<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) June 30, 1999
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CYPRUS AMAX MINERALS COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 1-10040 36-2684040
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(State or other juris- (Commission I.R.S. Employer
diction of incorporation) File Number) (Identification No.)
9100 East Mineral Circle, Englewood, CO 80112
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(Address of principal executive offices) (Zip Code)
(303) 643-5000
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(Registrant's telephone number, including area code)
<PAGE>
Item 2. Disposition of Assets
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On June 30, 1999, pursuant to a Stock Purchase and Sale Agreement, dated as of
May 12, 1999, by and among Cyprus Amax Minerals Company ("Cyprus Amax"), Amax
Energy Inc., Cyprus Amax Coal Company, and RAG International Mining GmbH, Cyprus
Amax completed the sale of its coal subsidiary to RAG International Mining GmbH.
The terms of the transaction were established through arm's length negotiation.
Cyprus Amax received $1,039 million in cash in the transaction and expects to
report near break-even pre-tax earnings from the sale. Because of Cyprus Amax's
tax position in 1999, tax payments as a result of the transaction are expected
to be partially mitigated. Proceeds from the sale are expected to be used for
general corporate purposes, including debt reduction, the existing share buyback
program and to strengthen Cyprus Amax's financial position and core mining
business.
2
<PAGE>
Item 7. Financial Statements and Exhibits
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(b) Unaudited Pro forma Financial Information
Cyprus Amax's unaudited Pro forma financial statements give effect to the sale
of its coal subsidiary as if such transaction had occurred for balance sheet
purposes, on March 31, 1999 and for income statement purposes as of January 1,
1998. 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 March 31, 1999
(In Millions)
Historical
--------------------------- Pro forma
Disposition Consolidated
----------- Pro forma Without
Consolidated Coal Adjustments Coal
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Current Assets $ 837 $ 202 $ 1,053(1) $ 1,688
Properties - At Costs, Net 3,799 1,245 2,554
Equity Investments and Other Assets 555 82 19(3) 492
----------- ---------- ----------- -----------
Total Assets $ 5,191 $ 1,529 $ 1,072 $ 4,734
=========== ========== =========== ===========
Current Liabilities $ 584 $ 160 $ 85(2) $ 509
Long-Term Debt and Capital Lease Obligations 1,719 33 - 1,686
Other Liabilities 738 310 (13)(3) 415
----------- ---------- ----------- -----------
Total Noncurrent Liabilities and Deferred
Credits 2,457 343 (13) 2,101
Minority Interest 32 13 - 19
Shareholders' Equity
Preferred Stock 5 - - 5
Common Stock 1 - - 1
Paid-In Surplus 2,913 1,439 1,439(4) 2,913
Accumulated Deficit (706) (426) (439)(4) (719)
Other (8) - - (8)
----------- ---------- ----------- -----------
2,205 1,013 1,000 2,192
Treasury Stock at Cost (87) - - (87)
----------- ---------- ----------- -----------
Total Shareholders' Equity 2,118 1,013 1,000 2,105
----------- ---------- ----------- -----------
Total Liabilities and Shareholders' Equity $ 5,191 $ 1,529 $ 1,072 $ 4,734
=========== ========== =========== ===========
</TABLE>
3
<PAGE>
Pro forma Income Statement for Year Ended December 31, 1998
(In Millions except Per Share Data)
<TABLE>
<CAPTION>
Historical
-------------------------- Pro forma
Cyprus Disposition Consolidated
Amax ----------- Pro forma Without
Consolidated Coal Adjustments (5) Coal
------------ ----------- --------------- ------------
<S> <C> <C> <C> <C>
Revenue $ 2,566 $ 906 $ - $ 1,660
Costs and Expenses
Costs of Sales 1,787 700 - 1,087
Selling and Administrative 119 14 - 105
Depreciation, Depletion, and Amortization 361 107 - 254
Write-Downs and Special Charges 118 - - 118
Exploration Expense 45 - - 45
------------ ----------- --------------- ------------
Total Costs and Expenses 2,430 821 - 1,609
Income From Operations 136 85 - 51
Other Income (Expense)
Interest Income 17 - - 17
Interest Expense (168) (11) - (157)
Capitalized Interest 5 3 - 2
Loss on Equity Investments and Other (53) - - (53)
------------ ----------- --------------- ------------
Income (Loss) Before Income Taxes and Minority
Interest (63) 77 - (140)
Income Tax Benefit (Provision) (13) (2) - (11)
Minority Interest 1 - - 1
------------ ----------- --------------- ------------
Net Income (Loss) (75) 75 - (150)(5)
Preferred Stock Dividends (19) - - (19)
------------ ----------- --------------- ------------
Income (Loss) Applicable to Common Shares $ (94) $ 75 $ - $ (169)
============ =========== =============== ============
Earnings (Loss) per Common Share
Basic and Diluted * $ (1.02) $ .81 $ (1.83)(6)
Weighted Average Common Shares Outstanding
Basic 92 92 92
Diluted 102 102 102
</TABLE>
* Diluted earnings (loss) per share were anti-dilutive.
4
<PAGE>
Pro forma Income Statement for Period Ended March 31, 1999
(In Millions except Per Share Data)
<TABLE>
<CAPTION>
Historical
------------------------------ Pro forma
Cyprus Disposition Consolidated
Amax ----------- Pro forma Without
Consolidated Coal Adjustments (6) Coal
------------ ----------- --------------- ------------
<S> <C> <C> <C> <C>
Revenue $ 449 $ 166 $ - $ 283
Costs and Expenses
Costs of Sales 345 124 - 221
Selling and Administrative 18 1 - 17
Depreciation, Depletion, and Amortization 73 21 - 52
Write-Downs and Special Charges - - - -
Exploration Expense 3 - - 3
------------ ----------- --------------- ------------
Total Costs and Expenses 439 146 - 293
Income From Operations 10 20 - (10)
Other Income (Expense)
Interest Income 4 - - 4
Interest Expense (36) (2) - (34)
Capitalized Interest 1 - - 1
Loss on Equity Investments and Other (10) - - (10)
------------ ----------- --------------- ------------
Income (Loss) Before Income Taxes and Minority (31) 18 - (49)
Interest
Income Tax Benefit (Provision) 4 (2) - 6
Minority Interest 1 1 - -
------------ ----------- --------------- ------------
Net Income (Loss) $ (26) $ 17 $ - $ (43)(6)
Preferred Stock Dividends (5) - - (5)
------------ ----------- --------------- ------------
Income(Loss) Applicable to Common Shares $ (31) $ 17 $ - $ (48)
============ =========== =============== ============
Earnings (Loss) per Common Share
Basic and Diluted * $ (0.33) $ .19 $ (0.53)(6)
Weighted Average Common Shares Outstanding
Basic 90 90 90
Diluted 100 100 100
</TABLE>
* Diluted earnings (loss) per share were anti-dilutive.
Notes to Unaudited Pro forma Balance Sheet and Income Statements
(1) Reflects the gross cash proceeds of $1,039 million from the sale of the
coal subsidiary. Additionally, deferred tax asset has been adjusted to
reflect the sale.
(2) To adjust for expenses related to the coal subsidiary sale, primarily
legal, investment brokers fees and outside services. Additionally, income
taxes payable has been adjusted to reflect the sale.
(3) To adjust noncurrent notes receivable and other long-term liabilities to
reflect the future buyout of subleased equipment between RAG International
Mining GmbH and Cyprus Amax. Additionally, deferred income taxes have been
adjusted to reflect the sale.
5
<PAGE>
(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) Assumes that the proceeds of $1,039 million from the sale of the coal
subsidiary remains in cash. At an average interest rate of six percent,
interest income would increase by $62 million and income tax expense would
increase by $15 million, resulting in a Pro forma Consolidated Loss Without
Coal of $103 million, or $1.33 loss per share.
(6) Assumes that the proceeds of $1,039 million from the sale of the coal
subsidiary remains in cash. At an average interest rate of six percent,
interest income would increase by $16 million and income tax expense would
increase by $4 million, resulting in a Pro forma Consolidated Loss Without
Coal of $31 million, or $0.40 loss per share.
(c) Exhibits
Exhibit
Number Document
------ --------
2(a) Stock Purchase and Sale Agreement, dated as of May 12, 1999, by and
among Cyprus Amax Minerals Company, Amax Energy Inc., Cyprus Amax Coal
Company and RAG International Mining GmbH, incorporated herein by
reference to Exhibit 10 to Cyprus Amax Minerals Company Form 10-Q for
the quarter ended March 31, 1999.
2(b) Tax Sharing and Indemnification Agreement, dated June 30, 1999, by
and between Cyprus Amax Minerals Company, Amax Energy Inc., Cyprus
Amax Coal Company and RAG American Coal Company.
99 Press Release, dated June 30, 1999, issued by Cyprus Amax Minerals
Company.
The following schedules are being omitted from this filing:
Schedules to the Stock Purchase and Sale Agreement
- --------------------------------------------------
3.2.6 Pre-Closing Conditions
3.2.7(b) Cyprus Amax Coal Company Subsidiaries
3.2.8 Cyprus Amax Coal Company and Subsidiaries Common Shares Authorized,
Issued, and Par Values
3.2.10 Cyprus Amax Coal Company - Domestic Operations Financial Statements
3.2.11 Real Property
3.2.12 Personal Property
3.2.13 Intellectual Property
3.2.14 Material Contracts
3.2.15 Listing of Large Customer
6
<PAGE>
3.2.16 Employee Policies
3.2.17 Litigation and Claims
3.2.18 Environmental Matters
3.2.19 Extraordinary Events
3.2.20 Compliance with Laws
3.2.21 Unabated and Abated Notices of Violation
3.2.22 Insurance Policies
3.2.23 Transactions with Affiliates
3.2.24(a-d) Bonds
3.2.24(e-f) Guarantees, Letters of Credits, Equipment Leases, and Leases
3.2.25 Employee Benefit Plans
3.2.25(g) Welfare and Benefit Plan Litigation
3.2.25(k) Multi-employer benefit plans
3.3.25(l) Retirees and dependents under Section 9706 of the Internal Revenue
Code
3.3.25(m) Retirees and Dependents under Section 9712(d)(1)(A) of the Internal
Revenue Code
3.3.25(n) Retirees and Dependents under Section 9712(d)(1)(B) of the Internal
Revenue Code
3.3.25(o) Welfare and Benefit Plans Payment
4.2.3 Debt and Capital Leases
4.3.6(c) Guarantees Related to Australian Assets
4.3.6(e) Equipment Leases
5.1.3 Actuarial Calculation Methodology
5.19 Employees Excluded from Section 5.1.9
6.2.5 Consents Required at Closing
Registrant will furnish supplementally a copy of any omitted schedule to 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: July 14, 1999 CYPRUS AMAX MINERALS COMPANY
By: /s/ John Taraba
--------------------------
Name: John Taraba
Vice President and
Controller (Principal
Accounting Officer)
8
<PAGE>
Exhibits
- --------
Exhibit
Number Document
------ --------
2(a) Stock Purchase and Sale Agreement, dated as of May 12, 1999, by and
among Cyprus Amax Minerals Company, Amax Energy Inc., Cyprus Amax
Coal Company and RAG International Mining GmbH, incorporated herein
by reference to Exhibit 10 to Cyprus Amax Minerals Company Form 10-Q
for the quarter ended March 31, 1999.
2(b) Tax Sharing and Indemnification Agreement, dated June 30, 1999, by
and between Cyprus Amax Minerals Company, Amax Energy Inc., Cyprus
Amax Coal Company and RAG American Coal Company.
99 Press Release, dated June 30, 1999, issued by Cyprus Amax Minerals
Company.
9
<PAGE>
TAX SHARING AND INDEMNIFICATION AGREEMENT
This Tax Sharing and Indemnification Agreement (this "Agreement") is
made as of the 30th day of June, 1999 by and between Cyprus Amax Minerals
Company, a Delaware corporation ("Cyprus Amax"), Amax Energy Inc., a Delaware
corporation ("Energy") (Cyprus Amax and Energy together referred to herein as
"Seller"), Cyprus Amax Coal Company, a Delaware corporation (the "Company") and
RAG American Coal Company, a Delaware corporation ("Buyer"). Cyprus Amax,
Energy, Company and Buyer are sometimes individually referred to herein as a
"party" and sometimes collectively as "parties." Any reference to the Company
will be deemed to include a reference to any Subsidiaries of the Company
immediately prior to the Closing.
WHEREAS, Seller, the Company and RAG International Mining GmbH ("RIM")
have entered into the Stock Purchase and Sale Agreement, dated as of May 12,
1999 (the "Stock Purchase and Sale Agreement"), which Stock Purchase and Sale
Agreement RIM assigned to Buyer pursuant to the Assignment Agreement between RIM
and Buyer dated as of June 24, 1999, for the sale by Energy 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:
"Affiliated Group" means any affiliated group within the meaning of
Section 1504(a) of the Code or any similar group defined under a similar
provision of state, local or foreign law.
"Cyprus Plateau Tax Sharing Agreement" means the Tax Sharing Agreement
by and between Cyprus Amax and Cyprus Plateau Mining Corporation dated as of
September 30, 1997.
"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
<PAGE>
to any such assessments or refunds 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.
"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, but not including sales and compensating use taxes) or
receipts (together with any interest, penalties or additions imposed with
respect thereto), but shall not be deemed to include the Pennsylvania Capital
Stock and Foreign Franchise Tax.
"Income Tax Return" means any Tax Return with respect to Income Taxes.
"Seller Consolidated Return" means any consolidated, combined or
unitary Tax Return that includes Seller or any of its Tax Affiliates as the
common parent.
"Tax" or "Taxes" means (i) any federal, state, local, foreign, 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, 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 and (ii) any Liability to Cyprus Plateau
Mining Corporation under the Cyprus Plateau Tax Sharing Agreement, but in the
case of clauses (i) and (ii) shall exclude production royalties (or any interest
thereon) due any land owner for coal production and any Abandoned Mined Land
Reclamation fees pursuant to Section 402(a) of the Federal Surface Mining
Control and Reclamation Act of 1977, 30 U.S.C. Section 1232(a).
"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.
"Tax Affiliate" 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; provided, however, that for the purposes of this
-------- -------
Agreement, Tax Affiliates of Seller will not include the Company.
"Taxing Authority" shall mean any Governmental Authority, domestic or
foreign, having jurisdiction over the assessment, determination, collection, or
other imposition of any Tax.
"Treasury Regulations" shall mean valid regulations issued by the
United States Treasury Department pursuant to the Code and shall include
temporary regulations. Any
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<PAGE>
reference to a provision of temporary Treasury Regulations shall, if such
provision is modified or renumbered, be deemed to refer to the successor
provision as so modified or renumbered, but only to the extent that such
successor provision applies to the Company under the effective date rules
applicable to such successor provision.
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, except to the extent that such Taxes are accrued as a Liability in the
determination of the Adjusted Equity Value:
(i) all Taxes imposed on Seller or the Company with respect to all
taxable periods of Seller or the Company that end on or prior to
the Closing Date;
(ii) all Taxes imposed on the Company under Treasury Regulation
Section 1.1502-6 or any similar provision of state, local or
foreign Law as a result of the inclusion of the Company in a
Seller Consolidated Return on or prior to the Closing Date ;
(iii) all Taxes allocated to Seller pursuant to Section 3 hereof;
(iv) one-half of the Taxes (other than any Income Taxes) imposed on
the transfers consummated under the Stock Purchase and Sale
Agreement;
(v) all Income Taxes arising as a result of the Section 338(h)(10)
Election made pursuant to Section 19 hereof; and
(vi) all Taxes payable under the Tax Disaffiliation Agreement, dated
as of May 24, 1993, by and between AMAX Inc. and Alumax Inc.
provided, however, that the Taxes set forth in clauses (i) through (v) 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.
3. Straddle Periods.
----------------
(a) With respect to any taxable period of the Company 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 any relevant Taxing Authority to close such Straddle Period as
of the end 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,
respectively; provided, however, that notwithstanding any provision to the
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contrary contained in this Agreement, Seller will not be responsible for any
Taxes to the extent accrued as a Liability in the determination of the Adjusted
Equity Value. If the Closing Date is not the last day of a calendar month and
it is not reasonably practicable to perform a closing of the books as of the end
of the Closing Date, Income Taxes for a Straddle Period as to which an election
is made under this
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<PAGE>
Section 3(a) shall be determined based upon a closing of the books as of the end
of the calendar month immediately preceding the calendar month that includes the
Closing Date and a pro rata portion (by day) of the Company's results for the
calendar month that includes the Closing Date, except that events or
transactions during the calendar month that includes the Closing Date that are
not in the ordinary course of business of the Company shall be allocated to the
portion of the Straddle Period up to and including the Closing Date only if such
events or transactions actually occur during such portion of the Straddle
Period.
(b) In any case where applicable Law does not permit the Company to
close a Straddle Period as of the end of the Closing Date, Seller will be
allocated any Income Taxes imposed on the Company 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 as of the end of the Closing Date based upon tax
accounting methods, practices and procedures last used by the Company in
preparing its Income Tax Returns; provided, however, that if (i) the Closing
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Date is not the last day of a calendar month and (ii) it is not reasonably
practicable to perform a closing of the books as of the end of the Closing Date,
Income Taxes for the portion of a Straddle Period up to and including the
Closing Date will be determined based upon a closing of the books as of the end
of the calendar month immediately preceding the calendar month that includes the
Closing Date and a pro rata portion (by day) of the Company's results for the
calendar month that includes the Closing Date, except that events or
transactions during the calendar month that includes the Closing Date that are
not in the ordinary course of business of the Company shall be allocated to the
portion of the Straddle Period up to and including the Closing Date only if such
events or transactions actually occur during such portion of the Straddle
Period; and provided, further, however, that such Income Taxes will not include
-------- ------- -------
any Income Taxes arising as a result of actions taken by the Company, 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) 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
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 been consummated during the period through the end of
the 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 Closing Date and the denominator of which is the number of days in
the entire Straddle Period; provided, that Seller's allocation shall be adjusted
--------
appropriately to reflect the actual proportionate period of property ownership
or the activity of the Company during the Straddle Period, as applicable, for
any such Non-Income Taxes imposed with respect to the ownership of specific
items of property held by the Company or the activity of the Company, as
applicable, during the Straddle Period.
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<PAGE>
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
imposed on the Company other than those for which Seller is responsible pursuant
to Sections 2 and 3 hereof, including, without limitation, (i) Taxes
attributable to periods ending after the Closing Date (other than any Taxes
allocated to Seller pursuant to Sections 2 and 3 hereof), (ii) Taxes imposed on
the actual or deemed transfers of any stock or assets or the assumption of any
liabilities pursuant to the Stock Purchase and Sale Agreement (other than Taxes
for which Seller is responsible pursuant to Sections 2(iv) and (v)) and (iii)
any Taxes to the extent accrued as a Liability in the determination of Adjusted
Equity Value.
5. Refunds of Indemnified Taxes.
----------------------------
(a) In accordance with Section 8.8 of the Stock Purchase and Sale
Agreement, Buyer, the Company and their Tax Affiliates shall hold in trust for
the benefit of Seller 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 any Seller's Refunds with respect to claims for tax refunds that are
Excluded Assets as defined in Section 1.1 of the Stock Purchase and Sale
Agreement, and, within five (5) business days after receipt by Buyer, the
Company or their Tax Affiliates of any such Seller's Refund, Buyer, the Company
or their Tax Affiliates shall pay over to Seller the amount of such Seller's
Refund without right of set off or counterclaim.
In accordance with Section 8.8 of the Stock Purchase and Sale
Agreement, Seller and its Tax Affiliates shall hold in trust for the benefit of
Buyer and the Company 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") and,
within five (5) business days of receipt by Seller or its Tax Affiliates of any
such Buyer's Refund, Seller and its Tax Affiliates shall pay over to Buyer or
the Company the amount of such Buyer's Refund without right of set off or
counterclaim. For purposes of this Agreement, any payments received from Cyprus
Plateau Mining Corporation under the Cyprus Plateau Tax Sharing Agreement with
respect to taxable periods (or portions thereof) ending on or prior to the
Closing Date shall be deemed to be "Seller's Refunds."
(b) Upon the 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. Seller will have the sole right to prosecute any
claims for Seller's Refunds, including any claims for tax refunds that are
Excluded Assets as defined in Section 1.1 of the Stock Purchase and Sale
Agreement (by suit or otherwise) at Seller's expense and with counsel of
Seller's choice. Buyer will cooperate, and cause the Company and their Tax
Affiliates to cooperate, fully, at Seller's expense, with Seller and its counsel
in connection therewith.
Upon the 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. Buyer will have the sole right to prosecute any claims for
Buyer's Refunds (by suit or otherwise) at Buyer's expense
-5-
<PAGE>
and with counsel of Buyer's choice. Seller will cooperate, and cause its Tax
Affiliates to cooperate, fully, at Buyer's expense, with Buyer and its counsel
in connection therewith.
(c) 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.
(d) Buyer and the Company hereby constitute and appoint Seller the
true and lawful attorney of Buyer and the Company, with full power of
substitution within the affiliated group of corporations of which Cyprus Amax is
the common parent (or any continuation of or successor to such group), and in
their name and stead or otherwise, by and on behalf of and for the benefit of
Seller: (i) to institute and prosecute from time to time in the name of the
Company or otherwise, but at the expense and for the benefit of Seller, any and
all proceedings at law, in equity, before agencies or otherwise, which Seller
may deem proper in order to collect, reduce to possession, assert or enforce any
and all claims for Seller's Refunds that are Excluded Assets as defined in
paragraph (c) of the definition in Section 1.1 of the Stock Purchase and Sale
Agreement; (ii) to defend, prosecute or compromise any and all claims for
Seller's Refunds that are Excluded Assets as defined in paragraph (c) of the
definition in Section 1.1 of the Stock Purchase and Sale Agreement; and (iii) to
do all such acts and things in relation to the matters set forth in clauses (i)
and (ii) of this Section 5(d) as Seller shall deem desirable; and Buyer and the
Company further declare that the appointment made and the powers hereby granted
are coupled with an interest and are and shall be irrevocable by Buyer and the
Company or by their dissolution or in any manner or for any reason. Seller
shall inform Buyer about the conduct of the proceedings described in the
preceding sentence; shall allow Buyer, at Buyer's expense, to participate in
such proceedings, including, without limitation, to attend all meetings with
taxing authorities; and shall provide Buyer with copies of any written external
correspondence, claims or filings with respect to such proceedings within ten
(10) business days after receipt or transmission.
6. Tax Benefits.
------------
(a) Buyer and the Company shall promptly remit to Seller 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
shall promptly remit to Buyer 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, whether resulting from
a deduction, credit, reduced gain or increased loss from
the disposition of an asset, or otherwise;
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<PAGE>
(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 any individual item
of income, gain, loss, deduction or credit.
(b) If either Buyer or Seller (the "remittor") makes a remittance to
the other party (the "remittee") under Section 6(a) or Section 7(c) hereof of
any Tax Benefit and all or part of such Tax Benefit is subsequently changed, the
remittee will promptly pay to the remittor that portion of such remittance equal
to the portion of the Tax Benefit that is changed and, in addition thereto, any
other costs or expenses incurred by the remittor in respect to the changed
portion of the Tax Benefit (it being agreed that the remittor shall not suffer
any cost or expense by reason of the changed portion of the Tax Benefit).
7. Buyer to Forgo Carrybacks.
-------------------------
(a) This Section 7 shall apply to all Taxes other than (i) federal
Income Taxes and (ii) Income Taxes imposed by any state or locality that gives
effect to the Section 338(h)(10) Election (as hereinafter defined).
(b) Unless Seller otherwise consents, Buyer will cause the Company to
forgo 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").
(c) If Seller consents to a Post-Closing Carryback under Section 7(b)
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
promptly remit to Buyer 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.
(d) If Seller makes any remittance to Buyer under Section 7(c) hereof
and all or part of such Post-Closing Carryback is subsequently disallowed, then
Buyer shall promptly pay to Seller 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.
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9. Preparation and Filing of Tax Returns.
-------------------------------------
(a) Seller will prepare or cause to be prepared, and file or cause to
be filed, (i) all consolidated, combined, or unitary Income Tax Returns of
Seller or any of its Tax Affiliates or former Tax Affiliates that include the
Company, including but not limited to those Income Tax Returns that are listed
on Schedule 9(a)(i) hereto, (ii) all Income Tax Returns required to be filed by
or on behalf of the Company for taxable periods ending (including by reason of
any election under Section 3 hereof) on or before the Closing Date, including
but not limited to those Income Tax Returns that are listed on Schedule 9(a)(ii)
hereto, (iii) any Pennsylvania Corporation Tax Report (Form RCT-101) that
includes both the Corporation Net Income Tax (an Income Tax) and the Capital
Stock and Foreign Franchise Tax (not an Income Tax), required to be filed on
behalf of the Company for periods ended (including by reason of any election
under Section 3 hereof) on or before the Closing Date, including but not limited
to those Tax Returns that are listed on Schedule 9(a)(iii) hereto, and (iv) all
other Tax Returns required to be filed by or on behalf of the Company on or
before the Closing Date. Seller will include the income of the Company
(including any deferred income included in income by Treasury Regulations
Section 1.1502-13 and 1.1502-14 and similar provisions of state, local or
foreign Law and any excess loss accounts taken into account under 1.1502-19 and
similar provisions of state, local or foreign Law) on the Seller Consolidated
Returns for all periods through the end of the Closing Date and pay any Income
Taxes attributable to such income, other than income and Income Taxes arising as
a result of actions taken by the Company, 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.
(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 taxable
periods including, but ending after, the Closing Date ("Straddle Period
Returns") in a manner consistent with the Company's past Tax accounting practice
and, in the absence thereof, reasonable Tax accounting practices selected by
Buyer (except that accounting elections and determinations made by Buyer shall
be made, where reasonably possible, in a manner that minimizes the net Tax
incurred by Seller and its Tax Affiliates). If Buyer files Tax Returns for such
Straddle Periods inconsistently with such Tax accounting practices, 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 Tax 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 Regulations Section 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 with respect to Tax Returns
prepared by Seller for the Company pursuant to Section 9(a).
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<PAGE>
(e) Upon request of either party, the other party shall make available
prior to filing (and after filing until the expiration of the applicable statute
of limitations) 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.
Seller and Buyer shall attempt in good faith to resolve any issues arising out
of the review of such Tax Returns.
10. Settlement of Actual Tax Allocations.
------------------------------------
(a) This Section 10(a) shall govern the settlement as between Seller,
on the one hand and Buyer and the Company, on the other hand, 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) and (c) hereof, Buyer will, at
least sixty (60) 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) and (c) 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
prior to the delivery of such statement, in respect of such Taxes (whether as
estimated Taxes or otherwise) (the "Section 10(a) Statement") (unless the final
due date (including extensions) of such Straddle Period Return is less than
sixty (60) days after the Closing Date, in which case Buyer shall provide the
materials described in clauses (i) and (ii) a reasonable time prior to the final
due date (including extensions) of such Straddle Period Return). Seller and its
authorized representatives will have the right to review the Section 10(a)
Statement for thirty (30) days following Seller's receipt of the Section 10(a)
Statement (the "30-Day Review Period"). If Seller disagrees with the allocation
in the Section 10(a) Statement, Seller will notify Buyer in writing of such
disagreement prior to the close of the 30-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 fifteen
(15) days following the end of the 30-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 end of the 30-Day Review Period,
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 Section 10(a)
Statement or in such notice (as the case may be) as being allocable to Seller
pursuant to Section 3(b) and (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);
provided, however, that in the event of a disagreement, not later than five (5)
days after the date on which Seller and Buyer jointly request the Accountant to
resolve the
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<PAGE>
disagreement pursuant to Section 16, Seller will pay to Buyer or Buyer will pay
to Seller, as the case may be, an amount equal to the difference between (x) the
amount of Taxes shown on the Statement as being allocable to Seller pursuant to
Section 3(b) and (c) hereof that are not in dispute, and (y) 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). Not later than five (5) days after 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 amount of Taxes shown in such
notice as being allocable to Seller pursuant to Section 3(b) and (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), provided that such payment shall be adjusted to
take into account the amount of any payment previously made by Seller or Buyer
pursuant to the immediately preceding sentence.
(b) This Section 10(b) shall govern the settlement as between Seller,
on the one hand, and Buyer and the Company, on the other hand, 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) and (c) 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) and (c) 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 prior to the delivery of such statement, in
respect of such Taxes (whether as estimated Taxes or otherwise) (the "Section
10(b) Statement") (unless the final due date of such Tax is less than thirty
(30) days after the Closing Date, in which case Buyer shall provide the
materials described in clauses (i) and (ii) a reasonable time prior to the final
due date of such Tax). Seller and its authorized representatives will have the
right to review the Section 10(b) Statement for ten (10) days following Seller's
receipt of the Section 10(b) Statement (the "10-Day Review Period"). If Seller
disagrees with the allocation in the Section 10(b) 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 end of the 10-
Day Review Period, 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 Section 10(b) Statement or in such notice (as the case may be) as being
allocable to Seller pursuant to Section 3(b) and (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); provided, however, that in the event of a disagreement, not
later than five (5) days after the date on which Seller and Buyer jointly
request the Accountant to resolve the disagreement pursuant to Section 16,
Seller will pay to Buyer or Buyer will pay to Seller, as the case may be, an
amount equal to the difference between (x) the amount of Taxes shown on the
Statement as being allocable to Seller pursuant to Section 3(b) and (c) hereof
that are not in
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<PAGE>
dispute, and (y) 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). Not later than five (5) days after
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
amount of Taxes shown in such notice as being allocable to Seller pursuant to
Section 3(b) and (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), provided that
such payment shall be adjusted to take into account the amount of any payment
previously made by Seller or Buyer pursuant to the immediately preceding
sentence.
11. Cooperation; Access to Information; Tax Records.
-----------------------------------------------
(a) Buyer, Seller and the Company will cooperate fully with one
another 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 of Tax Returns, and (iv) any administrative or judicial proceeding
in respect of Taxes assessed or proposed to be assessed. 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 with a Tax package containing
such aforementioned Tax data and other information relating to the Company
within sixty (60) days after the Closing and in the form reasonably requested by
the Seller.
(b) Seller, Buyer, the Company and their respective Tax Affiliates
shall make available to each other 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
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<PAGE>
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. Audits, Litigation and Other Proceedings.
----------------------------------------
(a) Buyer will promptly notify Seller in writing following receipt by
Buyer, the Company, or their Tax Affiliates of notice of any pending or
threatened Tax audits of or assessments against the Company, Buyer, or their Tax
Affiliates (i) relating to any taxable period of the Company ending on, prior to
or including the Closing Date, or (ii) that may 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 clause (i) or (ii) of
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 clause (i) or (ii) of
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.
(c) To exercise the Representation Right, Seller must first, within a
reasonable period following the receipt of the Audit Notification, (i) notify
Buyer in writing that Seller intends to exercise the Representation Right, and
(ii) deliver 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.
(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
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<PAGE>
relate to the Company, and such participation shall be reflected by the grant of
appropriate powers of attorney. In the case of any such proceeding as to which
Buyer would reasonably be expected to have a consent right under Section 12(g)
hereof, Seller will inform and consult with Buyer about the conduct of such
proceedings.
(e) Buyer shall have exclusive control of all administrative and
judicial proceedings related to the Company's Taxes other than those described
in clause (i) or (ii) of 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.
(g) Seller will not settle any audit, litigation or other proceedings
(other than with respect to federal Income Taxes or Income Taxes imposed by any
state or locality in which the Section 338(h)(10) Election is given effect,
except to the extent that such audit, litigation or other proceeding relates to
the Allocations (as hereinafter defined)) in a manner that would materially and
adversely affect the Company after the Closing Date without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or delayed).
This Section 12(g) shall apply to, but not be limited to, (i) the dispute
currently pending with the Colorado Department of Revenue relating to whether
the Company is entitled to an enterprise zone exemption for purposes of sales
and use tax, (ii) the dispute currently pending with the Wyoming Department of
Revenue and Campbell County relating to the assessment of additional severance
and ad valorem taxes on account of the receipt by the Company of certain
contract termination payments, and (iii) the litigation currently pending before
the U.S. Court of Federal Claims relating to whether the Company is entitled to
a refund of federal black lung excise taxes (the "Black Lung Excise Tax
Litigation"); provided, however, that, notwithstanding anything to the contrary
-------- -------
in this Agreement or the Stock Purchase and Sale Agreement, in no event will
Seller settle the Black Lung Excise Tax Litigation without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or delayed).
13. Treatment of Indemnification. 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 or as a contribution to capital, as the case
may be, and not as an item subject to tax or as a reduction to a deductible
item.
14. Indemnification.
---------------
(a) If Seller or Buyer or the Company (the "Indemnified Party")
determines that it or any of its Tax Affiliates is or may be entitled to
indemnification by another party (the "Indemnifying Party") under this Agreement
as a result of: (i) any obligation to pay Taxes as allocated in Sections 2
through 4 or (ii) the Seller's breach of a representation or warranty contained
in Section 18; (provided, however, that any claim for indemnification based upon
-------- -------
a breach of a representation or warranty contained in Section 18 is subject to
Section 9.5.1 of the Stock Purchase and Sale Agreement), the Indemnified Party
will promptly deliver to the
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<PAGE>
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 Taxing
Authority ("Taxing Authority 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 as promptly as practicable after the
Indemnified Party receives the Taxing Authority Notice (but in no event more
than five (5) days after the Indemnified Party receives the Taxing Authority
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
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 Indemnified Party may
exercise any and all of its rights under applicable Law and the Stock Purchase
and Sale Agreement to collect such amount.
(c) If the Indemnified Party and the Indemnifying Party are unable to
settle any dispute regarding a claim for indemnification within thirty (30) days
after receipt of the Objection Notice, the Indemnified Party and the
Indemnifying Party 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 or the
transactions contemplated hereby and for the allocation of Taxes pursuant to
this Agreement. Each of the parties hereto, on behalf of itself and its
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
-14-
<PAGE>
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.
Notwithstanding the foregoing, as of the Closing Date, the common parent of
Buyer's affiliated group shall expressly assume the rights and obligations of
Seller under the Cyprus Plateau Tax Sharing Agreement and shall cause Cyprus
Plateau Mining Corporation promptly to perform all of its obligations
thereunder. Buyer shall use its reasonable best efforts to enter into a tax
sharing agreement with Cyprus Plateau Mining Corporation on terms substantially
similar to those of the Cyprus Plateau Tax Sharing Agreement and to obtain any
necessary consents of the shareholders of Cyprus Plateau Mining Corporation to
such agreement.
16. Resolution of Disputes. If Seller and Buyer or the Company fail
----------------------
to agree mutually 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 or the Company
shall deliver to the Accountant copies of any schedules or documentation which
may be reasonably required by the Accountant to make its determination. Seller
and Buyer or the Company shall be entitled to make presentations to the
Accountant in connection therewith. Seller and Buyer or the Company shall use
all commercially reasonable efforts to cause the Accountant to complete promptly
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 or the Company.
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
promptly 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. In the event
that any payment under this Agreement or the Stock Purchase and Sale Agreement
is made by a person incorporated or organized under the laws of any country (or
subdivision thereof) other than the United States (or any state thereof), and
such payment is subject to withholding tax, the payor shall withhold such tax
and pay such tax over to the appropriate Taxing Authority and shall pay the
payee such additional amounts as are necessary so that the net amount received
by the payee after deduction of withholding tax with respect to such payment and
with respect to such additional amounts is equal to the amount that would have
been received if no such withholding had been made. Such additional amounts
shall be reduced by the amount of any Tax benefit to the payee from the payment
of such withholding tax, when, as and if such Tax benefit is realized through
the reduction of Taxes otherwise due. In computing the amount of such Tax
benefit, the payee shall be deemed to realize all other items of
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<PAGE>
loss, deduction or credit before realizing any Tax benefit from the payment of a
withholding tax described in this Section 17.
18. Seller's Representations and Warranties. Seller hereby
---------------------------------------
represents and warrants to Buyer as of the Closing Date, as set forth below.
The exceptions, modifications, descriptions and disclosures in any Schedule
attached hereto are made for all relevant purposes of this Agreement and are
exceptions to all representations and warranties set forth in this Agreement or
in any agreement or instrument delivered pursuant to or in connection with this
Agreement (the "Related Agreements") to the extent applicable thereto.
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), the Company has correctly
completed in all material respects and filed or caused to be filed all required
Income Tax Returns on a timely basis or has filed an appropriate application for
extension of time to file. All Seller Consolidated Returns in which the Company
has been included that were required to be filed have been correctly completed
in all material respects and filed on a timely basis or Seller has filed an
appropriate application for extension of time to file. Neither Seller nor the
Company is delinquent in the payment of any Income Tax shown as payable on such
income Tax Returns or estimated tax assessment payable by or on behalf of the
Company (other than any Income Taxes the amount or validity of which are being
contested in good faith by appropriate proceedings).
(b) Except as set forth on Schedule 18(b), 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.
(c) Except as indicated on Schedule 18(c) hereto, 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.
(d) Except as indicated on Schedule 18(d) hereto, (i) no election
under Code Section 338 has been made or filed by or with respect to the Company,
(ii) no closing agreement pursuant to Code Section 7121 has been entered into by
or with respect to the Company, (iii) the Company has not agreed to make any
adjustment pursuant to Code Section 481(a) for any taxable year for which the
statute of limitations has not expired by reason of any change in any accounting
method, and there is no application pending with any taxing authority requesting
permission of any changes in any accounting method of the Company, and (iv) the
Internal Revenue Service has not proposed any such adjustment or change in
accounting method with respect to the Company for any taxable year for which the
statute of limitations has not expired.
-16-
<PAGE>
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 Law (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 generally 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 a wholly owned subsidiary of 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.
(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 sixty (60) days after the Closing Date, Buyer shall:
(i) determine, based upon the principles contained in the
relevant Treasury regulations, the modified aggregate
deemed sales price ("MADSP") for the assets of the Company
(within the meaning of Treasury Regulations Section
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 Regulations Sections 1.338(b)-2T and 1.338
(b)-3T, provided that Buyer shall allocate such MADSP as
described in Schedule 19(c)(ii) (together (i) and (ii) are
the "Allocations").
(d) Buyer shall prepare 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). Promptly following the finalization of the
Allocations pursuant to the terms of this Section 19, Buyer and Seller shall
both execute and deliver completed 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
-17-
<PAGE>
twenty (20) days, Buyer and Seller will, in accordance with Section 16 hereof,
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 Allocations and
shall not take any position inconsistent with the Section 338(h)(10) Election 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 Allocations and shall not take any position
inconsistent with the Section 338(h)(10) Election 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 end of the Closing Date, the Company will
not engage in any transaction that is not in the ordinary course of business of
the Company.
(i) Upon failure of the Buyer to satisfy any of its obligations under
this Section 19, Seller, at its election, may forego making the Section
338(h)(10) Election.
(j) The distribution by the Company to Energy of the stock of Cyprus
Australia Coal Company prior to the Closing shall be treated as part of the
deemed liquidation of the Company under Section 332 of the Code pursuant to
Treasury Regulations Section 1.338(h)(10)-1(e)(2)(ii).
20. Survival of Representation, 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, which shall be
bound thereby.
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.
23. Entire Agreement. This Agreement, the Stock Purchase and Sale
----------------
Agreement, and the other Related Agreements constitute the entire agreement
among the parties and supersede any and all other prior or contemporaneous
understandings, negotiations or agreements among 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.
-18-
<PAGE>
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, 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 the benefit of 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.
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 and the transactions contemplated hereby.
29. Third-Party Beneficiaries. Except as otherwise provided
-------------------------
expressly herein, 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. Words importing the singular shall include the
------------
plural and vice versa, and words importing a gender shall include other genders.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine or neuter form. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
The headings contained in this Agreement are inserted for convenience only and
shall not constitute a part hereof or affect any interpretation hereof. All
references herein to Sections (other than references to Sections of the Code or
other statute) and subsections shall be deemed to be references to Sections and
subsections of this Agreement unless the context shall otherwise require.
References in this Agreement to any Section shall include all subsections and
paragraphs in such Section; and references in this Agreement to any subsection
shall include all paragraphs in such subsection. The schedules, exhibits and
attachments to this Agreement form an integral part of this Agreement and are
incorporated by reference for all purposes as if set forth fully therein.
Unless the context shall otherwise require or provide, any
-19-
<PAGE>
reference to any agreement or other instrument or Law is to such agreement,
instrument or Law, as amended and supplemented from time to time (and, in the
case of a Law, to any successor provision); provided, however, that no covenant
-------- -------
herein shall be deemed to have been breached because of a change in Law issued
subsequent to the completion of the action or conduct which is the subject of
the covenant. This Agreement shall be construed in accordance with its fair
meaning and shall not be construed strictly against either party, without regard
to which party drafted this Agreement.
31. 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):
-----------------------------------------
RAG American Coal Company
210 East Lombard Street
Suite 401
Baltimore, MD 21202
Attention: President
Fax No.: (410) 659-0894
Tel. No.: (410) 727-4600
With copies to:
RAG International Mining GmbH
Roermonder Strasse 63
52134 Herzogenrath (Aachen)
Germany
Attention: Mr. Rainer Benning
Fax No.: 011 49 2407 51 204
Tel. No.: 011 49 2407 51 200
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attention: Thomas Sauermilch, Esq.
Fax No.: (212) 547-5444
Tel. No.: (212) 547-5532
-20-
<PAGE>
Cyprus Amax, Energy (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) 643-5084
Tel. No.: (303) 643-5000
With a copy to:
Wachtell, Lipton, Rosen, & Katz
51 West 52nd Street
New York, NY 10019
Attention: Stephanie Seligman
Fax No.: (212) 403-2000
Tel. No.: (212) 403-1000
32. 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.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Attest: CYPRUS AMAX MINERALS COMPANY
______________________________ By:__________________________
Name: /s/ D.E. Huffman Name: /s/ Philip C. Wolf
Title: Assistant Secretary Title: Senior Vice President
Attest: AMAX ENERGY INC.
______________________________ By:______________________________
Name: /s/ D.E. Huffman Name: /s/ Philip C. Wolf
Title: Assistant Secretary Title: Senior Vice President
Attest: CYPRUS AMAX COAL COMPANY
______________________________ By:______________________________
Name: /s/ J. Alan Link Name: /s/ James F. Roberts
Title Vice President Title: President
Attest: RAG AMERICAN COAL COMPANY
______________________________ By:______________________________
Name: /s/ J. Alan Link Name: /s/ James F. Roberts
Title: Vice President Title: President
-22-
<PAGE>
Schedule 9(a)(i)
CONSOLIDATED FEDERAL INCOME TAX RETURN
- --------------------------------------
Cyprus Amax Minerals Co. & Subsidiaries
COMBINED/CONSOLIDATED STATE TAX RETURNS
- ---------------------------------------
Alaska Iowa
Arizona Kentucky
California Maine
Colorado Minnesota
Connecticut Montana
Idaho Nebraska
Illinois New Mexico
Indiana Utah
<PAGE>
Schedule 9(a)(ii)
SEPARATE STATE TAX RETURNS
- --------------------------
Cyprus Amax Coal Sales Corp. Louisiana
Cyprus Amax Royalty Co. Kentucky
Tennessee
West Virginia
Cyprus Consolidated Resources Corp. Pennsylvania
West Virginia
Cyprus Coal Equipment Co. Kentucky
West Virginia
Cyprus Cumberland Resources Pennsylvania
Cyprus Emerald Resources Pennsylvania
Cyprus Freeport Resources Pennsylvania
Cyprus River Processing Pennsylvania
Cyprus Pennsylvania Land Holdings Pennsylvania
Cyprus Pennsylvania Services Pennsylvania
Maple Meadows Mining Co. West Virginia
Warrick Holding Co. Kentucky
NOTE: Ohio law requires a full year return prepared by purchaser. There is no
statutory right to an election to terminate year at date of sale, however, the
Ohio Department of Taxation may consider a request to file returns for each
period. The following companies require Ohio Tax Returns:
Alliance Power Marketing Inc.
Cyprus Amax Coal Sales Corp.
Cyprus Amax Royalty Co.
<PAGE>
Schedule 9(a)(iii)
Cyprus Consolidated Resources Corp.
Cyprus Cumberland Resources
Cyprus Emerald Resources
Cyprus Freeport Resources
Cyprus River Processing
Cyprus Pennsylvania Land Holdings
Cyprus Pennsylvania Services
<PAGE>
Schedule 15
Cyprus Plateau Tax Sharing Agreement
<PAGE>
Schedule 18(a)
No exceptions.
<PAGE>
Schedule 18(b)
Cyprus Plateau Tax Sharing Agreement
Tax Disaffiliation Agreement, dated as of May 24, 1993, by and between AMAX Inc.
and Alumax Inc.
<PAGE>
Schedule 18(c)
Equipment leased under the following leases may be required to be
treated 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:
1. Equipment Lease dated September 1, 1984 between Cumberland Leasing
Company and AMAX Inc. and certain of its subsidiaries, expiring
January 15, 2000.
2. Equipment Lease dated December 1, 1985 between Citicorp Lease
Management and AMAX Inc., expiring June 30, 2001.
<PAGE>
Schedule 18(d)
1. A closing agreement pursuant to Section 7121 of the Code on
Internal Revenue Service Form 906 (Closing Agreement on Final
Determination Covering Specific Matters) was entered into by Cyprus
Amax Minerals Company and its subsidiaries in January 1994.
2. Cyprus Amax Minerals Company and its subsidiaries entered into a
Consent Agreement in February 1994, consenting to certain
adjustments under Section 481(a) of the Code by reason of a change
in their method of computing their depreciation adjustment for
alternative minimum tax purposes.
3. Cyprus Amax Minerals Company and its subsidiaries filed an Internal
Revenue Service Form 3115 (Application for Change in Accounting
Method) in December 1994 relating to their method of computing
their depreciation adjustment for alternative minimum tax purposes.
<PAGE>
Schedule 19(c)(ii)
1. Buyer shall allocate, in the aggregate, no more than fifty percent
(50%) of the MADSP to the assets of the Subsidiaries of the Company
set forth on Schedule 9(a)(iii).
2. Buyer shall allocate all of the excess of the MADSP over 110% of
the book value of the assets of the Company to the Company's
"property used in the trade or business" (as defined in Section
1231(b) of the Code).
<PAGE>
CYPRUS AMAX MINERALS COMPLETES SALE OF COAL UNIT
TO RAG INTERNATIONAL MINING GmbH
DENVER (June 30, 1999) - Cyprus Amax Minerals Company (NYSE:CYM) today
announced it has completed the sale of its Cyprus Amax Coal Company subsidiary
to RAG International Mining GmbH.
Under the terms of the sale, the transaction value is $1.1 billion,
consisting of cash payments and assumption of debt by RAG. RAG assumed other
long-term obligations and acquired related assets. In addition, Cyprus Amax
expects to receive certain future production payments and insurance settlements
from the Willow Creek mine. Cyprus Amax's Australian coal assets were not
included in the transaction.
Because of Cyprus Amax's expected tax position in 1999, tax payments as a
result of the transaction are expected to be partially mitigated. The Company
does not expect to report any material gain or loss on the transaction.
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 business. Additional details will be
announced in the Company's second quarter earnings release currently scheduled
for July 21, 1999.
Salomon Smith Barney served as advisor to Cyprus Amax for the sale.
Cyprus Amax Minerals Company, headquartered in Englewood, Colorado, is a
leading producer of copper, the world's largest producer of molybdenum, and
holds a 30% interest in Kinross Gold Corporation. 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 1998 Form 10-K.
####
<TABLE>
<CAPTION>
Contacts:
<S> <C>
Gerald J. Malys John Taraba
Senior Vice President & Chief Financial Officer Vice President & Controller
(303) 643-5060 (303) 643-5244
</TABLE>
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 the
Cyprus Amax Minerals Company Web Site, http://www.cyprusamax.com.
-------------------------
