any of their Tax Affiliates resulting from any Adjustment for which Buyer, the
Company, or any of their Tax Affiliates has been indemnified pursuant to this
Agreement. Seller will remit to Buyer within five business days the amount of
any Tax Benefit recognized by Seller or any of its Tax Affiliates resulting from
any Adjustment for which Seller or any of its Tax Affiliates has been
indemnified pursuant to this Agreement. For purposes of this Agreement:
i. "Tax Benefit" means a reduction in the amount of Taxes
that would otherwise be payable (net of any additional
Taxes that may in the future be payable), whether
resulting from a deduction, credit, reduced gain or
increased loss from the disposition of an asset, or
otherwise, all as determined in the reasonable judgment of
the "remittor" (as defined below);
ii. a person will be deemed to have "recognized" a Tax Benefit
at the time the amount of Taxes such person otherwise
would pay is reduced; and
iii. an "Adjustment" is any adjustment to (A) any individual
item of income, gain, loss, or deduction, or (B) any
individual item of credit.
-7-
<PAGE>
(b) If either Buyer or Seller (the "remittor") makes a remittance to the
other party (the "remittee") under Section 6(a) or Section 7(b) hereof of any
Tax Benefit and all or part of such Tax Benefit is subsequently disallowed, the
remittee will pay to the remittor within five business days that portion of such
remittance equal to the portion of the Tax Benefit that is disallowed and, in
addition thereto, any other costs or expenses incurred by the remittor in
respect to the disallowed portion of the Tax Benefit (it being agreed that the
remittor shall not suffer any cost or expense by reason of the disallowed
portion of the Tax Benefit).
7. Buyer to Forgo Carrybacks
-------------------------
(a) Unless Seller otherwise consents, Buyer will cause the Company to
forego any carryback for Tax purposes to any taxable period of the Company
ending on or before the Closing Date of any net operating loss, net capital
loss, or other deduction or credit incurred by the Company in any taxable period
ending after the Closing Date (a "Post-Closing Carryback").
(b) If Seller consents to a Post-Closing Carryback under Section 7(a)
hereof, (i) Seller will cooperate with Buyer and the Company in filing an
appropriate refund claim or amended Tax Return, and (ii) Seller will assign and
remit to Buyer within five business days the amount of any refund of Tax
received by, or Tax Benefit recognized by, Seller or any of its Tax Affiliates
as a result of such Post-Closing Carryback.
(c) If Seller makes any remittance to Buyer under Section 7(b) hereof and
all or part of such Post-Closing Carryback is subsequently disallowed, then
Buyer shall pay to Seller within five business days that portion of the
remittance that relates to the portion of the Post-Closing Carryback that is
disallowed and, in addition thereto, any other costs or expenses incurred by
Seller in respect to the disallowed portion of the Post-Closing Carryback (it
being agreed that Seller shall not suffer any expense or other cost by reason of
agreeing to such Post-Closing Carryback or any adjustment thereto).
8. No Obligation to File Amended Tax Returns. Except as otherwise
-----------------------------------------
specifically provided in this Agreement, neither Seller nor Buyer, nor any of
their respective Tax Affiliates will be obligated to file any amended Tax Return
or other Tax refund claim.
9. Preparation and Filing of Tax Returns.
-------------------------------------
(a) Seller will prepare or cause to be prepared, and, to the extent
permitted by law, file or cause to be filed, (i) all consolidated, combined, or
unitary Income Tax Returns (including Chilean Income Tax Returns) of Seller or
any of its Tax Affiliates or former Tax Affiliates that include the Company and
which are listed on Schedule 9(a)(i) hereto, (ii) all Income Tax Returns
(including Chilean
-8-
<PAGE>
Income Tax Returns) required to be filed by or on behalf of the Company or the
Chilean Partnership for taxable periods ending (including by reason of any
election under Section 3 hereof) on or before the Closing Date and which are
listed on Schedule 9(a)(ii) hereto and all Chilean Income Tax Returns for any
such periods, and (iii) all other Tax Returns (including Chilean Income Tax
Returns) required to be filed by or on behalf of the Company or the Chilean
Partnership on or before the Closing Date in a manner consistent with the
Company's and the Chilean Partnership's past Tax accounting practices.
(b) Buyer will prepare or cause to be prepared, and file or cause to be
filed, all Tax Returns of the Company other than those set forth in Section 9(a)
hereof. Buyer will prepare all Tax Returns of the Company for Straddle Periods
including, but ending after, the Closing Date ("Straddle Period Returns") in a
manner consistent with the Company's past Tax accounting practice, to the extent
permitted by law, and, in the absence thereof, reasonable Tax accounting
practices selected by Buyer; provided, however, that any Tax Returns prepared by
Buyer in respect to the Company shall be prepared consistent with the Chilean
Pro forma Tax Return described in Section 3(c). If Buyer files Straddle Period
Returns for such Straddle Periods inconsistently with such Tax accounting
practices in violation of this provision, then, any provision of this Agreement
to the contrary notwithstanding, in addition to any other remedies available,
Seller and its Tax Affiliates shall only be liable for the amount of Taxes that
would be owed by them had such Straddle Period Returns been filed consistently
with such past Tax accounting practices.
(c) Neither Seller, nor Buyer, nor any of their Tax Affiliates will
exercise any election available under Treasury regulation (S)1.1502-76(b)(2) or
any corresponding provisions of other Tax laws for any Straddle Period.
(d) Buyer and the Company will assist Seller in timely obtaining any
required signatures or other filing requirements in respect to Tax Returns
prepared by Seller for the Company pursuant to Section 9(a).
(e) Upon the reasonable request, and at the expense, of either party, the
other party shall make available prior to filing (and after filing) for
inspection and copying all Tax Returns and related workpapers with respect to
Taxes to the extent that (i) such Tax Return relates to Taxes for which the
requesting party may be liable, (ii) such Tax Return relates to Taxes for which
the requesting party may be liable in whole or in part for any additional Taxes
owing as a result of adjustments to the amount of Taxes reported on such Tax
Return, (iii) such Tax Return relates to Taxes for which the requesting party
may have a claim for Tax Benefits under this Agreement, or (iv) the requesting
party reasonably determines that it must inspect such Tax Return to confirm
compliance with the terms of this Agreement.
-9-
<PAGE>
10. Settlement of Actual Tax Allocations.
------------------------------------
(a) This Section 10(a) shall govern the settlement as between Seller, Buyer
and the Company of all Straddle Period Tax allocations for Taxes that are
reported on a Straddle Period Return.
With respect to each Straddle Period Return that involves Taxes subject to
allocation pursuant to Section 3(b) hereof, Buyer will, at least thirty (30)
days prior to the final due date (including extensions) of such Straddle Period
Return, provide to Seller (i) a copy of such Straddle Period Return (including
supporting schedules and workpapers) and (ii) a statement (including supporting
schedules and workpapers) certifying the amount of Tax shown on such Straddle
Period Return that is allocable to Seller pursuant to Section 3(b) hereof
reduced by any payments made by the Company on or prior to the Closing Date, and
by Seller and its Tax Affiliates at any time, in respect of such Taxes (whether
as estimated Taxes or otherwise) (the "Statement"). Seller and its authorized
representatives will have the right to review the Statement for ten (10) days
following Seller's receipt of the Statement (the "10-Day Review Period"). If
Seller disagrees with the allocation in the Statement, Seller will notify Buyer
in writing of such disagreement prior to close of the 10-Day Review Period, and
Seller and Buyer will consult and attempt to resolve in good faith the
disagreement. In the event Seller and Buyer are unable to resolve the
disagreement within ten (10) days following the end of the 10-Day Review Period,
Seller and Buyer will jointly request the Accountant to resolve the disagreement
pursuant to Section 16. Not later than five (5) days after the later of (i) the
end of the 10-Day Review Period, or (ii) if there is a disagreement, the date
notice of the resolution of the disagreement by the Accountant is provided to
Buyer and Seller, Seller will pay to Buyer or Buyer will pay to Seller, as the
case may be, an amount equal to the difference between (i) the Taxes shown on
the Statement or in such notice (as the case may be) as being allocable to
Seller pursuant to Section 3(b) hereof, and (ii) any payments made by the
Company on or prior to the Closing Date, and by Seller and its Tax Affiliates at
any time, in respect of such Taxes (whether as estimated Taxes or otherwise).
With respect to the Chilean Income Taxes subject to allocation pursuant to
Section 3(c), not later than five (5) days after the later of (i) the end of the
Buyer's review period in Section 3(c), or (ii) if there is a disagreement, the
date notice is provided to Buyer and Seller regarding the resolution of the
disagreement by the Accountant, Seller will pay to Buyer or Buyer will pay to
Seller, as the case may be, an amount equal to the difference between (i) the
Taxes shown on the Chilean Pro forma Tax Return as being allocable to Seller
pursuant to Section 3(c) hereof, and (ii) any payments made by the Company on or
prior to the Closing Date, and by Seller and its Tax Affiliates at any time, in
respect of such Taxes (whether as estimated Taxes or otherwise).
-10-
<PAGE>
(b) This Section 10(b) shall govern the settlement as between Seller, Buyer
and the Company of all Straddle Period Tax allocations for Taxes that are not
required to be reported on a Straddle Period Return (e.g., Taxes which are
assessed without the filing of a Tax Return). With respect to each such Tax
subject to allocation pursuant to Section 3(b) hereof, Buyer will, at least
thirty (30) days prior to the final due date of such Tax, provide to Seller (i)
a copy of the Tax assessment or other supporting schedules and workpapers and
(ii) a statement (including supporting schedules and workpapers) certifying the
amount of Tax that is allocable to Seller pursuant to Section 3(b) hereof
reduced by any payments made by the Company on or prior to the Closing Date, and
by Seller and its Tax Affiliates at any time, in respect of such Taxes (whether
as estimated Taxes or otherwise) (the "Statement"). Seller and its authorized
representatives will have the right to review the Statement for ten (10) days
following Seller's receipt of the Statement (the "10-Day Review Period"). If
Seller disagrees with the allocation in the Statement, Seller will notify Buyer
in writing of such disagreement prior to close of the 10-Day Review Period, and
Seller and Buyer will consult and attempt to resolve in good faith the
disagreement. In the event Seller and Buyer are unable to resolve the
disagreement within ten (10) days following the end of the 10-Day Review Period,
Seller and Buyer will jointly request the Accountant to resolve the disagreement
pursuant to Section 16. Not later than five (5) days after the later of (i) the
end of the 10-Day Review Period, or (ii) if there is a disagreement, the date
notice of the resolution of the disagreement by the Accountant is provided to
Buyer and Seller, Seller will pay to Buyer or Buyer will pay to Seller, as the
case may be, an amount equal to the difference between (i) the Taxes shown on
the Statement or in such notice (as the case may be) as being allocable to
Seller pursuant to Section 3(b) hereof, and (ii) any payments made by the
Company on or prior to the Closing Date, and by Seller and its Tax Affiliates at
any time, in respect of such Taxes (whether as estimated Taxes or otherwise).
(c) Nothing contained in Section 10(a) or 10(b) shall be deemed to limit
the rights of the Company, Buyer or their Tax Affiliates to obtain
indemnification from Seller with respect to Chilean Income Taxes or other Taxes,
including, without limitation, their right to indemnification under Section 2
hereof.
11. Cooperation; Access to Information; Tax Records.
-----------------------------------------------
(a) Buyer, Seller and the Company will cooperate with each other with
respect to, and will make available to each other such Tax data and other
information relating to the Company as may be reasonably required for, (i) the
preparation by Buyer or Seller of any Tax Returns required to be prepared by
Buyer or Seller under this Agreement, (ii) determining the liability for and
amount of any Taxes due or the right to and amount of any refund of Taxes, (iii)
examinations or documentation of Tax Returns and Tax filing positions, and (iv)
any administrative or judicial proceeding in respect of Taxes assessed or
proposed to be assessed.
-11-
<PAGE>
Such cooperation shall include making all information and documents in their
possession related to the Company available to the other as provided in Section
11(b) hereof. Seller and Buyer shall also make available to the other, as
reasonably requested and available, personnel (including officers, directors,
employees and agents of Seller and Buyer and their Subsidiaries) responsible for
preparing, maintaining and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings relating to Taxes. Any information or documents provided
under this Section 11, shall be kept confidential by the party receiving the
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any administrative or
judicial proceedings relating to Taxes. If requested by Seller, Buyer will
provide Seller, within ninety (90) days after the Closing Date, a completed tax
compliance manual (in a form prepared based on the Seller's and Company's past
practices) and Seller shall, if requested by Buyer, provide the Buyer, Company
and its Tax Affiliates with assistance in the preparation of such documentation,
data and other information necessary to meet such requirements (it being
mutually understood that such documentation, data and other information is
necessary in order for Seller and Buyer to satisfy their obligations to file Tax
Returns as provided in Section 9). In each case, the party requesting the
cooperation described herein shall reimburse the cooperating party for any
reasonable out-of-pocket expenses incurred in providing such cooperation.
(b) Seller, Buyer, the Company and their respective Tax Affiliates shall
make available to each other, at such other's expenses, for inspection and
copying during normal business hours upon reasonable notice all Tax records in
their possession relating to the Company to the extent reasonably required by
the other party in connection with the preparation of Tax returns, audits,
litigation, or the resolution of items under this Agreement. Seller, Buyer and
their respective Tax Affiliates shall preserve and keep such Tax records in
their possession until the expiration of any applicable statutes of limitation
and as otherwise required by law, but in any event for a period not less than
eight (8) years after the Closing. Notwithstanding the foregoing, a party or
its Tax Affiliates may dispose of records sooner upon ninety (90) days prior
notice to the other party. Such notice shall include a list of the records to
be disposed of describing in reasonable detail each file, book or other record
accumulation being disposed. The notified party shall have the opportunity, at
its cost and expense, to copy or remove, within such ninety (90) day period, all
or any part of such Tax records. For purposes of this Section 11, Tax records
include Tax Returns, journal vouchers, cash vouchers, general ledgers, material
contracts, return workpapers, and any other records pertaining to or used in the
preparation of Tax Returns (including those books and records required to be
maintained and made available pursuant to Section 8.2 of the Stock Purchase and
Sale Agreement).
-12-
<PAGE>
12. Audits.
------
(a) Buyer will promptly notify Seller in writing upon receipt by Buyer, the
Company, or their Tax Affiliates of notice of any pending Tax audits of or
written assessments against the Company, Buyer, or any of their Tax Affiliates
(i) relating to any taxable period of the Company ending on, prior to or
including the Closing Date, or (ii) that likely will affect the determination of
Taxes for which Seller is or may be obligated to indemnify Buyer pursuant to
this Agreement. The notice required under this Section 12(a) is referred to in
this Agreement as the "Audit Notification."
(b) Subject to Section 12(c) hereof, Seller will have the right, at its
election, (i) to represent the Company and to exclusively control the handling
of any Tax audit or assessment referred to in Section 12(a) hereof, including in
any administrative or court proceeding relating thereto, (ii) to employ counsel
of its choice at its expense and to control the conduct of such audit,
assessment, or proceeding, including settlement or other disposition thereof and
(iii) to settle the contest of any Tax or agree to an adjustment to any Tax
referred to in Section 12(a) (the rights under (i), (ii) and (iii) are referred
to in this Agreement collectively as the "Representation Right"); provided,
--------
however, that the Representation Right will apply only to any issues or items
- -------
(x) relating to any taxable period of the Company ending on, prior to or
including the Closing Date, or (y) that may affect the determination of Taxes
for which Seller is or may be obligated to indemnify the Company, Buyer, or
their Tax Affiliates pursuant to this Agreement. As reasonably necessary, Buyer
will fully cooperate, and will cause the Company and its Tax Affiliates to fully
cooperate, at Seller's expense with Seller and its counsel in the defense
against or compromise of any claim in any said audit, assessment, or proceeding,
such cooperation to include (but not be limited to) the grant of any necessary
powers of attorney. Notwithstanding the preceding sentence, Seller shall
neither consent nor agree to the settlement of any dispute regarding Taxes
(other than Taxes for which Seller is obligated to indemnify the Company, Buyer
or any of their Tax Affiliates) which settlement may have a material adverse
impact on the Company and its Tax Affiliates without the prior written consent
of the Buyer, which consent shall not be unreasonably withheld or delayed.
(c) Seller shall be entitled to exercise the Representation Right, only if,
within a reasonable period following the receipt of the Audit Notification,
Seller shall have (i) notified Buyer in writing that Seller intends to exercise
the Representation Right, and (ii) delivered to Buyer a written statement
acknowledging Seller's obligation to indemnify the Company, Buyer, or their Tax
Affiliates in accordance with the terms of this Agreement with respect to the
Taxes as to which Seller exercises the Representation Right.
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<PAGE>
(d) Buyer's personnel shall have the right to participate in any
administrative or judicial proceedings for which the Seller exercises its
Representation Right (including assisting with field audits, administrative
appeals, and subsequent litigation) in so far as they relate to the Company, and
such participation shall be reflected by the grant of appropriate powers of
attorney.
(e) Buyer shall have exclusive control of all administrative and judicial
proceedings related to the Company's Taxes other than those described in Section
12(a).
(f) For so long as the Seller is exercising its Representation Right, the
Seller shall not be required to indemnify the Buyer pursuant to Section 14
hereof until there occurs a Final Determination of the liability of the Company,
the Buyer or its Tax Affiliates for the Tax.
13. Treatment of Indemnification. Unless otherwise required by law, on
----------------------------
their Tax Returns, Seller and Buyer will (and will cause their Tax Affiliates
to) treat any payment made or received under this Agreement, or the Stock
Purchase and Sale Agreement, as an adjustment to the Purchase Price.
14. Indemnification.
---------------
(a) If either Buyer or Seller (the "Indemnified Party") determines that it
or any of its Tax Affiliates is or may be entitled to indemnification by the
other party (the "Indemnifying Party") under this Agreement as a result of: (i)
the allocations of responsibility for Taxes set forth in Sections 2 through 4 or
(ii) the Seller's breach of a representation or warranty contained in Section
18, the Indemnified Party will promptly deliver to the Indemnifying Party a
written notice and demand therefor (the "Notice") specifying the basis for its
claim for indemnification, the nature of the claim, and, if known, the amount
for which the Indemnified Party reasonably believes it or any of its Tax
Affiliates is entitled to be indemnified. The Notice must be received by the
Indemnifying Party no later than thirty (30) days before the expiration of the
applicable Tax statute of limitations; provided, however, that if the
Indemnified Party does not receive notice from the applicable governmental
taxing authority ("Government Notice") that an item exists that could give rise
to a claim for indemnification hereunder more than thirty (30) days before the
expiration of the applicable Tax statute of limitations, then the Notice must be
received by the Indemnifying Party immediately after the Indemnified Party
receives the Government Notice. Unless the Indemnifying Party objects to the
claim for indemnification (in the manner set forth in Section 14(b) hereof), and
subject to Section 12(f), the Indemnifying Party will pay the Indemnified Party
the amount set forth in the Notice, in cash or other immediately available
funds, within thirty (30) days after receipt of the Notice; provided, however,
that if the amount for which the Indemnified Party reasonably believes it is
entitled to be indemnified
-14-
<PAGE>
is not known at the time of the Notice, the Indemnified Party will deliver to
the Indemnifying Party a further notice specifying such amount as soon as
reasonably practicable after such amount is known and payment will then be made
as set forth above.
(b) The Indemnifying Party may object to the claim for indemnification (or
the amount thereof) set forth in any Notice by giving the Indemnified Party,
within thirty (30) days following receipt of such Notice, written notice setting
forth the Indemnifying Party's grounds for so objecting (the "Objection
Notice"). If the Indemnifying Party does not give the Indemnified Party the
Objection Notice within such thirty (30)-day period, the Indemnifying Party may
exercise any and all of its rights under applicable law to collect such amount.
(c) If Buyer and Seller are unable to settle any dispute regarding a claim
for indemnification within thirty (30) days after receipt of the Objection
Notice, Buyer and Seller will, in accordance with Section 16, jointly request
the Accountant to resolve the dispute as promptly as possible.
(d) Failure by the Indemnified Party to promptly deliver to the
Indemnifying Party a Notice in accordance with Section 14(a) hereof will not
relieve the Indemnifying Party of any of its obligations under this Agreement
except to the extent the Indemnifying Party is prejudiced by such failure.
(e) The indemnification provisions of this Section 14 shall be the
exclusive remedy following the Closing for any breaches or alleged breaches of
any representation, warranty or other provision of this Agreement and for the
allocation of Taxes pursuant to this Agreement. Each of the parties hereto, on
behalf of itself and its officers, directors, employees, shareholders, partners,
affiliates, agents or representatives (collectively, such party's
"Representatives") agrees not to bring any actions or proceedings, at law,
equity or otherwise, against any other party or its Representatives, in respect
of any breaches or alleged breaches of any representation, warranty or other
provision of this Agreement, except pursuant to and subject to the express
provisions of this Section 14.
15. Termination of Existing Tax Sharing Agreements. Except as set forth on
----------------------------------------------
Schedule 15 hereto, as of the close of the Closing Date, any Tax sharing
agreement or arrangement that exists or may exist between the Company and Seller
or its Affiliates will terminate, and any obligations to make payments under any
such agreement or arrangement will be canceled.
16. Resolution of Disputes. If Seller and Buyer fail to mutually agree on
----------------------
the resolution of any of the matters in this Agreement which require the
agreement of the parties, then such matter shall be referred to the Accountant
for a binding determination. Seller and Buyer shall deliver to the Accountant
copies of any schedules or documentation which may be reasonably required by the
Accountant
-15-
<PAGE>
to make its determination. Seller and Buyer shall be entitled to make
presentations to the Accountant in connection therewith. Seller and Buyer shall
use all reasonable efforts to cause the Accountant to promptly complete such
determination. The determination of the Accountant shall be final and binding on
all parties. The costs incurred in retaining the Accountant to make a
determination shall be shared equally by Seller and Buyer.
17. Payment. All currency amounts required to be paid to a party under
-------
this Agreement shall be paid in United States of America Dollars. If a party
(the "Payor") fails to make a payment due and owing under this Agreement to the
other party or any of its Tax Affiliates (the "Payee") reasonably within five
business days after the parties hereto agree (or there is a binding
determination) that such payment is due and owing, the Payor will pay to the
Payee interest on such payment from and including the date the parties reach
such agreement (or such binding determination is made) to but excluding the day
the Payor makes such payment, at a rate equal to seven percent (7%) per annum.
18. Seller's Representations and Warranties. Cyprus Amax and Specialty,
---------------------------------------
jointly and severally, hereby represent and warrant to Buyer as set forth below.
Disclosure of any items not otherwise required to be disclosed shall not create
any inference of materiality.
(a) Except as set forth on Schedule 18(a), all required Income Tax Returns
with respect to the Company and the Company's Tax Affiliates (including the
Chilean Partnership) have been duly filed and Seller will cause to be filed all
required Income Tax Returns that are due to be filed on or before the Closing
Date on a timely basis (or will have filed an accurate/complete appropriate
application for extension of time to file). All such Tax Returns were true,
correct and complete in all material respects when filed. Neither the Company
nor any of the Company's Tax Affiliates is delinquent in the payment of any Tax
or estimated Tax payable by or on behalf of the Company or any of the Company's
Tax Affiliates for any Taxes for any Tax periods covered by the Tax Returns
referred to in the preceding sentence (whether or not shown on such Tax Returns)
(other than any Income Taxes the amount or validity of which are being contested
in good faith by appropriate proceedings).
(b) The Company has delivered to Buyer true copies of the Company's and its
Subsidiaries' federal, state and foreign Income Tax Returns for the tax years
1994, 1995 and 1996.
(c) Except as set forth on Schedule 18(c), the Company is not a party to,
bound by, or subject to, any obligation under any Tax sharing, Tax
indemnification or similar agreement or has any liability for the Taxes of any
other Person as a transferee, successor or otherwise.
-16-
<PAGE>
(d) The Company has not filed a consent pursuant to Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by it.
(e) No property owned by the Company is property that the Buyer, or the
Company or any of their Affiliates is or will be required to treat as being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, is tax-exempt use property within the
meaning of Section 168(h)(1) of the Code or tax-exempt bond financed property
within the meaning of Section 168(g) of the Code.
(f) Except as set forth in Schedule 18(f), none of the Company nor any
Subsidiary of the Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes of
any of them.
(g) All Taxes that the Company or any Subsidiary of the Company is or was
required by Law to withhold or collect have been duly withheld and collected
and, to the extent required, have been paid to the proper Governmental Authority
or taxing authority.
(h) The Seller is not a foreign person subject to withholding under Section
1445 of the Code and the regulations promulgated thereunder, and, at the
Closing, Seller shall deliver to Buyer a certificate to that effect (a "FIRPTA
------
Certificate").
- -----------
(i) There is no agreement, plan, arrangement or other contract covering any
employee or independent contractor of the Company or any of its Tax Affiliates
that could give rise to the payment of any amount that could not be deductible
pursuant to Section 280G of the Code.
(j) There are no pending, proposed, or, to the Knowledge of Seller,
threatened, audits, judicial proceedings, assessments or deficiencies with
respect to Taxes of the Company or any of its Subsidiaries. There is no
pending, proposed, or, to the Knowledge of Seller, threatened, claim by any
Governmental Authority in any jurisdiction in which any of the Seller, the
Company of any of its Tax Affiliates do not pay Taxes or file Tax Returns that
any such Person is required to pay Taxes or file Tax Returns.
(k) Except as set forth in Schedule 18(k), neither the Company nor any of
its Subsidiaries has agreed or is required to make any adjustment under Section
481(a) of the Code or any comparable provision of state, local or foreign law.
-17-
<PAGE>
(l) No liens for Taxes exist with respect to the assets, income or
operations of any of the Seller, the Company or any of its Subsidiaries other
than any lien for Taxes which are being contested in good faith and by
appropriate proceedings.
19. Section 338(h)(10) Election.
(a) Buyer (or one of its Tax Affiliates) and Seller will join in making,
and will take (and will cause its respective Tax Affiliates to take) any and all
action necessary to effect a timely election with respect to the sale of the
stock of the Company under Section 338(h)(10) of the Code (and the Treasury
Regulations and administrative pronouncements thereunder) and any comparable
provision of state or local Tax law (including any state or local tax law which
treats a Section 338(h)(10) Election as a Section 338 Election) (collectively a
"Section 338(h)(10) Election"). Seller and Buyer acknowledge that for Federal
Income Tax purposes (and for State Income Tax purposes in those states whose
Income Tax provisions follow the Federal Income Tax Treatment), the sale of the
stock of the Company combined with the Section 338(h)(10) Election will be
treated as a sale of assets by the Company to Buyer followed by a complete
liquidation of the Company into Seller. Buyer and Seller will report (and will
cause their respective Tax Affiliates to report) any transactions that occur
under the Stock Purchase and Sale Agreement or hereunder consistent with the
Section 338(h)(10) Election, and will take no position (nor allow their
respective Tax Affiliates to take a position) contrary thereto. Buyer and its
Tax Affiliates agree to make an election under Section 338 with respect to the
Chilean Partnership and its shareholder.
(b) Seller and the Buyer shall each provide to the other all necessary
information to permit the Section 338(h)(10) Election to be made.
(c) Within ninety (90) days after the Closing Date, Buyer shall:
i. determine, based upon the principles contained in the relevant
Treasury regulations, the modified adjusted deemed sales price
("MADSP") for the assets of the Company (within the meaning of
Treasury regulation (S)1.338(h)(10)-1(f)); and
ii. determine, based upon the principles contained in the relevant
Treasury regulations, the proper allocation of such MADSP among
the assets of the Company in accordance with Treasury
regulation (S)1.338(b)-2T (together (i) and (ii) are the
"Allocations").
In making the determinations under this subparagraph (c), Buyer shall consult in
good faith with the Seller and keep the Seller informed as to the methodology
and status of such determinations.
-18-
<PAGE>
(d) Buyer shall prepare all forms (including, without limitation, Internal
Revenue Service Form 8023) and schedules (collectively, the "Forms") necessary
to effect the Section 338(h)(10) Election and will deliver a completed copy of
any such Forms to Seller for its review within sixty (60) days after the date
provided in Section 19(c). At the Closing, Seller and Buyer shall both execute
and deliver completed pro-forma Forms 8023.
(e) Seller shall have the right within thirty (30) days following the
delivery of the Allocations to object in writing to the Allocations specifying
in reasonable detail the basis for such objection(s). Seller shall be deemed to
have agreed with the Allocations, except as specifically objected to in such
notice. If Seller does so object, Seller and Buyer shall cooperate with each
other to attempt to reach a mutual agreement thereon, or, failing such agreement
within twenty (20) days, Seller and Buyer will, in accordance with Section 16
thereof, jointly request the Accountant to resolve the dispute as promptly as
possible.
(f) Seller shall calculate the gain or loss, if any, resulting from the
Section 338(h)(10) Election in a manner consistent with the determination of
MADSP and the Allocations and shall not take any position inconsistent with the
Section 338(h)(10) Election, the MADSP or the Allocations in connection with any
Tax Return or otherwise.
(g) Buyer shall determine its tax basis for the assets of the Company in a
manner consistent with the determination of MADSP and the Allocations and shall
not take any position inconsistent with the Section 338(h)(10) Election, the
MADSP or the Allocations in any Tax Return or otherwise.
(h) Buyer covenants that, during the period beginning immediately after the
Closing and ending at the close of the Closing Date, the Company will not engage
in any transaction that is not in the ordinary course of business of the
Company.
20. Survival of Representations, Warranties, Covenants, Agreements and
------------------------------------------------------------------
Indemnification. The representations and warranties contained in this Agreement
- ---------------
shall survive the Closing and be enforceable for a period of ninety (90) days
after the expiration of the applicable statute of limitations with respect to
the relevant item of Tax, but shall thereafter be of no force or effect, except
as they relate to a Notice filed under Section 14. All covenants and agreements
contained in this Agreement shall survive the Closing in accordance with their
terms.
21. Amendments. Any amendment, supplement, variation, alteration or
----------
modification to this Agreement must be made in writing and duly executed by an
authorized representative or agent of each of the parties hereto.
-19-
<PAGE>
22. Assignment. This Agreement and all the rights and obligations granted
----------
hereby shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns, it being expressly agreed that this Agreement
shall not be assigned nor shall any rights or obligations arising hereunder be
transferred by one party without the prior written consent of the other party,
provided that Buyer may assign its rights hereunder to any Affiliate of Buyer,
provided that Buyer, in an agreement reasonably satisfactory to Cyprus Amax,
agrees to remain fully responsible with respect to the liabilities and
obligations of Buyer hereunder.
23. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes any and all other prior or contemporaneous
understandings, negotiations or agreements between the parties relating to the
transactions contemplated hereby or the subject matter of this Agreement, and
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives.
24. No Waiver. The failure in any one or more instances of a party to
---------
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or to
waive any breach of any of the terms, covenants or conditions of this Agreement,
shall not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and remain in full
force and effect as if no such forbearance or waiver had occurred. No waiver
shall be effective unless it is in writing and signed by an authorized
representative of the waiving party.
25. No Double Recovery. No provision of this Agreement shall be construed
------------------
to provide an indemnity or other recovery for any Taxes, costs, damages, or
other amounts for which the damaged person has been fully compensated under any
other provision of this Agreement or under any other agreement or action at law
or equity.
26. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
other jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law, each
party hereby waives any law which renders any provision hereof prohibited or
unenforceable in any respect.
27. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original, and all such counterparts shall be
deemed to constitute one and the same instrument.
-20-
<PAGE>
28. Fees, Costs and Expenses. Except as otherwise provided herein, each
------------------------
party shall be responsible for its own fees, costs and expenses incurred by it
in connection with this Agreement.
29. Third-Party Beneficiaries. Nothing in this Agreement is intended to
-------------------------
create, nor shall anything in this Agreement be deemed to create or have
created, any third party beneficiary rights.
30. Construction. In this Agreement, (a) references to this Agreement
------------
shall include all attachments hereto, and (b) words importing the singular shall
include the plural and vice versa, and words importing a gender shall include
other genders. Regardless of whether or not expressly stated in each
circumstance, Buyer and the Company, jointly and severally, agree that upon
Closing, each shall be fully liable and responsible for any and all liabilities
and obligations of any nature of the other, arising under this Agreement,
including under the Related Agreements.
31. Headings. The descriptive section headings contained in this Agreement
--------
are for convenience of reference only and shall not control or effect the
meaning or construction of any provision of this Agreement.
32. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given when personally delivered,
five (5) business days after mailing when mailed by certified mail, return
receipt requested, or one (1) business day after sending via Federal Express or
similar overnight courier service, or when receipt is confirmed when sent by
facsimile. Such notices or other communications shall be sent to the following
addresses, unless other addresses are subsequently specified in writing:
Buyer (and the Company after the Closing):
-----------------------------------------
Foote Acquisition Corporation
c/o Dynamit Nobel Holdings, Inc.
520 Madison Avenue, 28th Floor
New York, New York 10020
Attention: Arthur Taylor
Fax No.: (212) 715-5215
Tel. No.: (212) 826-9042
-21-
<PAGE>
With a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, 16th Floor
Los Angeles, California 90067
Attention: Barry L. Dastin
Fax No.: (310) 788-1000
Tel. No.: (310) 788-1200
Cyprus Amax, Specialty (and the Company prior to the Closing):
-------------------------------------------------------------
c/o Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Attention: Philip Wolf, Senior Vice President
and General Counsel
Fax No.: (303) 643-5269
Tel. No.: (303) 643-5000
With a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
Attention: Grant A. Bagan
Fax No.: (312) 984-3669
Tel. No.: (312) 984-7567
33. Governing Law; Jurisdiction
---------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONTROLLED AS TO ITS VALIDITY,
ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE THEREOF) APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED IN THAT STATE. ALL DISPUTES, LEGAL ACTIONS, SUITS AND PROCEEDINGS
WHICH, IN WHOLE OR IN PART, ARISE OUT OF OR RELATE TO THIS AGREEMENT SHALL BE
BROUGHT IN A STATE OR FEDERAL DISTRICT COURT LOCATED IN NEW YORK, NEW YORK.
EACH PARTY HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL DISTRICT COURTS IN NEW YORK, NEW YORK. EACH PARTY HEREBY IRREVOCABLY
WAIVES ALL CLAIMS OR DEFENSES OF LACK OF JURISDICTION OR OF IMMUNITY FROM
JURISDICTION, AND ANY RIGHT TO OBJECT ON THE BASIS THAT ANY DISPUTE, ACTION,
SUIT OR PROCEEDING BROUGHT IN THE STATE OR FEDERAL DISTRICT COURT OF NEW
-22-
<PAGE>
YORK, NEW YORK HAS BEEN BROUGHT IN AN IMPROPER OR INCONVENIENT VENUE OR FORUM.
THIS PROVISION ON CHOICE OF LAW AND JURISDICTION SHALL NEITHER GOVERN NOR AFFECT
CHOICE OF LAW OR JURISDICTION PERTINENT TO CLAIMS AGAINST PERSONS NOT A PARTY TO
THIS AGREEMENT.
-23-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Attest: CYPRUS AMAX MINERALS COMPANY
/s/ D. E. Huffman By: /s/ P. C. Wolf
- ----------------- ---------------
Name: P. C. Wolf
Title: Sr. V. P.
Attest: CYPRUS SPECIALTY METALS COMPANY
/s/ D. E. Huffman By: /s/ P. C. Wolf
- ----------------- ---------------
Name: P. C. Wolf
Title: Sr. V. P.
Attest: CYPRUS FOOTE MINERAL COMPANY
/s/ D. E. Huffman By: /s/ P. C. Wolf
- ------------------ ---------------
Name: P. C. Wolf
Title: Sr. V. P.
Attest: BUYER
/s/ Arthur G. Taylor By: /s/ M. Latsch
- --------------------- --------------
Name: Michael Latsch
Title: Vice President
-24-
<PAGE>
SCHEDULE 9(A)(I)
----------------
1997 and 1998 consolidated, combined or unitary Income Tax Returns of Seller
that include Cyprus Foote Mineral Company:
Federal Consolidated Income Tax Return
Alaska Combined Corporation Net Income Tax Return
Arizona Consolidated Corporate Income Tax Return
California Combined Corporation Franchise or Income Tax Return
Colorado State Combined C Corporation Income Tax Return
Idaho Combined Corporation Income Tax Return
Illinois Combined Corporation Income and Replacement Tax Return
Kentucky Consolidated Corporation Income and License Tax Return
Maine Combined Corporate Income Tax Return
Minnesota Combined Corporation Franchise Tax Return
Montana Consolidated Corporation License Tax Return
Nebraska Combined Corporation Income Tax Return
New Mexico Combined Corporate Income and Franchise Tax Return
Utah Combined Corporation Franchise or Income Tax Return
-25-
<PAGE>
SCHEDULE 9(A)(II)
-----------------
1997 and 1998 separate company state Income Tax Returns for Cyprus Foote Mineral
Company:
Kansas
North Carolina
Ohio
Oklahoma
Pennsylvania
Tennessee
Virginia
Vermont
Texas
-26-
<PAGE>
SCHEDULE 15
-----------
None
-27-
<PAGE>
SCHEDULE 18
-----------
a) none
b) none
c) none
d) none
e) none
f) the statute of limitations relating to the payment of Taxes has been
extended for the following:
. 1994 and 1995 federal consolidated income tax return
. 1994 California combined return
. 1989-92 Colorado combined returns
. 1994-96 Illinois combined returns
g) none
h) none
i) none
j) 1994-1995 California combined return audit is scheduled to begin October
19, 1998
1994-1996 Illinois combined return audit is scheduled to begin November
2, 1998
1994-1996 Utah combined return audit is scheduled to begin February 15,
1999
k) there are no Section 481(a) adjustments that require adjustments in periods
subsequent to the Closing
-28-
<PAGE>
EXHIBIT 99
NEWS
[CYPRUS AMAX CYPRUS AMAX For immediate release
LOGO APPEARS MINERALS COMPANY
HERE] Post Office Box 3299
Englewood, Colorado 80155
================================================================================
CYPRUS AMAX MINERALS COMPLETES SALE OF
LITHIUM UNIT TO CHEMETALL GmbH
DENVER (October 13, 1998) Cyprus Amax Minerals Company (NYSE:CYM) today
announced it has completed the sale of its Cyprus Foote Mineral Company lithium
subsidiary to an affiliate of Chemetall GmbH, a specialty chemicals unit of
Metallgesellschaft AG.
Cyprus Amax received $305 million in cash in the transaction and expects to
report a pre-tax gain of approximately $150 million from the sale. This should
result in an after-tax gain of slightly over $100 million in the fourth quarter.
However, as a result of the sale of assets earlier in the year, only a nominal
amount of Federal Income Taxes are expected to be paid. Proceeds from the sale
will be used for general corporate purposes, including debt reduction, the share
buyback program and to strengthen Cyprus Amax's financial position and core
mining businesses.
Merrill Lynch served as advisor to Cyprus Amax for the sale.
Cyprus Amax Minerals Company, headquartered in Englewood, Colorado, is a
leading producer of copper and coal, the world's largest producer of molybdenum,
and holds a 31% interest in Kinross Gold. Cyprus Amax is exploring for minerals
worldwide.
Actual results may vary materially from any forward-looking statement the
Company makes. Refer to the Cautionary Statement and Risk Factors contained in
the Company's most recent Form 10-K.
####
Investor Relations Contact
Marj Charlier
Director of Investor Relations
(303) 643-5625
To obtain a faxed copy of this or any Cyprus Amax news release, call
1-800-758-5804, ext. 224250. News releases can also be accessed via the
Internet at http://www.prnewswire.com, or at the Cyprus Amax Minerals web site,
-------------------------
http://www.cyprusamax.com.
- -------------------------
